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Hayek, Keynes, and modern macroeconomics

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  • Roger Koppl

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  • William Luther

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Abstract

The Great Recession seems to be creating a change in the trend of macroeconomic thinking. Prior to the financial crisis of 2008, dynamic stochastic general equilibrium (DSGE) models dominated the macroeconomics literature without any apparent challengers on the horizon. Since then, however, we have seen an increasing interest in macroeconomic models that address the state of confidence (“animal spirits”), complexity, cognition, and radical uncertainty. Most of the renewed interest in animal spirits, complexity, cognition, and radical uncertainty has come from a more or less “Keynesian” perspective. We discuss the potential to emphasize these elements from a more “Hayekian” perspective and argue that Austrian approaches to macroeconomics along these lines are more likely to resonate with mainstream economists than in years past. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Roger Koppl & William Luther, 2012. "Hayek, Keynes, and modern macroeconomics," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 223-241, September.
  • Handle: RePEc:kap:revaec:v:25:y:2012:i:3:p:223-241 DOI: 10.1007/s11138-011-0161-5
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    Cited by:

    1. Heise, Arne, 2014. "The Future of Economics in a Lakatos–Bourdieu Framework," MPRA Paper 80024, University Library of Munich, Germany.
    2. Petrik Runst, 2014. "Crisis and belief: confirmation bias and the behavioral political economy of recession," Constitutional Political Economy, Springer, vol. 25(4), pages 376-392, December.
    3. William Luther & Mark Cohen, 2014. "An Empirical Analysis of the Austrian Business Cycle Theory," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(2), pages 153-169, June.

    More about this item

    Keywords

    Animal spirits; Cognition; Complexity; Great recession; Hayek; Keynes; Radical uncertainty; State of confidence; B53; E32; G12; E5; E6;

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • A - General Economics and Teaching

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