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Peter Galbács - One of the best experts on this subject based on the ideXlab platform.

  • The Theory of New Classical Macroeconomics: A Positive Critique
    2015
    Co-Authors: Peter Galbács
    Abstract:

    Methodological Principles and an Epistemological Introduction.- The Rational Expectations Hypothesis as a Key Element of New Classical Macroeconomics.- The World View of New Classical Macroeconomics.- Monetary Policy in the New Classical Framework.- Fiscal Policy and New Classical Macroeconomics.- Economic Policy Consequences.

  • Preface: The Theory of New Classical Macroeconomics: A Positive Critique
    2015
    Co-Authors: Peter Galbács
    Abstract:

    This book examines New Classical Macroeconomics from a comparative and critical point of view that confronts the original texts and later comments as a first dimension of comparison. The second dimension appears in a historical context, since none of the New Classical doctrines can be analyzed ignoring the parallelism and discrepancies with the theory of Keynes, Friedman or Phelps. Radicalism of New Classical Macroeconomics has brought fundamental changes in economic thought, but the doctrines got vulgarized and distorted thanks to the mass of followers. Nowadays, economic theory and policy, trying to find their ways, have a less clear relationship than ever. Therefore, this volume is aimed at mapping and reconsidering the policy instruments and transmission mechanisms offered by the New Classicals. Its central question points to the real nature of New Classical Macroeconomics: what consequences are grounded by the assumptions New Classicals used. Moreover, issues raised by automatic fiscal stabilizers and fiscal reforms are analyzed as well, even if they were out of the range of Classical texts. The book draws a picture of New Classical Macroeconomics stressing the analogies with Keynesian countercyclical policies, instead of the discrepancies commonly held.

  • The World View of New Classical Macroeconomics
    Contributions to Economics, 2015
    Co-Authors: Peter Galbács
    Abstract:

    We start conducting thorough research in this chapter. First of all, an attempt is made to find the ultimate sources of the main idea of New Classical Macroeconomics and mainstream theory as a whole: where does the tradition of freedom come from and what does it really mean for economics? In this context, the importance of the platonic tradition is highlighted again. Later on, analyzing some significant macro models, an insight into the implicit logical order that governs New Classical Macroeconomics in the background is gained. The central topic is the examination of how New Classicals described the mechanisms of the labour market. The theoretical role of trade unions and the New Classical ‘style’ of depicting wage bargaining processes are also reviewed below. As we will see, New Classicals argued assuming the conclusion (i.e. petitio principii), since the most important assumption (i.e. axiom) in the theory of general macroeconomic equilibrium is the equilibrium itself. The idea of a stable economy evanishes, if we suspend this axiom.

  • Fiscal Policy and New Classical Macroeconomics
    Contributions to Economics, 2015
    Co-Authors: Peter Galbács
    Abstract:

    It is argued, first, that fiscal policy was not a neglected and indifferent topic for New Classicals, and, second, that their sceptical attitude towards monetary policy was not projected directly upon fiscal policy. By analyzing permanent income hypothesis specified both on adaptive and rational expectations and, then, the Barro–Ricardian equivalence theorem, the crucial assumptions supporting the ineffectiveness of fiscal policy are identified. We come to the point that ineffectiveness of fiscal policy can be considered valid only by presupposing some strong and implausible assumptions. It is argued as well that New Classicals did not stress the ineffectiveness of fiscal (and also monetary) policy, but identified precisely the conditions under which economic policy strikes a snag. Starting from the Barro-Ricardian equivalence, the theory of non-Keynesian effects is also reviewed arguing for the fact that New Classical Macroeconomics put an emphasis on fiscal reforms by which it can be possible for governments to get back the effectiveness of countercyclical policy and to control the economy not only by unanticipated operations. To some extent it is clarified that New Classical Macroeconomics got considerably close to the theory of Keynes sometimes.

