The New Classical Macroeconomics: A Sceptical Inquiry

by Kevin D. Hoover

The 1970s and 1980s have witnessed the re-establishment of the classical economic tradition, nearly totally eclipsed since the appearance in 1936 of Keynes' "General Theory". The new classical economics embellishes the central themes of its forerunner - the inherent stability of the private economy, the rationality of economic man and the efficiency of a system of freely determined market prices - with a sophisticated mathematical method. This marriage of the old and the new has generated a number of striking and influential conclusions, among them that people hold rational expectations, that private agents will rationally undo the effects of monetary policy, that taxpayers should be indifferent to government deficits, and that unemployment and business cycles are equilibrium phenomena beyond the reach of macroeconomic policy. This book gives an account of the central doctrines of the new classical economics, without unnecessarily difficult mathematics. It focuses on four central issues: the foundation of monetary theory; monetary and fiscal policy; labour supply and business cycles; and the attack on econometric models. In addition, the relationship of the new classical economics to monetarism and the Austrian School, with both of which it is often confused, is explored.

Genres: Economics

310 pages, Hardcover

First published December 1, 1988