Output, Interest and Prices: Part 0
A whirlwind tour through 300 years of macroeconomic thought!
Note to the Reader: The accompanying twitter video summary is available here:
The history of macroeconomic thought is a story of how growth theory, monetary theory and business cycle theory came together into one discipline. Throughout this, there are three macroeconomic variables that have stood the test of time as being central: output, interest rates and prices.
As such, this history can be understood by examining the evolution of the equations describing and relating these variables. This begins with the buildup to the neoclassical consensus:
Then we arrive at the three counterrevolutions of the 1960s and 1970s:
Finally, we conclude at the foundations of the modern research frontier:
Doing so makes it apparent that, although our methodology has advanced by leaps and bounds, the increase in our knowledge on substantive macroeconomic questions has been far less than many might believe.