Implications and Relevance
Edited by Phillip Arestis, Michelle Baddeley and John S.L. McCombie
Chapter 3: Central bank behaviour and the stability of macroeconomic equilibrium: a critical examination of the 'New Consensus'
3. Central bank behaviour and the stability of macroeconomic equilibrium: a critical examination of the ‘New Consensus’ Mark Setterﬁeld* 1. INTRODUCTION It has become commonplace to refer to the existence of a ‘New Consensus’ in monetary macroeconomics. According to Taylor (2000, p. 91), variants of this model are already characteristic of most macroeconomic policy research and the policy models of several prominent central banks, including the Federal Reserve and the European Central Bank. Macroeconomics is, of course, no stranger to ‘consensus’, having been dominated for several decades by the Neoclassical Synthesis.1 But the problem with consensus – especially when it is more apparent than real – is that it can serve to narrow and stiﬂe debate, something that can only fetter scientiﬁc progress. As Mehrling remarks with respect to the Neoclassical Synthesis: in the beginning, the neoClassical Synthesis was more of a way of talking than a way of thinking, a common language that allowed diverse groups interested in economic issues to converse with one another … [But] as more and more economists came to speak the new language, it became not just a way of talking but a way of thinking. What could not be said in the new language could not be understood, and hence must be nonsense. The price paid for the uniﬁcation of economics discourse was therefore a certain ﬂattening of that discourse. (Mehrling, 1996, p. 72) This chapter asserts the importance of continued debate in macroeconomics, based on a critical examination and comparative evaluation...
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