The Revival of Laissez-faire in American Macroeconomic Theory: A Case Study of the Pioneers
In the 1970s, the Keynesian orthodoxy in macroeconomics began to break down. In direct contrast to Keynesian recommendations of discretionary policy, models advocating laissez-faire came to the forefront of economic theory, from monetarism to public choic
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Robert E Lucas Jr and new classical economics
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action advocacy analysis argued assumed assumption Austrian method became behavior believed Buchanan 1986b Buchanan and Wagner business cycle capital changes classical economics classical liberalism classical model competition concept decisions deficits demand developed discussion econometric economic activity economic system economic theory effect empirical equilibrium ethical existing expected utility hypothesis fiscal institutions framework freedom Friedman 1953a Friedman and Savage Friedman and Schwartz ideas ideological individual inflation influence intellectual interwar Keynesian economists Knight Knightian uncertainty knowledge laissez laissez-faire Lucas Lucas's macroeconomic ment methodological monetarism monetarist monetarist model Mont Pelerin Society neoclassical economics nominal income organization output perfect competition philosophy political positive economics Positive Program postulate predictions problem production public choice theory public finance quantity of money rational expectations recommended response result revival of laissez-faire Road to Serfdom role scientific Simons and Hayek Simons's social control socialist structure theoretical tion uncertainty University of Chicago values viduals
Page 64 - Stripped of all technicalities this means that government in all its actions is bound by rules fixed and announced beforehand — rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one's individual affairs on the basis of this knowledge.
Page 85 - Progress in positive economics will require not only the testing and elaboration of existing hypotheses but also the construction of new hypotheses. On this problem there is little to say on a formal level. The construction of hypotheses is a creative act of inspiration, intuition, invention; its essence is the vision of something new in familiar material. The process must be discussed in psychological, not logical, categories; studied in autobiographies and biographies, not treatises on scientific...
Page 84 - I venture the judgment that currently in the Western world, and especially in the United States, differences about economic policy among disinterested citizens derive predominantly from different predictions about the consequences of taking action, differences that can in principle be eliminated by the progress of positive economics — rather than from fundamental differences in basic values, differences about which men can ultimately only fight.
Page 97 - natural rate of unemployment', in other words, is the level that would be ground out by the Walrasian system of general equilibrium equations, provided there is embedded in them the actual structural characteristics of the labor and commodity markets, including market imperfections, stochastic variability in demands and supplies, the cost of gathering information about job vacancies and labor availabilities, the costs of mobility and so on...
Page 6 - I take to be universally recognized scientific achievements that for a time provide model problems and solutions to a community of practitioners.
Page 6 - On the one hand, it stands for the entire constellation of beliefs, values, techniques, and so on shared by the members of a given community.
Page 56 - mobilise " all available resources is, therefore, not to use artificial stimulants — whether during a crisis or thereafter — but to leave it to time to effect a permanent cure by the slow process of adapting the structure of production to the means available for capital purposes.
Page 78 - Its major theme is the role of competitive capitalism — the organization of the bulk of economic activity through private enterprise operating in a free market — as a system of economic freedom and a necessary condition for political freedom.
Page 80 - ... threatening freedom and give this effect considerable weight. Just how much weight to give to it, as to other items, depends upon the circumstances. If, for example, existing government intervention is minor, we shall attach a smaller weight to the negative effects of additional government intervention. This is an important reason why many earlier liberals, like Henry Simons, writing at a time when government was small by today's standards, were willing to have government undertake activities...