Tuesday, April 15, 2008

Yet another bookmark

Alan S. Blinder explains Keynesian economics.


Matt Nolan said...

Interesting article.

The new classical school had a more robust methodology for analyzing problems. Nowadays New Keynesian theory uses the new classical tools to try and explain data in a sense that involves market imperfections - this is definitely the way macro theory is going.

Many economists see themselves as New Keynesian now

Terence said...

Thanks Matt. Did you read the great heterodox economics debate on TPM cafe. It was interesting to read James Galbraith critiquing New Keynesianism from an old Keynesian perspective.

Matt Nolan said...


No I didn't read it. There is still a methodological debate between new and old Keynesians - ultimately I think the main sticking point is rational expectations.

I agree rational expectations don't hold in the short run, but we don't have anything else.

Keynes treated expectations as unobservable (like economists do preferences now) so its an area where the great man left us in the dark.