Macroeconomic Methodology

Macroeconomic Methodology

A Post-Keynesian Perspective

Jesper Jespersen

Jesper Jespersen presents a treatise on the importance of the choice of methodology within macroeconomics. Given that no scientifically based macroeconomic policy recommendation should be established without an evaluation of the methods employed, this book gives a clear exposition of how proper macroeconomic analysis should be undertaken. Furthermore, it is convincingly argued that one of the lasting contributions of John Maynard Keynes was his emphasis on methodology; that macroeconomic consequences of uncertainty could not be analysed within the established general equilibrium framework. It is due to post-Keynesian economics supported by critical realism that the understanding of Keynes’s methodology has been resurrected, which has eventually resulted in renewed debate on realistic macroeconomic policies to restore full employment without inflation.

Chapter 2: Macroeconomic Methodology: From a Critical Realist Perspective

Jesper Jespersen

Subjects: economics and finance, economic psychology, history of economic thought, methodology of economics, post-keynesian economics


The coherence of Post Keynesian Economics lies principally at the methodological level. (Dunn, 2004: 34) PROLOGUE The purpose of this chapter is to give the theory-of-science background to the development of a realist-inspired, macroeconomic methodology that can serve as a foundation for post-Keynesian macroeconomic theory. It is crucial to clarify the methodological fundamentals before any theory is drawn up. Theories and models in economics cannot be plucked out of thin air; they will always be anchored to the chosen method, and therefore it is important to discover whether there is consistency between the employed scientific practice and the theoretical intention. If the goal of a macroeconomic analysis is to provide policy recommendations to improve real macroeconomic development, then the theory must be anchored to a realistic methodology. If on the contrary the goal is to investigate the existence of equilibrium in a theoretical model, then the method should be chosen accordingly to fit this problem. It is important that the aim of the analysis is recognized when the analytical models for policy recommendations are developed and selected. In the previous chapter, the significant division of purposes between neoclassical general equilibrium theory and post-Keynesian macroeconomic theory was described. General equilibrium theory has the primary task of analysing and understanding the nature of the functioning of a perfect market system. Here, the existence of equilibrium is a core attribute. The ambition of post-Keynesian macroeconomic theory is to understand and explain trends in past macroeconomic development and to provide policy recommendations with relevance...

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