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Bill Gerrard: University of Leeds, Leeds, UK
ACKNOWLEDGMENT: This article is based on the following books: Chrystal and Price (1994), Cowen and Kroszner (1994), Davidson (1994), Dore et al. (1994), Farmer (1993) and Snowdon et al. (1994).
Introduction
Modern macroeconomics is a diverse and fast-developing subject area.It needs to be surveyed continually to show how individual contributions generate collective progress towards a better understanding of the behaviourof the macro economy. However, most surveys of macroeconomics tend tofocus on the existence of competing schools of thought (for example, Chrystal and Price, 1994; Phelps, 1990). A Modern Guide to Macroeconomics: An Introduction to Competing Schools of Thought by Snowdon et al. (1994) provides a very comprehensive and detailed survey of macroeconomics to be recommended to all those studying macroeconomics at an intermediate level or beyond. The guiding principle of the survey is that economists disagree and these disagreements can be best understood in terms of seven competing schools of thought: orthodox Keynesian, monetarist, new classical, real business cycle theory, new Keynesian, Austrian and post-Keynesian. The authors conclude: "There is a large amount of competition between the rival schools in economics and an emphasis placed upon differences rather than similarities" (p. 418). But the "emphasis placed upon differences" is a matter of interpretation. Undoubtedly macroeconomics is characterized by deep divisions, but there is also much in the way of agreement between the schools which is often obscured by the concentration on disagreement.
This survey follows Snowdon et al. (1994) and others in considering the macroeconomic debate in terms of different schools of thought. Seven schools are differentiated and classified as orthodox, new or radical. The two orthodox schools, ISLM Keynesian and neoclassical/monetarist, were the early mainstream schools which focused primarily on the determination of aggregate demand. The three new schools, new classical, real business cycle and new Keynesian, are more recent mainstream schools which have put much greater emphasis on deriving macro outcomes from choice-theoretic foundations.The two radical schools, Austrian and post-Keynesian, provide a critique of mainstream methods of analysis and seek to develop alternative macro models which allow more adequately for the essential dynamic nature of a monetary production economy. But, having set out the differences between the schools, the degree of agreement is discussed. It is...