Robert Skidelsky is best known for his three-volume biography of John Maynard Keynes, the great British economist. So, it should come as no surprise that a big chunk of Money and Government chronicles the impact Keynes had on 20th Century economics. And, the impact of Keynesian Economics was huge until the 1970s when the theory broke down because of “stagflation.” Stagflation perplexed Keynesian economists because the Economy wasn’t supposed to experience rising unemployment and inflation at the same time. But the 1970s–perhaps suffering a hangover from the Vietnam War and then jolted by the OPEC oil embargo–struggled with an Economy mired in slow-growth and rising inflation–conditions that were supposed to be impossible together under Keynesian Economics.

You might not want to read all the macroeconomic stuff in Money and Government, but I recommend you read Chapter 1: “The Mysteries of Money: A Short History.” That will explain how we got from bartering to credit default swaps and crypto-currencies. Skidelsky provides clear explanations for the thorny economic issues of today. He doesn’t overreach with predictions. Money and Government reveals the workings of the economy system we’re living with and tackles some of the problems we will be facing in the years ahead. Recommended! GRADE: A-
Table of Contents
List of Figures xiii
Preface xvii
Introduction 1
i Unsettled Issues 1
ii The Culprits 4
iii A Brief Sketch of the Book 8
Appendix 1.1 Ideas, Vested Interests and Cycles 11
Part 1 History of Economic Thought 19
1 The Mysteries of Money: A Short History 21
i The Classical Dichotomy 21
ii The Origins of Money 23
iii The Value of Money 25
iv Creditors and Debtors 27
v The Origins of the Quantity Theory of Money 32
vi The Demand for Money 35
vii Money, the Great Deceiver 36
viii Conclusion 38
2 The Fight for the Gold Standard 40
i Prelude to the Gold Standard: the British Recoinage Debate of the 1690s 41
ii Nineteenth-century Monetary Debates: An Overview 44
iii Bullionists versus the ‘Real Bills’ Doctrine 45
iv Currency School versus Banking School 49
v Bimetallism 50
vi How Did the Gold Standard Actually Work? 52
3 The Quantity Theory of Money: From History to Science 60
i The Quantity Theory of Money: The Two Branches 60
ii Fisher’s Santa Claus 62
iii Knut Wicksell’s Credit Money version of the QTM 67
iv Was Wicksell a Quantity Theorist? 70
v Conclusion 71
Appendix 3.1 Fisher’s Equation 71
4 Theories of the Fertile and Barren State 73
i Introduction 73
ii The Fertile State of the Mercantilists 77
iii The Wasteful State of the Political Economists 81
iv The Victorian Fiscal Constitution 85
v The Persistence of Mercantilism 88
vi Conclusion 93
Part 2 The Rise, Triumph and Fall of Keynes 95
5 Keynes’s Intervention 99
i The Trouble with Money 99
ii The Problem with Fiscal Policy 106
iii The Macmillan Committee 114
iv The General Theory of Employment, Interest, and Money 117
v Policy Implications 124
Appendix 5.1 Contrast Between the Classical and Keynesian Models 132
Appendix 5.2 The Fiscal Multiplier 133
6 The Keynesian Ascendancy 137
i Keynesianism Ascendant 137
ii Full Employment Keynesianism: 1945-60 141
iii Growth Keynesianism: 1960-70 148
iv Reasons for the Strength of the Boom 154
v Stagflation Keynesianism: 1970-76 162
vi Great Britain: the End of the Keynesian Road 167
7 The Theory and Practice of Monetarism 171
i Keynes and the Classics 172
ii The Neo-classical Synthesis 173
iii The Emergence of the Counter-orthodoxy 174
iv Monetarism 176
v The Monetarist Experiment: 1976-85 184
vi Monetarism’s Fiscal Legacy 190
vii From Friedman to the New Consensus: 1985-2008 194
viii Conclusion 201
Appendix 7.1 IS/LM, the Keynesian Teaching Tool 203
Appendix 7.2 The Modelling of Expectations 205
Appendix 7.3 The Central Bank Reaction Function 212
Part 3 Macroeconomics in the Crash and After, 2007- 215
8 The Disablement of Fiscal Policy 221
i The Fiscal Crisis of the State 221
ii The British Debate 225
iii Austerity: A Comparative Assessment 241
iv Conclusion 244
Appendix 8.1 Monetary Financing of the Deficit 246
9 The New Monetarism 248
i Pre-crash Monetary Orthodoxy 249
ii Why Quantitative Easing? 253
iii Quantitative Easing Programmes, 2008-16 256
iv How was QE Meant to Work? 258
v Assessment 263
vi Conclusion 277
Appendix 9.1 A Note on Tim Congdon 279
10 Distribution as a Macroeconomic Problem 288
i The Indifference of Mainstream Theory to Inequality 288
ii The Microeconomics of Distribution 290
iii Distribution and the Macroeconomy 293
iv The Modern Under-consumptionist Story 298
v Conclusion 305
11 What Was Wrong with the Banks? 307
i Pre-crash Orthodoxy 308
ii Theory 310
iii Understanding Banking: Some Essential Terms 316
iv Loosening the Regulatory Noose 318
v Financial Innovation 322
vi Conclusion 327
Appendix 11.1 Why Didn’t the Credit Ratings Agencies Do Their Job? 329
12 Global Imbalances 331
i Introduction 331
ii A Pre-crash Bird’s-eye View 334
iii Some Basic Theory 335
iv Current Account Imbalances as a Cause of Meltdown? 336
v Saving Glut versus Money Glut 338
vi Banking Imbalances 342
vii Conclusion 343
Part 4 A New Macroeconomics 345
13 Reinventing Political Economy 347
i Introduction 347
ii What Should Governments Do and Why? 349
iii A New Macroeconomic Constitution 351
iv The Inflation Problem 358
v Making Banking Safe 361
vi Inequality 368
vii Hyper-globalization and its Discontents 371
viii Reforming Economics 384
Notes 391
Bibliography 427
Index 461