ȀȂǿ Partʺ: Economicsfree-market-oriented than thou.” (I am reporting my impression of doc-
trines, not conjecturing about anyone’s motives nor saying that exagger-
ation crowds out scholarly substance; still, fads do come and go in the
academic world.)
Self-parodying free-marketry has handed an opportunity to look sen-
sible by contrast to self-styled New Keynesians, who share several percep-
tions of reality with the monetarists and who take imperfect competition
and price and wage stickiness seriously. (Examples of the work of this mis-
leadingly named school appear in Mankiw and RomerȀȈȈȀ.) As Axel Lei-
jonhufvud (ȀȈȇȅ) has noted in a more general context, macroeconomists
have been playing musical chairs with doctrinal positions and labels.
Nowadays (aroundȁǿȀǿ), a new-classical/new-Keynesian synthesis,
also called dynamic (or dynamicstochastic) general-equilibrium theory,
enjoys academic prestige. It explores the properties of mathematical mod-
els and tweaks them to remove blatant contrasts with statistics of the
real world. It assumes rational expectations, which is sensible enough if
taken to mean no more than that people will not persist in making rec-
ognized mistakes. It assumes that markets are always in or near equilib-
rium—in some stretched sense of that word—so showing scant attention
to the issues of coordination and discoordination that concern Austrian
economists.Ȁ
Ļis disarray in macroeconomics gives Austrian-school economists, as
well as monetarists and New Keynesians, an opportunity to set the main
stream of macroeconomics on a sounder course. Two major characteris-
tics, besides others mentioned below, especially equip Austrians to seize
this opportunity. First, it focuses on the central problem bridging micro
and macro economics, the problem of economywide coordination. (Ger-
ald O’Driscoll aptly entitled his doctoral dissertationEconomics as a Coor-
dination Problem.) Second, it is readier than other free-market-oriented
schools to face reality as it is, “warts and all.”
ŏśśŞŐŕŚōŠŕśŚ
Robert Clower (ȀȈȇȃ, p.ȁȆȁ) observed that
the approaches of the Keynesians, monetarists, and new classical econo-
mists to monetary theory and macroeconomics will get us exactly nowhereȀSome might consider this characterization unfair. For an enthusiastic textbook treat-
ment, see Wickensȁǿǿȇ.