Axel Leijonhufvud's On Keynesian Economics and the Economics of Keynes (1968) was a seminal contribution to the literature on what came to be known as the micro-foundations of macro-economics, but its Marshallian approach, which involved analysing the disequilibrium dynamics of markets in which trade at non-market clearing prices would occur, was not that eventually adopted in the early 1970s. Instead, a Walrasian development of monetarism, namely new- classical macroeconomics, which combined the postulate of continuously clearing markets with the rational expectations hypothesis became dominant. Even so, Leijonhufvud's subsequent work on the costs of inflation had an important influence in establishing this phenomenon's policy importance, and, along with his earlier analysis of employment fluctuations, provides still important insights about why the relevance of now-orthodox economics might be limited to helping us understand the economy's performance within a corridor whose boundaries lie close to its full-employment-price-stability equilibrium.
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Length: Date of creation: 2006 Date of revision: Handle: RePEc:uwo:epuwoc:20063
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Find related papers by JEL classification: B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics B31 - Schools of Economic Thought and Methodology - - History of Thought: Individuals - - - Individuals D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General D90 - Microeconomics - - Intertemporal Choice and Growth - - - General E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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