Edited by Jesper Jespersen and Mogens Ove Madsen
Chapter 11: Neoclassical and Keynesian macro models: thinking about the ‘special case’
The purpose of this chapter is to propose a reflection on an old and fundamental topic in economic theory, i.e. the degree of ‘generality’ of the neoclassical rather than the Keynesian macro model: is it true, as stated by the proponents of the so called Neoclassical Synthesis, that The General Theory is nothing but a ‘special case’? The chapter is organized as follows. The next section illustrates the standard neoclassical macro model. In this section there is nothing essentially new; it only serves the purpose of setting the stage for the subsequent arguments. This model will be written in its ‘complementarity format’, which is the best way to show the strong formal similarities between the neoclassical and the Keynesian (General Theory) macro model. Along these lines, the third section shows how Keynesian models may be written in the same way as a neoclassical model. The following section will use these formal similarities as a starting point for a deeper discussion on the issue of ‘generality’ of neoclassical and Keynesian macro models. The fifth section concludes.
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