Macroeconomic theory has its origins in the study of business cycles and monetary theory.[1][2] In general, early theorists believed monetary factors could not affect real factors such as real output. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual, microeconomic parts. Attempting to explain unemployment and recessions, he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear, leaving no surplus of goods and no willing labor left idle.[3]
The generation of economists that followed Keynes synthesized his theory with neoclassical microeconomics to form the neoclassical synthesis. Although Keynesian theory originally omitted an explanation of price levels and inflation, later Keynesians adopted the Phillips curve to model price-level changes. Some Keynesians opposed the synthesis method of combining Keynes's theory with an equilibrium system and advocated disequilibrium models instead. Monetarists, led by Milton Friedman, adopted some Keynesian ideas, such as the importance of the demand for money, but argued that Keynesians ignored the role of money supply in inflation.[4] Robert Lucas and other new classical macroeconomists criticized Keynesian models that did not work under rational expectations. Lucas also argued that Keynesian empirical models would not be as stable as models based on microeconomic foundations.
The new classical school culminated in real business cycle theory (RBC). Like early classical economic models, RBC models assumed that markets clear and that business cycles are driven by changes in technology and supply, not demand. New Keynesians tried to address many of the criticisms leveled by Lucas and other new classical economists against Neo-Keynesians. New Keynesians adopted rational expectations and built models with microfoundations of sticky prices that suggested recessions could still be explained by demand factors because rigidities stop prices from falling to a market-clearing level, leaving a surplus of goods and labor. The new neoclassical synthesis combined elements of both new classical and new Keynesian macroeconomics into a consensus. Other economists avoided the new classical and new Keynesian debate on short-term dynamics and developed the new growth theories of long-run economic growth.[5] The Great Recession led to a retrospective on the state of the field and some popular attention turned toward heterodox economics.
^Blanchard 2000, p. 1377.
^Dimand 2008.
^Snowdon & Vane 2005, p. 69.
^McCallum 2008.
^Mankiw 2006, pp. 37–38.
and 27 Related for: History of macroeconomic thought information
Macroeconomic theory has its origins in the study of business cycles and monetary theory. In general, early theorists believed monetary factors could not...
A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually...
Disequilibrium macroeconomics is a tradition of research centered on the role of disequilibrium in economics. This approach is also known as non-Walrasian...
the New Consensus, is the fusion of the major, modern macroeconomic schools ofthought – new classical macroeconomics/real business cycle theory and early...
that worked towards reconciling the macroeconomicthoughtof John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936)...
The historyof economic thought is the study of the philosophies of the different thinkers and theories in the subjects that later became political economy...
New classical macroeconomics, sometimes simply called new classical economics, is a school ofthought in macroeconomics that builds its analysis entirely...
In the historyof economic thought, a school of economic thought is a group of economic thinkers who share or shared a common perspective on the way economies...
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes...
of macroeconomicthought Historical school of economics Barry Smith, "Aristotle, Menger, Mises:An Essay in the Metaphysics of Economics", Historyof Political...
Deadly Innocent Frauds of Economic Policy in 2010. Functional finance Demand for money Historyof money Historyofmacroeconomicthought Fiat currency Graeber...
originating with the work of Judea Pearl. Econometrics Methodology of econometrics Macroeconomic model Historyofmacroeconomicthought Gordon Tullock, "A Comment...
Kotlikoff, Laurence. Macroeconomics Cambridge: MIT Press, 1998. ISBN 0-262-01170-0. Bernstein, Richard. Thomas Jefferson: The Revolution of Ideas. New York:...
Lucas's work on macroeconomic policymaking. The Lucas critique is significant in the historyof economic thought as a representative of the paradigm shift...
and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyses the economy...
Keynesian macroeconomics by adherents of new classical macroeconomics. Two main assumptions define the New Keynesian approach to macroeconomics. Like the...
after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly...
term, but some of his work refers to the conditions that most would recognise as stagflation. In the version of Keynesian macroeconomic theory that was...
New classical macroeconomics, and forms the basis for the current consensus, which covers previously disputed areas ofmacroeconomics.[which?] The consensus...
The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social...
Microfoundations are an effort to understand macroeconomic phenomena in terms of economic agents' behaviors and their interactions. Research in microfoundations...
J.B. Say: The Story of a Mare's Nest". In Velupillai, K. Vela (ed.). Macroeconomic Theory and Economic Policy: Essays in Honour of Jean-Paul Fitoussi....
Modern monetary theory or modern money theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly and unemployment...
non-Keynesian economic thought, particularly Austrian School thinking on entrepreneurship and new classical macroeconomics. The intellectual roots of supply-side...
classical macroeconomics in explaining macroeconomic phenomena from the 1970s until the 1990s, when it was identified as having become a part of the new...
Global Information