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What They Were Thinking Then: The Consequences for Macroeconomics during the Past 60 Years

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  • George A. Akerlof

Abstract

This article explores the development of Keynesian macroeconomics in its early years, and especially in the Big Bang period immediately after the publication of The General Theory. In this period, as standard macroeconomics evolved into the "Keynesian-neoclassical synthesis," its promoters discarded many of the insights of The General Theory. The paradigm that was adopted had some advantages. But its simplifications have had serious consequences—including immense regulatory inertia in response to massive changes in the financial system and unnecessarily narrow application of accelerationist considerations (regarding inflation expectations).

Suggested Citation

  • George A. Akerlof, 2019. "What They Were Thinking Then: The Consequences for Macroeconomics during the Past 60 Years," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 171-186, Fall.
  • Handle: RePEc:aea:jecper:v:33:y:2019:i:4:p:171-86
    Note: DOI: 10.1257/jep.33.4.171
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    File URL: https://www.aeaweb.org/doi/10.1257/jep.33.4.171
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    Citations

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    Cited by:

    1. Pierre L. Siklos, 2020. "Looking into the Rear-View Mirror: Lessons from Japan for the Eurozone and the U.S?," IMES Discussion Paper Series 20-E-02, Institute for Monetary and Economic Studies, Bank of Japan.

    More about this item

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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