By Michel De Vroey
This booklet retraces the background of macroeconomics from Keynes's common concept to the current. significant to it's the distinction among a Keynesian period and a Lucasian - or dynamic stochastic normal equilibrium (DSGE) - period, each one governed by means of specific methodological criteria. within the Keynesian period, the booklet stories the next theories: Keynesian macroeconomics, monetarism, disequilibrium macro (Patinkin, Leijongufvud, and Clower) non-Walrasian equilibrium versions, and first-generation new Keynesian versions. 3 phases are pointed out within the DSGE period: new classical macro (Lucas), RBC modelling, and second-generation new Keynesian modeling. The e-book additionally examines a number of chosen works geared toward providing possible choices to Lucasian macro. whereas now not eschewing analytical content material, Michel De Vroey specializes in substantial checks, and the versions studied are awarded in a pedagogical and brilliant but serious manner.
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Additional resources for A History of Macroeconomics from Keynes to Lucas and Beyond
1 and make the thought experiment of deleting the market supply of ﬁsh, the MS lines, from the graph. , as a case of market non-clearing). This is wrong because market non-clearing is an excess of market-day ﬁsh supply over market-day demand for ﬁsh. It took about four decades after the publication of The General Theory for economists to realize that there was a deadlock and that the way out of it was to depart from the Marshallian trade technology and information assumptions. 12 One might think that money illusion is another possibility.
It must be underlined that Hicks assumed nominal-wage rigidity in both the classical and the Keynesian subsystem. This followed from his pragmatic viewpoint on the rigidity versus ﬂexibility issue. According to him, the choice between these two assumptions needed to reﬂect the reality of the moment. His opinion was that, at the time, the rigidity assumption was more relevant than the ﬂexibility assumption. 2 Hicks had little interest in demonstrating the existence of involuntary unemployment. Although he did not like the term, he took its cause, wage rigidity, as a fact of life, at least in some circumstances.
Ironically enough, from then on Keynesian economists came to declare that the hallmark of Keynesian macroeconomics was the wage rigidity assumption, the very claim that Keynesians wanted to dismiss. “Mr. Keynes goes as far as to make the rigidity of wage-rates the corner-stone of his system” (Hicks 1939:266). This move hardly resulted from a conceptual criticism as that I expressed above. Rather, it was grounded on an argument of realism. In Paul Samuelson’s words: Had Keynes begun his ﬁrst few chapters with the simple statement that he found it realistic to assume that modern capitalist societies had money wage rates that were sticky 22 23 Young’s book, Interpreting Mr.
A History of Macroeconomics from Keynes to Lucas and Beyond by Michel De Vroey