Handbook on the History of Economic Analysis Volume III
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Handbook on the History of Economic Analysis Volume III

Developments in Major Fields of Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume III contains entries on the development of major fields in economics from the inception of systematic analysis until modern times. The reader is provided with succinct summary accounts of the main problems, the methods used to address them and the results obtained across time. The emphasis is on both the continuity and the major changes that have occurred in the economic analysis of problematic issues such as economic growth, income distribution, employment, inflation, business cycles and financial instability. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.
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Chapter 10: Economic dynamics

J. Barkley Rosser Jr


“Economic dynamics” is a large topic. In the space allotted here it is impossible to fully cover it. So, I shall begin by clarifying what will not be covered in this entry. While the focus will be more on macroeconomic than microeconomic dynamics, long-run growth will not be a main topic, although it will enter in as it is connected to economic fluctuations. Also, there will be less focus on models of dynamics that rely mainly upon exogenous shocks as their main driver, sometimes argued to represent classical approaches. It must be recognized that much of current modelling in macroeconomics follows such an approach, with Frisch’s (1933) “rocking horse model” the archetype for much of what followed in this vein (Lucas and Sargent 1981; Kydland and Prescott 1982; Long and Plosser 1983). Business cycles arise from shocks to productivity or to the desire to work on the part of labour. Little effort is made to model these shocks, and the result is that such models have performed poorly in explaining such events as the crisis of 2008 and the events following it. However, it must be recognized that the wisecrack of William “Buz” Brock that the only truly exogenous force in the economy is the sun (personal communication 1985) contains considerable truth.

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