  • The Rational Expectations Hypothesis as a Key Element of New Classical Macroeconomics
    Contributions to Economics, 2015
    Co-Authors: Peter Galbács
    Abstract:

    The following chapter offers a comprehensive analysis of the most cited theory of New Classical Macroeconomics that became a foundation of subsequent theoretical developments. The immediate objective of New Classical theories to grasp the real world—something that makes this enquiry especially interesting—has made the confrontation of theory and reality inevitable. The ‘strong’ and ‘weak’ definition of the REH and the compatibility of these theories and the subsequent assumptions of unbiasedness and orthogonality are all thoroughly explored. In applying arguments from experimental economics, it is argued that the rational expectations hypothesis provided by New Classical theories is a component of a pure theory, despite New Classical ambitions to describe reality in its entirety. The core element of this chapter is that inflation targeting can be theorized successfully by the requisites and through a careful re-formulation of the REH. As it will be seen, the ‘strong’ definition does not make excessive claims on agents’ rationality if a central institution becomes incorporated in the models capable of anchoring public expectations.

Marion Gaspard - One of the best experts on this subject based on the ideXlab platform.

  • Ramsey's theory of National Saving: A Mathematician in Cambridge
    Journal of the History of Economic Thought, 2003
    Co-Authors: Marion Gaspard
    Abstract:

    In the December 1928 issue of the Economic Journal, Frank Ramsey asked the question “how much of its income should a nation save?” Few of the Cambridge economists of the 1930s were convinced by his highly formalized answer. His contribution sank quickly into oblivion, remaining there for about thirty-five years. In the 1960s, the success of the Hamiltonian formalism and the increasing interest for optimal growth led on the contrary to a quasi “natural” use of Ramsey's former intuitions. These mathematical tools became so widespread that, a few years later, New Classical Macroeconomics uses a New interpretation of the “à la Ramsey” models, within the setting of representative agent models, in order to bypass the Arrow and Sonnenschein-Mantel-Debreu “impossibility results.” The “à la Ramsey” model is the backbone of modern New Classical Macroeconomics. It is thus not surprising that these successive moves in macro-economic theory came to foster a slanted interpretation of Ramsey's 1928 article. In this respect, Roger E. A. Farmer's point of view is representative of the retrospective tribute sometimes paid to Ramsey's article:F. Ramsey was one of the first economists to study how an infinitely lived agent should allocate his resources over time. His work was at the forefront of mathematical economics at the time it was written but his approach has now become a standard part of graduate macroeconomic courses. Many applications of Ramsey's work assume that there is only one agent in the economy and that this representative agent can be thought of as a stand-in for the workings of the market mechanism (Farmer 1993, p. 77).

  • Ramsey's theory of National Saving : a mathematician in Cambridge
    2003
    Co-Authors: Marion Gaspard
    Abstract:

    In the December 1928 issue of the Economic Journal, Frank Ramsey asked the question “how much of its income should a nation save?†Few of the Cambridge economists of the 1930s were convinced by his highly formalized answer. His contribution sank quickly into oblivion, remaining there for about thirty-five years. In the 1960s, the success of the Hamiltonian formalism and the increasing interest for optimal growth led on the contrary to a quasi “natural†use of Ramsey's former intuitions. These mathematical tools became so widespread that, a few years later, New Classical Macroeconomics uses a New interpretation of the “A la Ramsey†models, within the setting of representative agent models, in order to bypass the Arrow and Sonnenschein-Mantel-Debreu “impossibility results.†The “A la Ramsey†model is the backbone of modern New Classical Macroeconomics. It is thus not surprising that these successive moves in macro-economic theory came to foster a slanted interpretation of Ramsey's 1928 article. In this respect, Roger E. A. Farmer's point of view is representative of the retrospective tribute sometimes paid to Ramsey's article:F. Ramsey was one of the first economists to study how an infinitely lived agent should allocate his resources over time. His work was at the forefront of mathematical economics at the time it was written but his approach has now become a standard part of graduate macroeconomic courses. Many applications of Ramsey's work assume that there is only one agent in the economy and that this representative agent can be thought of as a stand-in for the workings of the market mechanism (Farmer 1993, p. 77). (This abstract was borrowed from another version of this item.)

James Tobin - One of the best experts on this subject based on the ideXlab platform.

