A Critical Essay on Modern Macroeconomic Theory
Macroeconomics began as the study of large-scale economic
pathologies such as prolonged depression, mass unemployment and
persistent inflation. In the early 1980s rational expectations and
new classical economics dominated macroeconomic theory, with the
result that such pathologies can hardly be discussed within the
vocabulary of the theory. This book evolved from the authors'
profound disagreement with that trend. It demonstrates not only how
the new classical view got macroeconomics wrong, but how to go
about doing macroeconomics the right way.
Following an explanation of microeconomic foundations, chapters
introduce the basic elements for a better macro-model. The model is
simple, but combined with the appropriate model of the labor market
it can say useful things about the fluctuation of employment, the
correlation between wages and employment, and the role for
corrective monetary policy.
1. Introduction.
2. Perfectly Flexible Wages.
3. Imperfect Wage Flexibility.
4. Imperfect Competition.
5. The Labor Market.
6. Macroeconomics.
7. Conclusions.
Notes.
References.
Index.
Professor Emeritus of Cambridge University, and Fellow of Churchill
College.
Robert Solow is Institute Professor of Economics at the
Massachusetts Institute of Technology. He received the Nobel Prize
in economics in 1987 for his macroeconomic research linking
technology and growth.
