KeynesonInflation-RichmondFed.pdfVIP

KEYNES ON INFLATION Thomas M. Humphrey Not the least of inflation’s consequences is the restrictive demand management policies to prevent damage done to the reputations of certain prominent it; that far from being an extreme nonmonetarist, economists. A case in point is John Maynard Keynes he shared the monetarists’ antipathy to inflation, (1883-1946). Once highly regarded for his brilliant endorsed their policy goal of price stability, and em- pathbreaking analysis of the causes of mass unem- ployed at least five monetarist concepts in his analysis ployment in the Great Depression of the 1930s, he is of inflation; and, finally, that far from advocating now given low marks for his views on inflation. full employment at any cost, he maintained that even Popular folklore has it that he was largely uncon- at high unemployment rates expansionary aggregate cerned with inflation from the start, that his subse- demand policy must be curbed to prevent inflation. quent preoccupation with unemployment led him to More precisely, this article demonstrates (1) that ignore it altogether, and that, as a result, he favored Keynes was always concerned with inflation, (2) expansionary measures to eliminate unemployment that this concern motivated hi’s advocacy of anti- regardless of their inflationary consequences. Since inflationary aggregate demand management policy on his death in 1946 his name (or at least the label at least two occasion