The Stories We Tell: A Reconsideration of AS / AD Analysis | Zendy

David Colander | Zendy

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The Stories We Tell: A Reconsideration of AS / AD Analysis

Author(s) -

David Colander

Publication year - 1995

Publication title -

the journal of economic perspectives

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 9.614

H-Index - 196

eISSN - 1944-7965

pISSN - 0895-3309

DOI - 10.1257/jep.9.3.169

Subject(s) - disequilibrium , economics , keynesian economics , consistency (knowledge bases) , component (thermodynamics) , econometrics , macroeconomics , mathematical economics , computer science , thermodynamics , medicine , physics , artificial intelligence , ophthalmology

This paper explains that the AS/AD model as currently presented in the tests is seriously flawed. It does not fulfill the minimum requirement of a model: logical consistency. Its component parts are derived from models that reflect different, and inconsistent, models of the economy. Moreover, the appropriate disequilibrium adjustment story that appropriately accompanies it is inconsistent with observed reality. In this alternative model, Keynesian adjustment occurs through shifting AS/AD curves along institutionally determined price level vectors rather than through movements along the AS/AD curves.

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