  • The Natural Rate as New Classical Macroeconomics -- For Rod Cross, The Natural Rate Hypothesis 25 Years On
    1993
    Co-Authors: James Tobin
    Abstract:

    Friedman identified his "natural rate" as Walrasian equilibrium. Keynes's "full employment" is also Classical equilibrium: labor markets are clearing at existing real wages. Why is equilibrium unemployment not zero? Keynes and Friedman cite, but do not explain, "frictional" unemployment. They differ on what explains cycles. Friedman and Lucas answer: misperceptions of inflation. Markets clear at wrong prices and quantities. Today New Classicals stress variations in the natural rate itself. In Keynesian cycles markets don't clear. Excess supplies or demands trigger Phillips-curve movements of wages and prices. Unemployment and vacancies coexist in varying proportions because inter-sectoral shocks always occur. Adjustment dynamics, not representative-agent equilibria, determine the economy's behavior at NAIRU and other unemployment rates. Money makes a difference, not because of money illusions or misperceptions but because adjustments begin with nominal wage and price responses.

  • price flexibility and output stability an old keynesian view
    Journal of Economic Perspectives, 1993
    Co-Authors: James Tobin
    Abstract:

    In this symposium I shall play the role in which I was cast, the unreconstructed old Keynesian. Considering the alternatives, I do not mind being billed as a Keynesian, an old Keynesian at that. But old Keynesians come in several varieties, and I speak for no one but myself. Nor do I defend the literal text of The General Theory. Several generations of economists have criticized, amended, and elaborated that seminal work. I shall argue for the validity of the major propositions that distinguish Keynesian Macroeconomics from old or New Classical Macroeconomics.

  • The Invisible Hand in Modern Macroeconomics
    1991
    Co-Authors: James Tobin
    Abstract:

    The Invisible Hand, one of the Great Ideas of history and one of the most influential, is Adam Smith's most important legacy to Macroeconomics, as to all economics. It is particularly important today as the ultimate inspiration for the New Classical Macroeconomics and for Real Business Cycle Theory. These are intellectual movements that engage many of the best brains in the profession, especially among younger cohorts and especially in the United States. They dominate the agenda even of theorists and econometricians who are skeptical or hostile to their methods and conclusions.

Robert Boyer - One of the best experts on this subject based on the ideXlab platform.

  • The euro crisis: undetected by conventional economics, favoured by nationally focused polity.
    Cambridge Journal of Economics, 2013
    Co-Authors: Robert Boyer
    Abstract:

    This article interprets the initial success of the launch of the euro and its 'muddling through' since the outbreak of the Greek sovereign debt crisis. Two interrelated processes interacted to deliver a quite complex idiosyncratic systemic crisis. First, New Classical Macroeconomics had diffused the belief that market economies are structurally stable, money is neutral, financial markets are efficient and that the only culprit is public finance. The euro crisis was thus inaccurately diagnosed. Second, in the political arena, monetary integration has been used by many governments as a justification for liberalisation reforms opposed by various domestic social groups. At the European level, most governments have been defending national interests, whereas the European Commission and European Parliament had lost most of their expertise and legitimacy in defending a common community in line euro ambitions. Crisis resolution calls for leadership from a key collective actor, to return coherence to the eurozone's institutional setting. Copyright , Oxford University Press.

  • The Present Crisis. A Trump for a ReNewed Political Economy
    Review of Political Economy, 2013
    Co-Authors: Robert Boyer
    Abstract:

    The New Classical Macroeconomics and mathematical finance have both failed to anticipate the present crisis or explain why the present crisis is so severe. This is because they only considered pure market economies devoid of institutions and without concern for historical and structural transformations in contemporary economies. This opens the door to a political economy analysis of the transformations in socio-political alliances since the demise of the Fordist growth regime. The shift toward market-based financial systems, financial liberalization, and globalization, gave unprecedented power to international financiers and has led to the current economic and financial crisis. Controlling finance requires resolute action by public authorities and the pressure of citizen social movements. Financial re-regulation is closely related to the relative bargaining power of nation-states and international finance. International comparisons (e.g., North American and German capitalisms) suggest that this is a possible path.

Brian Snowdon - One of the best experts on this subject based on the ideXlab platform.