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The word ‘Keynesian’ means many things to many people. Decades ago, it was a carelessly applied label for economic liberals and interventionists in general. For a while in the late 1970s and early 1980s it became a pejorative term more or less synonymous with old-fashioned.

— Alan Blinder The fall and rise of Keynesian economics (1988)

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First and foremost, Keynesian economics is a theory of aggregate demand and of the effects of aggregate demand on real output and inflation.

The fall and rise of Keynesian economics (1988)

Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.

Monetary policy decisions tend to regress toward the mean and to be inertial—and hence biased in just the same way that adaptive expectations are biased relative to rational expectations. But errors like that, while systematic, will generally be small and will tend to shrink over time. And, in return, the system builds in natural safeguards against truly horrendous mistakes.

In central banking circles, it is viewed as obvious that the accumulation and destruction of reputational capital more closely resembles adaptive than rational expectations — it lags behind reality. Here, I think, the central bankers are closer to the truth than the economic theorists.

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