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From Disequilibrium to Equilibrium Macroeconomics: Barro and Grossman's Trade-off between Rigor and Realism

Author

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  • Romain Plassard

    (Université Côte d'Azur, France
    GREDEG CNRS)

Abstract

During the 1970s, Keynesian macroeconomics was challenged by the New Classical Economics of Robert Lucas. This involved a battle between disequilibrium and equilibrium macroeconomics. My article contributes to explain why the equilibrium approach came to dominate. My case study is Robert Barro and Herschel Grossman. In 1971, Barro and Grossman elaborated the basic disequilibrium model. In 1976, they wrote the first book on disequilibrium macroeconomics – i.e., Money, Employment, and Inflation. However, at the end of the 1970s, they came to advocate for equilibrium models à la Lucas (1972, 1975). My article traces how and why

Suggested Citation

  • Romain Plassard, 2019. "From Disequilibrium to Equilibrium Macroeconomics: Barro and Grossman's Trade-off between Rigor and Realism," GREDEG Working Papers 2019-17, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2019-17
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    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Ronald G. Bodkin, 1969. "Real Wages and Cyclical Variations in Employment: A Re-Examination of the Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 2(3), pages 353-374, August.
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    7. Grossman, Herschel I, 1973. "Aggregate Demand, Job Search, and Employment," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1353-1369, Nov.-Dec..
    8. Grossman, Herschel I., 1983. "The natural-rate hypothesis, the rational-expectations hypothesis, and the remarkable survival of non-market-clearing assumptions," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 19(1), pages 225-245, January.
    9. De Vroey,Michel, 2016. "A History of Macroeconomics from Keynes to Lucas and Beyond," Cambridge Books, Cambridge University Press, number 9781107584945.
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    11. Barro, Robert J & Grossman, Herschel I, 1971. "A General Disequilibrium Model of Income and Employment," American Economic Review, American Economic Association, vol. 61(1), pages 82-93, March.
    12. Olivier Blanchard, 2000. "What Do We Know about Macroeconomics that Fisher and Wicksell Did Not?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1375-1409.
    13. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
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    More about this item

    Keywords

    business cycle; non-neutrality of money; disequilibrium macroeconomics; equilibrium macroeconomics;
    All these keywords.

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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