Searching for Keynesianism

Abstract

While it is clear that Keynes' General Theory of Employment, Interest and Money (1936) has influenced macroeconomic theory, the extent to which his ideas about countercyclical stabilization have altered the course of public policy remains an open question. We develop a dynamic spatial voting model that allows the estimation of a counterfactual showing what planned public budgets would have been like over the cycle if Keynesianism (as interpreted by Leijonhufvud and Clower) had not had any impact on the course of public affairs. Comparison of the counterfactual with the estimated process describing ex ante policy choices after 1950 in Canada allows for the quantification of the changes in fiscal policy that can be attributed to the Keynesian revolution.