Keynes, the Classics and the ‘New Classicism’

In the last chapter we attempted to give an outline of ‘monetarist’ macroeconomics and to contrast this with the ‘Keynesian’ model we developed in earlier chapters. In developing any model — whether ‘Keynesian’, ‘monetarist’, or what you will — there is always a risk of losing sight of its overall structure in the necessarily rather detailed examination of its component parts. This chapter is designed to guard against this risk by: (a)recalling the principal characteristics of our Keynesian model(b)contrasting this with the model which is typically used to exemplify pre-Keynesian (or ‘classical’) macroeconomics(c)offering a brief account of what is nowadays called ‘New Classicism’ — a doctrine which, basing itself on a theory of how expectations are formed, denies the relevance of ‘Keynesian’ economics and has powerful implications for the conduct of economic policy. Monetarist Macroeconomics