himself-------------------------------------------------------------------
the 1970s and 1980s, macroeconomics was all about ‘schools of thought’..... Macroeconomists tended to take sides, and different schools had clear ideological associations. ..... Schools of thought fragmented mainstream macroeconomics .....
But then things began to change. The discipline appeared to become much more unified. .... most macroeconomists started talking the same language, even if they were not saying the same thing. .....This new synthesis was reflected in master’s-level textbooks which would typically begin by
setting out a Ramsey-style model,
then discuss
‘real business cycle’ models,
and finally
move on to add sticky prices to get New Keynesian theory."
ugh !
"There were two main factors behind this synthesis."
" microfoundations, ie deriving the components of macro models from standard optimisation applied to representative agents. This gave macroeconomics the potential to achieve the same degree of unity as microeconomics. "
" the development of New Keynesian theory, which allowed an analysis of aggregate demand within a microfounded framework, and which integrated ideas like rational expectations and consumption-smoothing into Keynesian analysis."
" All models were now ‘dynamic stochastic general equilibrium’ models"
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now he goes meta
first a straw dog is kicked at us
"... schools of thought are associated with macroeconomic crises, and macro synthesis follows periods of calm. "
even briefer narative:
"Keynesian theory itself was born out of the Great Depression. The first Neoclassical Synthesis arose from the period of strong growth and low inflation in the postwar period. Monetarism gained strength from the rapid inflation of the 1970s. The more recent synthesis may be a child of the Great Moderation, and now we have the Great Recession, schools of thought have returned."
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then the straw dog is set ablaze
too simple even for our barbed brit
divisions simply subsided during the great moderation as they had
similarly subsided during the post war (pre wage push price spiral )
first world recovery and prosperity
as in:
".. monetary policy somewhat depoliticised through central bank independence,
the successful implementation of New Keynesian theory during the Great Moderation allowed divisions among academic departments to remain dormant."
translation once credit policy strangled the wage product price spiral
what's to really fight about
after all during the great moderation
"..at freshwater departments like Chicago, the idea of an effective fiscal stimulus
was something they thought had died with the rational expectations and New Classical revolutions"
ie
a fully indy fed
and
fiscal fine tuning finally dead
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final positioning of the meta narrative into class struggle..really
"the Keynesian/Anti-Keynesian division is always going to be with us, because it reflects an ideological divide about state intervention."
---"That divide occurs all the time in microeconomics, but because it involves arguing about many different externalities or imperfections it does not lend itself to fragmentation into schools." must not have read greenwald stiglitz too carefully ---
" In macro there is one critical externality price rigidity,
and so disagreements about policy
can easily be mapped into differences about theory. "
yikes such is the thin barrier between new classicals and new keynesians
"Demand denial is attractive because it gives a non-ideological justification for what is essentially an ideological position about economic policy."
" Unfortunately, there is a danger that dividing mainstream analysis this way makes macroeconomics look more like a belief system than a science."
add your own dollup of irony here
