Austrian and new classical business cycle theories: a comparative study through the method of rational reconstruction
Austrian and New Classical Business Cycle Theories makes a major contribution to recent developments in macroeconomic theory. In the last two decades, economics has experienced a remarkable shift in focus. Keynesian macroeconomics, at least in its Hickian IS/LM version, has been the ruling orthodoxy since World War II. Although it was sometimes closely challenged by monetarism, it retained its dominant position until the 1970s. In that decade, however, monetarist criticism received support from two other research traditions the Austrian School and New Classical Economics, which stressed the allocative efficiency of markets. Rudy van Zijp critically compares these two traditions. He builds his argument on very careful and sustained analysis of developments in the Austrian and new-classical explanations of cyclical fluctuations, dismissing the claim that the business cycle theories of the two traditions are simply variations on a theme. After a comprehensive description of what he terms the Hayek Programme and the Lucas Programme, he concludes by contrasting the different aims and methods of the two traditions.
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The Roots of New Classicism
The Rise of New Classicism
Persistence Capital and Global Information
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adopted analysis argued assumed assumption Austrian business cycle Austrian economics Austrian School Barro behaviour business cycle theory changes Chapter Classical Economics concluded credit expansion criticized cyclical fluctuations decision situations demand discoordination discorroborated dispersion of knowledge dynamic economic agents economists entrepreneurs entrepreneurship equation equilibrium exogenous expectational errors expectations formation explain Friedman general-equilibrium global Hayek Problem Hayek programme hence implies information sets interest rate interpreted investment joint NR/RE hypothesis Keynesian Kirzner Lachmann lagged latter Lucas and Rapping Lucas critique Lucas's market rate mathematical formalization means methodological individualism Mises Mises's monetary authority money growth money supply natural rate neutrality of money neutrality proposition optimal period Phillips Curve praxeology price level rate of inflation rate of interest rational expectations real business cycle regards rejected relevant result role Sargent and Wallace sense shocks social phenomena structure of production subjectivism tendency towards coordination tion unemployment variables wage rate Wicksellian