Macroeconomic Theory After the Crisis

Abstract

Mainstream macroeconomic theory, especially as synthesized in the New Neoclassical Synthesis, is argued to have many problematic aspects, problems which have been especially underscored by the recent economic crisis, and which relate to its method, its views of the economy, and its goals and its policy implications. These failings call for greater pluralism in macroeconomic theory and greater acceptance of alternative approaches. One of these—which is based on accounting identities and behavioral and institutional relations, which stresses the importance of uncertainty and power, emphasizes the goals of reducing unemployment and distributional fairness, and views policymaking as an art—is particularly worthy of attention.

JEL classification: B22, B41, E00