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Macroeconomic Policies on Shaky Foundations – Whither Mainstream Economics?


  • Eckhard Hein

    (Berlin School of Economics and Law, Germany)

  • Torsten Niechoj

    (Macroeconomic Policy Institute (IMK) in the Hans Boeckler Foundation, Germany)

  • Engelbert Stockhammer

    (Vienna University of Economics and Business, Austria)


The present economics crisis – the worst since the Great Depression – has already been changing the rules for macroeconomic policies. Only a few months ago leading economic policy institutions had advocated laissez faire policies and regarded inflation targeting as the ‘golden rule’ for monetary policy. Today the same think tanks recommend recapitalization of banks, non-conventional monetary policies and counter-cyclical fiscal policies. The theoretical basis for mainstream economic policy is the New Neoclassical Synthesis or the New Consensus Model (NCM), which is based on utility maximising representative agents with rational expectations in a dynamic stochastic general equilibrium (DSGE) approach. Keynesian and Post-Keynesian authors have long been critical with this modelling strategy and its policy implications. As has become clear by now, the NCM model is completely inappropriate to deal with the present global financial and real economic crisis. What are the consequences for economic theory and eco­nomic policies? Will the mainstream view on the economy survive – with only minor reforms? Is there any potential within mainstream economics which will transform the “free market view” and the economic policy implications? Since the present situation obviously is an opportunity for Post-Keynesian and other heterodox approaches, are these schools well equipped and ready to tackle the present problems? And how can they have an impact, both on economic policies and on the future development of macroeconomics? The chapters in this book address these questions from different angles.

Suggested Citation

  • Eckhard Hein & Torsten Niechoj & Engelbert Stockhammer (ed.), 2009. "Macroeconomic Policies on Shaky Foundations – Whither Mainstream Economics?," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, volume 12, number 12-2009, January.
  • Handle: RePEc:imk:fmmcps:12-2009

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Leonardo Vera, 2014. "The Simple Post-Keynesian Monetary Policy Model: An Open Economy Approach," Review of Political Economy, Taylor & Francis Journals, vol. 26(4), pages 526-548, October.

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