ABSTRACT
An alternative Keynesian strategy is that fmancial policies should be operated with the purpose not of keeping total money expenditures on domestic products on a predetermined growth path, but rather of keeping real economic activity (output and employment) at a predetermined fullemployment level, raising money expenditures and so the demand for the products of labour if employment falls below this level and restraining demands if, by rising above this level, it causes an inflationary excess demand for resources. We call this the Orthodox Keynesian view about demand-management policies because it was the way in which Keynes himself regarded the matter during the 1930s; and, broadly speaking, it was the predominant view for a quarter of a century after the Second World War (1945-70). An implication of this view, which became fairly widely accepted during the postwar period, is that if the maintenance of economic activity at some predetermined full-employment level leads to an unacceptable inflation of money costs and prices, then some form of 'incomes policy' is needed in order to control inflation or, in our present terminology, wage-fixing must be used to control inflation. Thus we deSignate as Orthodox Keynesianism the use of demand-management policies to maintain employment at a high and stable level and the use of wage-fixing to control inflation.
