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 6: Equilibrium and Path-dependence from a Perspective of Uncertainty

Jesper Jespersen

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


I should, I think, be prepared to argue that, in a world ruled by uncertainty with an uncertain future linked to an actual present, a final position of equilibrium, such as one deals with in static economics, does not properly exist. (CWK, XXIX: 222, in a letter to H.D. Henderson, May 1936) PROLOGUE: ‘A LONG STRUGGLE OF ESCAPE’ This chapter covers an important methodological aspect of the macroeconomic discussion that began in 1936. As mentioned in the introductory chapter, there is a crucial, methodologically-based dividing line that runs through the history of macroeconomic theory and which defines the various schools of macroeconomic theory. It is the evaluation of whether an empirically anchored macroeconomic system can be analysed by using the general equilibrium method. This is an important dividing line on the analytical level (World 2). There are many reasons for this, reasons that have been explored in a vast quantity of macroeconomic literature since 1936. Not all the authors of these numerous books and articles have explicitly made clear that this fundamental question has been and still is a very crucial undercurrent in the debate between the orthodox and the heterodox macroeconomists. If they had, fewer bookshelves might have been needed (and much shadow boxing could have been avoided). In all fairness, it should be mentioned that it is only within the past 20–30 years that it has become clearer that there is such a methodological gulf separating the two positions. This is a comprehension process for which the...

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