Reconstructing Macroeconomics: Structuralist Proposals and Critiques of the Mainstream

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Macroeconomics is in disarray. No one approach is dominant, and an increasing divide between theory and empirics is evident. This book presents both a critique of mainstream macroeconomics from a structuralist perspective and an exposition of modern structuralist approaches. The fundamental assumption of structuralism is that it is impossible to understand a macroeconomy without understanding its major institutions and distributive relationships across productive sectors and social groups. Lance Taylor focuses his critique on mainstream monetarist, new classical, new Keynesian, and growth models. He examines them from a historical perspective, tracing monetarism from its eighteenth-century roots and comparing current monetarist and new classical models with those of the post Wicksellian, pre-Keynesian generation of macroeconomists. He contrasts the new Keynesian vision with Keynes’s General Theory, and analyzes contemporary growth theories against traditions of thought about economic development and structural change.

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Lance Taylor is Arnhold Professor of International Cooperation and Development, New School for Social Research. Table of Contents Acknowledgements Chapter one Social Accounts and Social Relations A Simple Social Accounting Matrix Implications of the Accounts Disaggregating Effective Demand A More Realistic SAM Stock-Flow Relationships A SAM and Asset Accounts for the United States Further Thoughts Chaper two Prices and Distribution Classical Macroeconomics Classical Theories of Price and Distribution Neoclassical Cost-Based Prices Hat Calculus, Measuring Productivity Growth, and Full Employment Equilibrium Markup Pricing in the Product Market Efficiency Wages for Labor New Keynesian Crosses and Methodological Reservations First Looks at Inflation Capter three Money, Interest,’ and Inflation Money and Credit Diverse Interest Theories Interest Rate Cost-Push Real Interest Rate Theory The Ramsey Model Dynamics on a Flying Trapeze The Overlapping Generations Growth Model Wicksell’s Cumulative Process Inflation Model More on Inflation Taxes Chapter four Effective Demand aId Its Real and Financial Implications The Commodity Market Macro Adjustment via Forced Saving and Real Balance Effects Real Balances, Input Substitution, and Money-Wage Cuts Liquidity Preference and Marginal Efficiency of Capital Liquidity Preference, Fisher Arbitrage, and the Liquidity Trap The System as a Whole The ISILM Model Maynard and Friends on Financial Markets Financial Markets and Investment Consumption and Saving "Disequilibrium" Macroeconomics A Structuralist Synopsis Chapter five Short-Term Model Closure and Long-Term Growth Model "Closures" in the ShQrt Run Graphical Representations and Supply-Driven Growth Harrod, Robinson, and Related Stories More Stable Demand-Determined Growth Chapter six Chicago Monetarism, New Classical Macroeconomics, and Mainstream Finance Methodological Caveats A Chicago Monetarist Model A Cleaner Version of Monetarism New Classical Spins Dynamics of Government Debt Ricardian Equivalence The Business Cycle Conundrum Cycles from the Supply Side Optimal Behavior under Risk Random Walk, Equity Premium, and the Modigliani-Miller Theorem More on Modigliani-Miller The Calculation Debate and Super-Rational Economics Chapter seven Effective Demand and the Distributive Curve Initial Observations Inflation, Productivity Growth, and Distribution Absorbing Productivity Growth Effects of Expansionary Policy Financial Extensions Dynamics of the System Comparative Dynamics Open Economy Complications Chapter eight Structuralist Finance and Money Banking History and Institutions Endogenous Finance Endogenous Money via Bank Lending Money Market Funds and the Level of Interest Rates Business Debt and Growth in a Post-Keynesian World New Keynesian Approaches to Financial Markets Chapter nine A Genus of Cycles1. Goodwin’s Model A Structuralist Goodwin Model Evidence for the United States A Contractionary Devaluation Cycle An Inflation Expectations Cycle Confidence and Multiplier Minsky on Financial Cycles Excess Capacity, Corporate Debt Burden,and a Cold Douche Final Thoughts Chapter ten Exchange Rate Complications Accounting Conundrums Determining Exchange Rates Asset Prices, Expectations, and Exchange Rates Commodity Arbitrage and Purchasing Power Parity Portfolio Balance Mundell-Fleming IS/LM Comparative Statics UlP and Dynamics Open Economy Monetarism Dornbusch Other Theories of the Exchange Rate A Developing Country Debt Cycle Fencing in the Beast Chapter eleven Growth and Development Theories New Growth Theories and Say’s Law Distribution and Growth Models with Binding Resource or Sectoral Supply Constraints Accounting for Growth Other Perspectives The Mainstream Policy Response Where Theory Might Sensibly Go.