ABSTRACT
The great religious revival generated by the counter-reformation in economic theory has inspired a return to the fundamentals of the True Religion. Under the theoretical onslaught of the counter-reformation, the Keynesians simply capitulated. The exposure of Keynes’s fundamental theoretical error left them with little choice. Unable to offer any resistance to Patinkin’s real-balance effect argument, the Keynesians unconditionally surrendered to the classical view. Perhaps the most striking aspect of the New Orthodoxy is that, on the vital question of unemployment, it is a reversion to the Classical Doctrine laid down by John Stuart Mill. The explanation of unemployment in the 15th edition of the New Bible could easily have been written by Mill or Pigou. It is presented in terms of the traditional supply and demand analysis applied to the market for labour. The classical doctrine that equilibrium means full employment is unchallenged as the central tenet of the New Orthodoxy.
