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N o End to the Consensus in Macroeconomic Theory? A Methodological Inquiry
Author(s) -
McCombie John,
Pike Maureen
Publication year - 2013
Publication title -
american journal of economics and sociology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.199
H-Index - 38
eISSN - 1536-7150
pISSN - 0002-9246
DOI - 10.1111/ajes.12008
Subject(s) - economics , unemployment , subject (documents) , keynesian economics , crunch , washington consensus , positive economics , political science , macroeconomics , law , computer science , medicine , politics , library science , physical therapy
After the acrimonious debates between the N ew C lassical and N ew K eynesian economists in the 1980s and 1990s, a consensus developed, namely, the N ew N eoclassical S ynthesis. However, the 2007 credit crunch exposed the severe limitations of this approach. This article presents a methodological analysis of the N ew N eoclassical S ynthesis and how the paradigmatic heuristic of the representative agent, namely, market clearing subject to sticky prices, excluded the K eynesian notion of involuntary unemployment arising from lack of effective demand. It shows these models may be modified to produce K eynesian results, but are ruled out of consideration by proponents of the N ew N eoclassical approach by weak incommensurability. It concludes that because of this the N ew N eoclassical S ynthesis, in spite of its failure to explain the sub‐prime crisis, is likely to resist successfully the resurgence in K eynesian economics.