Michel De Vroey
Academic year 2016-17
First semester, 30 hours
5 credits
A doctoral course on the history of macroeconomics from Keynes to Lucas (and beyond)
MOTIVATION
As compared to what it used to be twenty years ago, macroeconomics theory has evolved towards high technicity. I have no objection of principle against this evolution. I also believe that our doctoral school must be at the cutting edge of research and hence of technicality. Still, as President Mao used to say, we need to walk on both feet. Technique is one foot; the other is the ability of thinking critically and keeping the big picture. I see it as part of our teaching that we develop our students’ critical mind and general culture so that they would become more than just technicians. The value added of this course is twofold. First, it should help students of macroeconomics to understand where it all started from, what were the issues raised by the founders of the discipline, the controversies and revolutions that have arisen in the course of its development. Second, it should allow students to get acquainted with the seminal works in the field.
CONTENTS
The aim of this course is to engage in a reflection on the evolution of macroeconomics from Keynes up to the present, and a confrontation of the views of its two towering figures, Keynes and Lucas.
Keynes’s General Theory started a revolution, the so-called ‘Keynesian revolution’, marking a breach from the standard neoclassical paradigm of the time. It led to the new discipline of macroeconomics, itself centred on the IS-LM model from the conceptual point of view and on the idea that the state had to play a demand activation role, from the policy viewpoint. While Friedman’s monetarist theory was a first salvo against Keynesian macroeconomics, the most damaging attack against it was due to New Classical economists, under Lucas’ leadership. Lucas’s work led to the dethroning of the Keynesian orthodoxy and paved the way for a new approach in macroeconomics, real business cycle theory, centred on stochastic-dynamic models. These constitute the present-day prevailing orthodoxy. However, Keynesians (but then the meaning of this term needs to be made clear!) have not said their last word. From the days of the new classical offensive, they have retorted by proposing so-called New Keynesian models aiming at bringing out conclusions faring against laissez-faire policies. Efficiency wage models, coordination failure models, imperfect competition, are amongst the best known of these models. In a second stage, they have started to construct dynamic models with Keynesian features.
METHOD
The course will have a seminar form, alternating two types of readings: (a) seminal papers by ‘great’ macroeconomists (Keynes, Lucas, Prescott and others); (b) selected chapters on my recent book on the history of macro (“A History of Macroeconomics from Keynes to Lucas and Beyond” CUP 2016). Each class will deal with a paper or a chapter that students will be required to read in advance. The class will then consist in exchanges on the topic discussed in the paper/chapter with students invited to play the devil's advocate with respect to the tetxs read. The exam will consist of a paper to be written at the end of the course.
AUDIENCE
The course is open to all doctorate students , be they macroeconomists or not.
AGENDA
I will organize a meeting during the first week of the semester to present the course and discuss organizational matters with students (schedule, rules of the game, attendance and examination). It will be announced beginning of September.