Keynes’ famous quip that “in the long run, we’re all dead” has been misunderstood for almost a century. Many have interpreted it to mean that he cared little about the future. But that would be a mistake. He used it to explain how the quantity theory of money was subject to what we today call the Lucas critique: Printing more money would also affect money demand. The point being that whatever we do today with monetary policy – like expanding the money supply – might not have the desired consequences, due to how consumers respond.
Investment for the long run
Investment for the long run
Investment for the long run
Keynes’ famous quip that “in the long run, we’re all dead” has been misunderstood for almost a century. Many have interpreted it to mean that he cared little about the future. But that would be a mistake. He used it to explain how the quantity theory of money was subject to what we today call the Lucas critique: Printing more money would also affect money demand. The point being that whatever we do today with monetary policy – like expanding the money supply – might not have the desired consequences, due to how consumers respond.