"A key element in all Keynesian models is a ‘trade-off between inflation and real output: the higher is the inflation rate; the higher is output ."

“I guess everyone is a Keynesian in a foxhole.”

“The Keynesian Revolution was, in the form in which it succeeded in the United States, a revolution in method. This was not Keynes’s intent, nor is it the view of all of his most eminent followers. Yet if one does not view the revolution in this way, it is impossible to account for some of its most important features.”

“In the present decade, the U.S. economy has undergone its first major depression since the 1930’s, to the accompaniment of inflation rates in excess of 10 percent per annum. These events have been transmitted to other advanced countries and in many cases have been amplified. These events did not arise from a reactionary reversion to outmoded, 'classical' principles of tight money and balanced budgets. On the contrary, they were accompanied by massive government budget deficits and high rates of monetary expansion, policies which, although bearing an admitted risk of inflation, promised according to modern Keynesian doctrine rapid real growth and low rates of unemployment. That these predictions were wildly incorrect and that the doctrine on which they were fundamentally flawed are now simple matters of fact, involving no novelties of economic theory. The task now is to sort through the wreckage, determining which features of that remarkable intellectual event called the Keynesian Revolution can be salvaged and put to use and which others must be discarded.”

“For policy, the central fact is that Keynesian policy recommendations have no sounder basis, in a scientific sense, than recommendations of non-Keynesian economists or, for that matter, non-economists.”

“I do not see how one can look at figures like these without seeing them representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia's or Egypt's? If so, what exactly? If not, what is it about the "nature of India" that makes it so? The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else.”

“So I am skeptical about the argument that the subprime mortgage problem will contaminate the whole mortgage market, that housing construction will come to a halt, and that the economy will slip into a recession. Every step in this chain is questionable and none has been quantified. If we have learned anything from the past 20 years it is that there is a lot of stability built into the real economy.”