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What do we know about Macroeconomics that Fisher and Wicksell did not?

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Author Info
Olivier Blanchard

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Abstract

The answer to the question in the title is: A lot. In this essay, I argue that the history of macroeconomics during the 20th century can be divided in three epochs: Pre 1940. A period of exploration, where macroeconomics was not macroeconomics yet, but monetary theory on one side, business cycle theory on the other. A period during which all the right ingredients, and quite a few more, were developed. But also a period where confusion reigned, because of the lack of an integrated framework. From 1940 to 1980. A period of consolidation. A period during which an integrated framework was developed starting with the IS-LM, all the way to dynamic general equilibrium models and used to clarify the role of shocks and propagation mechanisms in fluctuations. But a construction with an Achille's heel, namely too casual a treatment of imperfections, leading to a crisis in the late 1970s. Since 1980. A new period of exploration, focused on the role of imperfections in macroeconomics, from the relevance of nominal price setting, to incompleteness of markets, to asymmetric information, to search and bargaining in decentralized markets. Exploration often feels like confusion. But behind it may be one of the most productive periods of research in macroeconomics.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7550.

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Date of creation: Feb 2000
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Handle: RePEc:nbr:nberwo:7550

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B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Simon Johnson & Andrei Shleifer, 2004. "Privatization and Corporate Governance," NBER Chapters, in: Governance, Regulation, and Privatization in the Asia-Pacific Region, NBER East Asia Seminar on Economics, Volume 12, pages 13-34 National Bureau of Economic Research, Inc. [Downloadable!]
  2. Ansgar Belke & Rainer Fehn, 2001. "Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?," Vienna Economics Papers 0106, University of Vienna, Department of Economics. [Downloadable!]
    Other versions:
  3. Palma, Nuno, 2007. "History of Economics or a Selected History of Economics?," MPRA Paper 5111, University Library of Munich, Germany. [Downloadable!]
  4. Michel De Vroey, 2002. "The history of economic thought: the French way," European Journal of the History of Economic Thought, Taylor and Francis Journals, vol. 9(4), pages 672-687, December. [Downloadable!] (restricted)
  5. Luca Colombo & Gerd Weinrich, 2006. "The Role of Expectations in a Macroeconomic Model with Inventories," Computing in Economics and Finance 2006 65, Society for Computational Economics. [Downloadable!]
  6. Jacqueline Dwyer & Kenneth Leong, 2000. "Nominal Wage Rigidity in Australia," RBA Research Discussion Papers rdp2000-08, Reserve Bank of Australia. [Downloadable!]
  7. Pu Chen & Joachim Frohn, 2006. "On the specification and estimation of large scale simultaneous structural macroeconometric models," AStA Advances in Statistical Analysis, Springer, vol. 90(1), pages 9-25, March. [Downloadable!] (restricted)
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  9. José Félix Cataño, 2005. "La ilusión del análisis integral: comentarios críticos a “La dicotomía micro-macro no es pertinente” de Jorge Iván González," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 7(13), pages 293-310, July-Dece. [Downloadable!]
  10. Gaël Giraud & Céline Rochon, 2008. "Natural rate of unemployment and efficiency: A dynamic analysis with flexible prices and increasing returns," OFRC Working Papers Series 2008fe02, Oxford Financial Research Centre. [Downloadable!]
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  12. Warwick J. McKibbin & David Vines, 2003. "Changes in Equity Risk Perceptions: Global Consequences and Policy Responses," Departmental Working Papers 2003-15, Australian National University, Economics RSPAS. [Downloadable!]
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  18. Robert A Buckle & Kunhong Kim & Heather Kirkham & Nathan McLellan & Jared Sharma, 2002. "A structural VAR model of the New Zealand business cycle," Treasury Working Paper Series 02/26, New Zealand Treasury. [Downloadable!]
  19. Roger Backhouse & Mauro Boianovsky, 2005. "Disequilibrium Macroeconomics: An Episode In The Transformation Of Modern Macroeconomics," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 012, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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