By Michel De Vroey
This publication retraces the background of macroeconomics from Keynes's normal idea to the current. vital to it's the distinction among a Keynesian period and a Lucasian - or dynamic stochastic normal equilibrium (DSGE) - period, every one governed via targeted methodological criteria. within the Keynesian period, the e-book experiences the subsequent theories: Keynesian macroeconomics, monetarism, disequilibrium macro (Patinkin, Leijongufvud, and Clower) non-Walrasian equilibrium types, and first-generation new Keynesian types. 3 phases are pointed out within the DSGE period: new classical macro (Lucas), RBC modelling, and second-generation new Keynesian modeling. The ebook additionally examines a couple of chosen works aimed toward featuring possible choices to Lucasian macro. whereas now not eschewing analytical content material, Michel De Vroey makes a speciality of sizeable exams, and the types studied are awarded in a pedagogical and brilliant but severe approach.
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Extra info for A History of Macroeconomics from Keynes to Lucas and Beyond
Any modiﬁcation in demand across the ﬁrst two sub-groups has an impact on employment. For example, a shift away from the demand for manufactured goods toward that for the goods of non-labor branch reduces wages and the level of activity. The effective demand model analyses what goes on in the manufacturing sector. This sector is treated as if it were a single branch. Fourth, Keynes replaced Marshall’s inﬁnitely elastic demand with an upward-sloping aggregate demand curve, its slope being determined by the propensity to consume.
This was an inevitable occurrence at the time. The aim Keynes pursued was too ambitious; the concepts and tools to achieve it were lacking as, to some extent, they still are today. As stated by Colander: Keynes’s revolution failed not because its vision was wrong, but because the tools were inadequate to the task at hand. (Colander 2006: 69) Thus, Keynes’s failure was a foregone conclusion. However, in no way must this failure hide the extraordinary breakthrough he achieved. His work changed the course of economic theory by setting the scene for a new subdiscipline, macroeconomics, that is, simpliﬁed, applied, and policy-oriented general equilibrium analysis.
I disagree with Schumpeter’s judgment. As for Keynes, my view is that achieving his generalizing goal in a rigorous way was beyond his capabilities and time constraints. A second difﬁculty is that at the beginning of his inquiry Keynes wanted to highlight a malfunction of the equilibration mechanism by displaying an impediment to the adjustment process. Later, Leijonhufvud labeled this process Keynes’s General Theory 9 the “laws of motions” of markets, these motions following from agents’ reactions to market signals (Leijonhufvud 2006a).