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1 results

  • 5 - Equilibrium Theory and Macroeconomic Models

  • from Part I - Introduction: Content, Structure, and Strategy of Mainstream Economics
  • Daniel M. Hausman, Rutgers University, New Jersey
  • Book:
    The Inexact and Separate Science of Economics
    Published online:
    25 May 2023
    Print publication:
    08 June 2023, pp 125-153

  • Summary

    Chapter 5 provides a fragmentary introduction to macroeconomics that shows that highlights some of the philosophical questions macroeconomic models raise and relates them to equilibrium theory. Section 1 discusses how growth theory is linked to equilibrium theory. Section 2 considers how growth theory can be adapted to address questions about economic fluctuations, including recessions. Section 3 focuses on a simple influential Keynesian model of economic fluctuations. Section 4 discusses a specific relationship between employment and the rate of inflation (the Phillips Curve) that highlights methodological issues concerning causal inference and microfoundations that have led many economists to reject Keynesian economics. Section 5 develops these methodological issues further, highlighting the role of identities in macroeconomics.