Chapter 5: The Roots of the Present are in the Past: The Relation of Postwar Developments in Macroeconomics to Interwar Business Cycle and Monetary Theory
Robert W. Dimand1 INTRODUCTION The reading lists of graduate courses in macroeconomic theory notoriously focus on articles published within the preceding five years or still circulating as preprints and discussion papers. This reflects the consensus that, this time, the issues and perspectives that agitated economics in the past may safely be discarded as relics of a time when people wrote in prose or in mathematics that did not quite match the notation and assumptions now in use (see Mark Blaug 2001; David Laidler, 2004, Chapter 19). Thus, if the course is being given in the mid-1960s, ‘We are all Keynesians now’, the future lies with disaggregated structural macroeconometric models of two thousand equations or more, and macroeconomists need not trouble themselves about the quantity theory of money or about the classical side of ‘Keynes and the classics’. Similarly, 15 years later, acceptance of the monetary misperceptions version of New Classical Economics as definitive and final meant that there was no need for serious study of Keynesian economics (a single chapter on IS/LM near the end of Robert Barro’s intermediate macro textbook or in Thomas Sargent’s graduate macro textbook suffices), since the remaining Keynesians were isolated holdovers (like the quantity theorists at the University of Chicago 15 years before) and there was not going to be a New Keynesian macroeconomics. This time is always different, as it also is for optimists discerning a ‘New Economy’ in each stock market boom (of whom Irving Fisher was neither the first nor the last)...
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