A Critical Essay on Modern Macroeconomic Theory - Hardcover

Frank Hahn; Robert Solow

Hardcover

ISBN 10: 0631134832 ISBN 13: 9780631134831

Publisher: WILEYBLACKWELL, 1996

Synopsis

Macroeconomics began as the study of large-scale economic pathologies such as prolonged depression, mass unemployment, and persistent inflation. In the early 1980s, rational expectations and new classical economics dominated macroeconomic theory, with the result that such pathologies can hardly be discussed within the vocabulary of the theory. This essay evolved from the authors' profound disagreement with that trend. It demonstrates not only how the new classical view got macroeconomics wrong, but alsohow to go about doing macroeconomics the right way. Hahn and Solow argue that what was originally offered as a normative model based on perfect foresight and universal perfect competition -- useful for predicting what an ideal, omniscient planner should do -- has been almost casually transformed into a model for interpreting real macroeconomic behavior, leading to Panglossian economics that does not reflect actual experience. Following an explanation of microeconomic foundations, chapters introduce the basic elements for a better macro model. The model is simple, but combined with the appropriate model of the labor market it can say useful things about the fluctuation of employment, the correlation between wages and employment, and the role for corrective monetary policy.

About this title

About the Author:

Frank Hahn is Professor Ordinario at the University of Siena, Professor Emeritus of Cambridge University, and Fellow of Churchill College. Robert Solow is Institute Professor of Economics Emeritus at the Massachusetts Institute of Technology. He received the Nobel Prize in economics in 1987 for his macroeconomic research linking technology and growth.

Review:

Like the great debate between Einstein and Bohr on quantum physics,the debate between Hahn-Solow and Lucas's rational expectationismis a must for all serious students of macro. This is how scientificprogress should be done—by sober analysis rather than cleverrhetoric or frenzied ideology.

(Paul A. Samuelson, Professor of Economics, M.I.T.)

Professors Hahn and Solow pick up the simple general equilibrium models of new classical macroeconomics and run with them. Of course, they head off in directions that are theirs alone. Critics of these models, and enthusiasts, will want to read this book and see how far they get.

(Paul M. Romer, Professor of Economics, University of Californiaat Berkeley)

About this edition

• Publisher: WILEYBLACKWELL
• Publication date: 1996
• ISBN 10: 0631134832
• ISBN 13: 9780631134831
• Binding: Hardcover
• Number of pages: 168