Download A History of Macroeconomics from Keynes to Lucas and Beyond by Michel De Vroey PDF

By Michel De Vroey

This e-book retraces the historical past of macroeconomics from Keynes's common conception to the current. crucial to it's the distinction among a Keynesian period and a Lucasian - or dynamic stochastic basic equilibrium (DSGE) - period, each one governed by means of exact methodological criteria. within the Keynesian period, the e-book reports the subsequent theories: Keynesian macroeconomics, monetarism, disequilibrium macro (Patinkin, Leijongufvud, and Clower) non-Walrasian equilibrium versions, and first-generation new Keynesian versions. 3 levels 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 couple of chosen works geared toward offering possible choices to Lucasian macro. whereas now not eschewing analytical content material, Michel De Vroey makes a speciality of noticeable exams, and the versions studied are provided in a pedagogical and vibrant but serious approach.

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They sought to interpret The General Theory as just one more manual of political arithmetic. In so far as it failed the test, they found it wrong, or obscure. (Shackle 1967: 129) Shackle’s point is appealing. The problem, however, is what to do once his conclusion has been attained, except repeating the same idea in different ways. Expanding the animal spirit idea has proven to be a hard nut to crack. There have only been a few interesting attempts, and then only decades after the publication of Keynes’s book, and they have not yet gained much ascendancy.

The relevance of the notion of involuntary unemployment was not questioned. Microeconomics was insufficiently developed to tackle the difficulties involved in trying to introduce it into neoclassical theory. Moreover, the fact that unemployment was massive was taken as an indication that it could not 24 A History of Macroeconomics from Keynes to Lucas and Beyond be voluntary. Finally, in the context of the Great Depression, many British economists had come to think that wage cuts were to be opposed and public works were needed to mop up unemployment.

Keynes insisted on two features of his theory: first, that only one market, the labor market, experiences market non-clearing; and, second, that this state of affairs qualifies as an equilibrium state in the classical sense of the term, that is, Keynes’s General Theory 21 it constitutes a state of rest. Moreover, to him, the deficiency of aggregate demand and the violation of Say’s Law (that supply creates its own demand) were two sides of the same coin. Say’s Law, which was later to become Walras’s Law, states that situations of generalized excess supply cannot arise.

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