Stagflation and the Rejection of Keynesian Economics: A Case of Naive Falsification
AbstractIn this paper I employ Imre Lakatos's methodology of scientific research programs to scrutinize the idea that stagflation in the 1970s falsified the Keynesian research program. I point out that Keynesian models were able to account for stagflation once they included inflation expectations, so the essential tenets of the Keynesian research program are consistent with the would-be anomaly of stagflation. Furthermore, Keynesian economics exhibited both theoretical and empirical progress by evolving in a way that rendered stagflation a logical consequence of Keynesian assumptions. The transition to new classical economics did not yield such progress. Also, as Keynesian economics tends to adopt novel findings and research methods, new classical economics does not have excess theoretical or empirical content relative to the Keynesian research program. In summary, I find that the falsification of the Keynesian program is unwarranted.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 50536.
Date of creation: 09 Oct 2013
Date of revision:
Keynesian Economics; New Classical Economics; Monetarism; Scientific Revolutions; Scientific Research Programs; Imre Lakatos;
Find related papers by JEL classification:
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-HPE-2013-10-18 (History & Philosophy of Economics)
- NEP-PKE-2013-10-18 (Post Keynesian Economics)
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