Last weekend I spent at a conference titled The World Economy in Crisis – The Return of Keynesianism? with about 250 participants, most of them international guests. Since the media did not cover it, let me state what I think are the main conclusions.

1. Young economists are fed up with the macroeconomic textbooks and their theories. They do not consider themselves ‘Keynesians’, but they like to think of themselves as ’serious scientists without dogma’.
2. The ‘mainstream’ (which is represented by the theories in textbooks) cannot explain the crisis, and couldn’t even put the crisis into the models. Ever tried to get a New-Neoclassical Synthesis model to explain why banks in the US hold close to 1,000 billion dollars as excess reserves? You’ll know what I mean.
3. This crisis is not over. Some participant said that the US consumers need to get the debt off their backs. Well, fine then, let us relieve the US consumer. But what is debt to the consumer is wealth to somebody else. Somebody holds the financial asset based on that mortgage and will be disappointed after default. So defaulting would not really make things better: your mortgage is gone which makes you richer (or better, less burdened by debt), but it will turn out that your pension fund holds the corresponding asset – and that is gone, too! So, there will be no significant net change in private wealth if the debt burden is reduced through default. Debt and wealth are two sides of the same coin!
4. It does not matter whether in the end Keynesians are right, or post-Keynesians, or Austrians or even monetarists (by the way, this is what Heiner Flassbeck said in his keynote address). We need to deal with this crisis without falling back to the dogmatic positions that were established in the last 30 years. Edmund Phelps is an example for somebody who should not be heard – he’s living deep inside the ivory tower (via Paul Krugman). This is not a stupid intellectual game between the ‘mainstream’ and ‘Keynesians’ – this is about saving the world economy from repeating the great depression of the 1930s, which put hundreds of millions into unemployment and poverty and led to political polarization.