Markets, Productivity, and Happiness in a Historical Perspective

Wages-policy as the new frontier of Keynesianism in Britain in the 1950s

Cristiano Carlo, University of Pisa
Paesani Paolo, University of Rome 'Tor Vergata'

Keynesianism is usually associated with the idea of using deficit spending to reduce unemployment. However, the context in which Keynesian policies were first introduced was post-war Britain, where inflation, rather than unemployment, became the key issue. In this context, as pointed out in particular by Kahn, the implementation of a wages policy should have become the new frontier of Keynesianism. The present paper investigates the position taken by leading Keynesian economists on this topic. Along with Kahn, we take into consideration contributions by Harrod, Kaldor, Meade and others among those closest to Keynesian circles. These economists, while sharing the view that inflation was a real phenomenon, differed significantly in their specific diagnoses and recommendations. Our key contention is that the absence of a consensus on how to deal practically with inflation weakened the Keynesian front against other approaches.


Keywords: Inflation, Keynesian economics

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