In search of lost time: the neoclassical synthesis

Vroey, Michel De; Duarte, Pedro Garcia

doi:10.1515/bejm-2012-0078

Cited by 26 publications

(15 citation statements)

References 58 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…43 See Duarte (2012), De Vroey and Duarte (2013), and references therein for a historical discussion of this literature. 44 See references cited in footnote 1.…”

Section: New Perspective On the Origins Of Woodford's 2003 Bookmentioning

confidence: 99%

“…31 Woodford is very explicit about this indeterminacy being more important than the indeterminacy of the "Samuelson case" (Gale 1973), in which non-stationary equilibria converge to a steady-state. Why so?…”

mentioning

confidence: 99%

“…31 If the indeterminate steady state implies the existence of sunspot equilibria, then there is no guarantee that the economy will eventually reach "the steady state allocation in every rational expectations equilibrium" (Woodford 1984, 73). It was clear at the time that stationary sunspot equilibria was a possibility either in monetary OLG models or in models without fiat money, as demonstrated by Azariadis (1981).…”

mentioning

confidence: 99%

See 2 more Smart Citations

Challenging Lucas: From Overlapping Generations to Infinite-Lived Agent Models

Assous

Duarte

2017

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Terms of use: Documents inThe canonical history of macroeconomics, one of the rival schools of thought and the great economists, gives Robert Lucas a prominent role in shaping the recent developments in the area. According to it, his followers were initially split into two camps, the "real business cycle" theorists with models of efficient fluctuations, and the "new-Keynesians" with models in which fluctuations are costly, and the government has a role to play, due to departures from the competitive equilibrium (such as nominal rigidities and imperfect competition). Later on, a consensus view emerged (the so-called new neoclassical synthesis), based on the dynamic stochastic general equilibrium (DSGE) model, which combines elements of the models developed by economists of those two groups. However, this account misses critical developments, as already pointed out by Cherrier and Saïdi (2015). As a reaction to Lucas's 1972 policy ineffectiveness results, based on an overlapping generations (OLG) model, a group of macroeconomists realized that a competitive OLG model may have a continuum of equilibria and that this indeterminacy justified government intervention for competitive cycles that emerged even in deterministic models. We can identify here two distinct, but related, groups: one of the deterministic cycles of David Gale, David Cass, and Jean-Michel Grandmont, and another of the stochastic models and sunspots of Karl Shell, Roger Guesnerie, Roger Farmer and Costas Azariadis (Lucas's PhD student). Here, the OLG was the workhorse model. Following from these works, a number of authors, including Michael Woodford, argued that similar results could occur in models with infinitely lived agents when there are various kinds of market imperfections. With such generalization, some of these macroeconomists saw that once these imperfections are introduced, nothing important for business cycle modeling was lost and they could therefore leave the OLG model aside as a model of business fluctuations, to the dismay of authors such as Grandmont, Robert Solow and Frank Hahn.In this paper, we scrutinize the differences between the deterministic cycles and sunspot groups and explore the many efforts of building a dynamic competitive business cycle model that implies a role for the government to play. We then assess the transformation process that took place in the late 1980s when several macroeconomists switched from OLG to infinitelived agents models with imper...

show abstract

“…43 See Duarte (2012), De Vroey and Duarte (2013), and references therein for a historical discussion of this literature. 44 See references cited in footnote 1.…”

Section: New Perspective On the Origins Of Woodford's 2003 Bookmentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

See 1 more Smart Citation

Challenging Lucas: From Overlapping Generations to Infinite-Lived Agent Models

Assous

Duarte

2017

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…As a matter of fact, in the Foundations of Economic Analysis he presented the general equilibrium framework and the Keynesian framework side by side without mentioning any problem of compatibility. For De Vroey (2009) and De Vroey and Pedro Garcia Duarte (2013), Samuelson considered that Walras’s theory described the long-run position of the economy. The Keynesian theory in turn captured the disequilibrium states of the system moving towards its long-run position, a vision different from Lange’s viewpoint.…”

Section: Immediate Influence Of Lange’s 1938 Papermentioning

confidence: 99%

Oskar Lange and the Walrasian Interpretation of Is-Lm

Rubin

2016

J Hist Econ Thought

108

View full text Add to dashboard Cite

A few years after the publication of The General Theory, a number of economists began to present John Maynard Keynes’s model, identified with IS-LM, as a particular case of the Walrasian model. This view of IS-LM has often been rationalized by a basic syllogism: IS-LM was invented by John Hicks, Hicks was a Walrasian, hence IS-LM was Walrasian. But as some historians of macroeconomics have shown, this syllogism is false. Considering this confusion as an established fact, this article studies how and why IS-LM came to be considered as Walrasian. It shows that the standard view took its roots in “The Rate of Interest and the Optimum Propensity to Consume,” a paper published by Oskar Lange in 1938, and resulted from a need to clarify the foundations of Keynes’s theory.

show abstract

“…Duarte and Lima 2012). Michel De Vroey and Pedro Duarte (2013) have dissected the old and the new neoclassical syntheses and the rise of dynamic stochastic general equilibrium models, which is also the focus of Duarte's 2011 essay on "Recent Developments in Macroeconomics." 31 Simon's shift from a decision-making referential framework to an information-processing framework was spurred by this collaboration, beginning in 1952, with experimental psychologists and Allan Newell on simulations of an Air Force information processing center at the RAND Systems Research Laboratory (see Klein 2015).…”

Section: The Rationality Of the Modelermentioning

confidence: 99%

The Cold War Hot House for Modeling Strategies at the Carnegie Institute of Technology

Klein

2015

SSRN Journal

View full text Add to dashboard Cite

US Military needs during the Cold War induced a mathematical modeling of rational allocation and control processes while simultaneously binding that rationality with computational reality. Modeling strategies to map the optimal to the operational ensued and eventually became a driving force in the development of macroeconomic dynamics. Key features of macroeconomics that originated in US military-funded research on applied mathematics in the 1950s and 1960s included recursive optimization taking uncertainty into account, agents modeled as collections of decision rules, and the certainty equivalent and equilibrium modeling strategies. The modeling strategies that opened the door to economists' agile underpinning of macroeconomics with microfoundations had their own foundation in empirical microeconomics. In the 1950's the United States Air Force Project SCOOP (Scientific Computation of Optimum Programs) and the Office of Naval Research awarded contracts to establish and maintain a research center for the Planning and Control of Industrial Operations at 37 See for example, Taylor 1975, Phelps and Taylor 1977, and da Silva's 2015 conference presentation on "The First Keynesian Reactions to Lucas's Macroeconomics of Equilibrium". 38 Speaking on the state of the discipline from the perspective of the 2008 financial crisis in the US and elsewhere, Ricardo Caballero (2011) remarked, "By some strange herding process, the core of macroeconomics seems to transform things that may have been useful modeling shortcuts into a part of a new and artificial "reality." And now suddenly everyone uses the same language, which in the next iteration gets confused with, and eventually replaces, reality."

show abstract

In search of lost time: the neoclassical synthesis

Cited by 26 publications

References 58 publications

Challenging Lucas: From Overlapping Generations to Infinite-Lived Agent Models

Challenging Lucas: From Overlapping Generations to Infinite-Lived Agent Models

Oskar Lange and the Walrasian Interpretation of Is-Lm

The Cold War Hot House for Modeling Strategies at the Carnegie Institute of Technology

Contact Info

Product

Resources

About