Reflections of Eminent Economists

Reflections of Eminent Economists

Edited by Michael Szenberg and Lall Ramrattan

In this collection of autobiographical essays, 26 prominent scholars detail their professional development, while offering insight into their lives and philosophies. With candor and humor they relate how they came to the field of economics, as well as how their views have evolved over the years.

Chapter 11: A Roundabout Approach to Macroeconomics: Some Autobiographical Reflections

Roger W. Garrison

Subjects: economics and finance, economic psychology, history of economic thought


11. A roundabout approach to macroeconomics: some autobiographical reflections* Roger W. Garrison I. INTRODUCTION: SETTING THE STAGE ‘Roundaboutness’ is a concept featured in Austrian capital theory. Homely stories about the bare-handed catching of fish are a prelude to a discussion of the economy’s capital structure. The outputs of some stages of production become inputs to others. Production takes time. The capital structure, broadly conceived, has a temporal profile – one that can be modified in response to changes in intertemporal consumption preferences and resource constraints. This was the central message of Eugen von Böhm-Bawerk (1959). Alfred Marshall, who theorized in terms of the short period and the long period, taught us that most problems in economics stem from the ever-critical time element. I think Marshall was right on time. But I also believe that a healthy understanding of some of those problems – particularly the ones in macroeconomics – is not best facilitated by his simple short-period/longperiod distinction. Adopting Marshallian methods, John Maynard Keynes dealt with the polar extremes in the quality of expectations, casting serious doubt on the viability of a market system. In the short run, the time element itself is no problem: short-run expectations faithfully reflect reality. If the level of spending changes, the multiplier process plays itself out in a clockwork sequence of spending and earning, eventually achieving a new circular-flow equilibrium. Long-run expectations, however, are another matter. Here, the time element is a debilitating problem: these expectations, if you can call them that, are baseless. The future...

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