Showing papers by "Robert M. Solow published in 1979"

Alternative Approaches to Macroeconomic Theory: A Partial View

Abstract: The paper begins by discussing and comparing informally the pictures of the aggregate economy that underlie three current approaches to theoretical macroeconomics: equilibrium theory, the 'post-Keynesian approach,' and fixed (or sticky) price models. Regarding the last as much the most promising, the paper then describes a handful of hypotheses about the labour market, more complementary than rival, that might explain the (downward) stickiness of wages. A recurrent theme is that the background assumption of optimizing agents is capable of yielding quite unclassical results if the utility function and the perceived constraints are slightly unconventional. Differentes approches a la throrie macroconomique: une vue partielle/partiale. L'auteur presente sans ceremonie une discussion et une comparaison des images de l'economie globale qui sous-tendent les approches en vogue en macroeconomie theorique: la theorie de l'equilibre, l'approche post-keynesienne, et les modeles 'a prix plus ou moins rigides. Comme l'auteur considere ce dernier groupe comme le plus prometteur, il s'attache a examiner quelques hypotheses bien davantage complementaires que rivales pour expliquer la rigidite a la baisse des salaires dans le marche du travail. L'un des leitmotivs de cet article est que le postulat conventionnel d'agents economiques optimisateurs peut fort bien engendrer des resultats tout a fait nonclassiques si la fonction d'utilite ou les contraintes pergues par les agents sont elles memes inhabituelles. I wonder if anyone has noticed that the title of this lecture contains a pun. There are indeed several alternative approaches to macro-theory now current, and I want to say something about them. Perhaps I seem to have promised a partial view in the sense that to do the opposite would be to offer a 'complete' view. Well, I do mean that; but even more than that I mean a partial view as opposed to an 'impartial' one. I want to begin by characterizing the main schools of thought in contemThis is the text of the W.A. Mackintosh Lecture delivered at Queen's University in March 1979. Except for the addition of a few footnote references to the literature, I have not tried to disguise the informal tone of the original. I would like to thank Mrs Mackintosh and the members of the Department of Economics at Queen's University for their hospitality and friendship. My colleague Stanley Fischer helped me with comments and advice. Canadian Journal of Economics / Revue canadienne d'Economique, XII, no. 3 August / aout 1979. Printed in Canada / Imprini6 au Canada. 0008-4085 /79 / 0000-0339 $01.50 / (?) 1979 Canadian Economics Association This content downloaded from 157.55.39.223 on Wed, 24 Aug 2016 04:49:54 UTC All use subject to http://about.jstor.org/terms 340 / Robert M. Solow porary macroeconomics, mainly because I think it is very important to keep straight the preconceptions that underlie each one. Otherwise it is too easy to accept quite powerful conclusions without a clear grasp of the assumptions to which they are logically bound. The mass media and the business press do that all the time when they popularize economic ideas. Then, I want to concentrate on the particular approach that seems to me the most sensible and trustworthy and say a little about the state of theoretical research within that approach and about some analytical trails that seem to need investigation. Macroeconomics is now, as it has always been, the subject of intense controversy. There must be several different reasons for this: for instance the policy stakes are large; the ultimate test of any theory, conformity with the facts, often turns out to be inconclusive and perhaps indecipherable; and it is even possible that the institutional environment changes, so that a theory adequate for one decade may fail in the next. You may think of still other reasons. In any case one can distinguish three or four general approaches or stances or theoretical positions that compete for attention and allegiance

Alternative Approaches to Macroeconomic Theory: A Partial View, W.A. Mackintosh Lecture 1979

Abstract: The paper begins by discussing and comparing informally the pictures of the aggregate economy that underlie three current approaches to theoretical macroeconomics: equilibrium theory, the 'post-Keynesian approach,' and fixed (or sticky) price models. Regarding the last as much the most promising, the paper then describes a handful of hypotheses about the labour market, more complementary than rival, that might explain the (downward) stickiness of wages. A recurrent theme is that the background assumption of optimizing agents is capable of yielding quite unclassical results if the utility function and the perceived constraints are slightly unconventional. Differentes approches a la throrie macroconomique: une vue partielle/partiale. L'auteur presente sans ceremonie une discussion et une comparaison des images de l'economie globale qui sous-tendent les approches en vogue en macroeconomie theorique: la theorie de l'equilibre, l'approche post-keynesienne, et les modeles 'a prix plus ou moins rigides. Comme l'auteur considere ce dernier groupe comme le plus prometteur, il s'attache a examiner quelques hypotheses bien davantage complementaires que rivales pour expliquer la rigidite a la baisse des salaires dans le marche du travail. L'un des leitmotivs de cet article est que le postulat conventionnel d'agents economiques optimisateurs peut fort bien engendrer des resultats tout a fait nonclassiques si la fonction d'utilite ou les contraintes pergues par les agents sont elles memes inhabituelles. I wonder if anyone has noticed that the title of this lecture contains a pun. There are indeed several alternative approaches to macro-theory now current, and I want to say something about them. Perhaps I seem to have promised a partial view in the sense that to do the opposite would be to offer a 'complete' view. Well, I do mean that; but even more than that I mean a partial view as opposed to an 'impartial' one. I want to begin by characterizing the main schools of thought in contemThis is the text of the W.A. Mackintosh Lecture delivered at Queen's University in March 1979. Except for the addition of a few footnote references to the literature, I have not tried to disguise the informal tone of the original. I would like to thank Mrs Mackintosh and the members of the Department of Economics at Queen's University for their hospitality and friendship. My colleague Stanley Fischer helped me with comments and advice. Canadian Journal of Economics / Revue canadienne d'Economique, XII, no. 3 August / aout 1979. Printed in Canada / Imprini6 au Canada. 0008-4085 /79 / 0000-0339 $01.50 / (?) 1979 Canadian Economics Association This content downloaded from 157.55.39.223 on Wed, 24 Aug 2016 04:49:54 UTC All use subject to http://about.jstor.org/terms 340 / Robert M. Solow porary macroeconomics, mainly because I think it is very important to keep straight the preconceptions that underlie each one. Otherwise it is too easy to accept quite powerful conclusions without a clear grasp of the assumptions to which they are logically bound. The mass media and the business press do that all the time when they popularize economic ideas. Then, I want to concentrate on the particular approach that seems to me the most sensible and trustworthy and say a little about the state of theoretical research within that approach and about some analytical trails that seem to need investigation. Macroeconomics is now, as it has always been, the subject of intense controversy. There must be several different reasons for this: for instance the policy stakes are large; the ultimate test of any theory, conformity with the facts, often turns out to be inconclusive and perhaps indecipherable; and it is even possible that the institutional environment changes, so that a theory adequate for one decade may fail in the next. You may think of still other reasons. In any case one can distinguish three or four general approaches or stances or theoretical positions that compete for attention and allegiance