“Monetarism—both of the older Friedman version stressing adherence to money stock targets and of the newer rational expectations variety—has been badly discredited. The stage has been set for recovery in the popularity of Keynesian diagnoses and remedies. I do not mean to imply, of course, that there is some Keynesian truth, vintage 1936 or 1961, to which economists and policymakers will or should now return, ignoring the lessons of economic events and of developments in economics itself over these last turbulent fifteen years. I do mean that in the new intellectual synthesis which I hope and expect will emerge to replace the divisive controversies and chaotic debates on macroeconomic policies, Keynesian ideas will have a prominent place.”

James Tobin, "Keynes' Policies in Theory and Practice", Challenge (1983).
1970s and later

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James Tobin22

American economist 1918–2002

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“Today, Keynesian theorizing does not inspire whispers and giggles from the audience. There are many economists under the age of forty who do not take offense when their work is called ‘Keynesian’, and I count myself as one of them. If Keynesian economics was dead in 1980, then today it has been reincarnated.”

N. Gregory Mankiw (1958) American economist

N. Gregory Mankiw, "The reincarnation of Keynesian economics", European Economic Review (1992).
1990s

“[Keynesian]I am now a Keynesian in economics.”

Richard Nixon (1913–1994) 37th President of the United States of America

Just after a broadcast interview with four newsmen (6 January 1971), according to Howard K. Smith, one of the interviewers. "Nixon Has Shifted to Ideas of Keyness: ABC Commentator" http://news.google.com/newspapers?id=awpdAAAAIBAJ&pg=916,487551 <br class="br">1970s

“One troublesome aspect is the place of rational expectations macroeconomics in the often political debate over Keynesian economics. At least implicitly, many people feel that what's bad for the rational expectations viewpoint is good for the Keynesian one, and vice versa. But it is hard to see how the problems in using the rational expectations approach to explain monetary nonneutrality can alleviate the theoretical and empirical shortcomings of the Keynesian model.”

Robert Barro (1944) American classical macroeconomist

Robert J. Barro, "Rational Expectations and Macroeconomics in 1984" (1984).

“Not only is it possible to devise complete models of the economy on hypotheses other than rationality, but in fact virtually every practical theory of macroeconomics is partly so based. The price- and wage- rigidity elements of Keynesian theory are hard to fit into a rational framework, though some valiant efforts have been made. … But if the Keynesian model is a natural target of criticism by the upholders of universal rationality, it must be added that monetarism is no better. I know of no serious derivation of the demand for money from a rational optimization. … The use of rationality in these arguments is ritualistic, not essential.”

Kenneth Arrow (1921–2017) American economist

1970s-1980s, "Rationality of Self and Others in an Economic System", 1986

“New-classical economics has been undeniably influential, but not in the way that its three prominent creators originally imagined. Its most important contribution to macroeconomics, the assumption of rational expectations, was stolen almost immediately, and applied more fruitfully, by the new Keynesians.”

Robert J. Gordon (1940) American economist

"Fresh Water, Salt Water, and other Macroeconomic Elixirs", 1989

“From the late 1940s until the early 1960s, events seemed to prove the Keynesians correct. Then, beginning in the 1960s, several distinguished economists began to challenge Keynesian ideas. Their counterrevolutionary views, which in many ways mirrored those of the classical economists, were strengthened by events in the 1970s, when the economy’s behavior began to contradict some Keynesian ideas. But in 2008 and 2009, as the economy sank into the most serious worldwide recession since the Great Depression, Keynesian ideas were once again at the center of a heated debate about the causes of the problem and the appropriate remedies.”

Robert Hall (economist)

Robert E. Hall and Marc Lieberman, Macroeconomics (2012).

“The legacy of Keynesian economics”

Martin Feldstein (1939–2019) American economist

the misdiagnosis of unemployment, the fear of saving, and the unjustified faith in government intervention — affected the fundamental ideas of policy makers for a generation and altered such basic institutions of our economy as the tax laws, the social insurance programs and the financial system. Changing these deeply ingrained aspects of economic life can happen only slowly. But the economics profession has undoubtedly begun to re-examine and re-evaluate the Keynesian notions that have been so dominant for the past 35 years. There is a return to older and more basic economic truths and an attempt to adapt these ideas to the changing conditions of technology and affluence. From this is emerging a new view of unemployment, of saving, and of the role of government.
"The Retreat from Keynesian Economics", The Public Interest (1981).

“In the early 1970s,… economists began to embrace the Rational Expectations Hypothesis (REH), according to which market participants’ expectations are “essentially the same as the predictions of the relevant economic theory” (Muth 1961: 316). What has been largely overlooked is that, … REH theorists presume that the role of market participants’ expectations in driving outcomes is not autonomous from the other components of the model. … Because REH models, by design, rule out an autonomous role for expectations, they are best viewed as derailing, rather than developing, the microfoundations approach.”

Roman Frydman (1948) American economist

"Which Way Forward for Macroeconomics and Policy Analysis?" 2013

“Lucas and Sargent’s main argument was that Keynesian economics had ignored the full implications of the effect of expectations on behavior. The way to proceed, they argued, was to assume that people formed expectations as rationally as they could, based on the information they had. Thinking of people as having rational expectations had three major implications, all highly damaging to Keynesian macroeconomics. …
The first implication was that existing macroeconomic models could not be used to help design policy. … The second implication was that when rational expectations were introduced in Keynesian models, these models actually delivered very un-Keynesian conclusions. … The third implication was that if people and firms had rational expectations, it was wrong to think of policy as the control of a complicated but passive system. Rather, the right way was to think of policy as a game between policy makers and the economy. …
To summarize: When rational expectations were introduced, Keynesian models could not be used to determine policy; Keynesian models could not explain long-lasting deviations of output from the natural level of output; the theory of policy had to be redesigned, using the tools of game theory.”

Olivier Blanchard (1948) French economist

Source: Macroeconomics (7th Edition, 2017), Ch. 24 : Epilogue: The Story of Macroeconomics

“It is too early to say there is a consensus about how all these topics fit together. Yet one can say that the new classical challenge has been met: Keynesian economics has been reincarnated into a body with firm microeconomic muscle.”

N. Gregory Mankiw (1958) American economist

N. Gregory Mankiw, "The reincarnation of Keynesian economics", European Economic Review (1992).
1990s

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