ABSTRACT
Classical and Keynesian views of macroeconomics – how a whole economy operates – are contrasted. A twentieth-century economic history is reviewed: the Versailles treaty; European hyperinflations; the gold standard and the 1930s depression. Fallacies of composition are illustrated. The marginal propensity to save, the investment multiplier, government demand management and the Phillips curve explained. The oil price shocks, predictions of Friedman and the stagflation of the 1970s overthrew the Keynesian paradigm and ushered in supply-side economics and the New Classical School. This in turn led to rational expectations, the great moderation, the efficient market hypothesis, the 2008 crash, the following recession and a return to Keynesian intervention. Post-Covid, post-Ukraine, the conclusion offered is that both micro and macro policies to address unemployment and stagflation are important.
