Methodological Foundations of Macroeconomics: Keynes and Lucas.

• Author: Tiwari, Kashi Nath

The author, Alessandro Vercelli, in this volume examines and compares the fundamental macroeconomic theories of John Maynard Keynes and Robert E. Lucas. The volume also presents the works of many eminent writers such as T. J. Sargent, J. A. Schumpeter, C. W. J. Granger, and P. Suppes. The new classical economic theory and heuristic models of Lucas are in direct conflict with the Keynesian economic theory. A lucid debate has been presented that encompasses various facets of macroeconomics on issues such as: theory, policy, methodology, and empiricism. The notions of equilibrium, stability, and determinism have been contrasted with those of disequilibrium, instability, and uncertainty. An alternative title for this volume could be: The Great Economic Debate: The Two Sides. To fully cover the debate numerous volumes are required, however, Vercelli has presented it very efficiently and effectively in one short volume.

The book is divided into two parts. The first part examines the methodological foundations of macroeconomics, while the second part presents and compares the theories of Keynes and Lucas. Altogether there are 14 chapters. In the first chapter, the author provides perspicuous introductory comments, while in Chapter 14, the author provides very thoughtful and comprehensive concluding remarks.

Part I consists of Chapters 2-7 and covers a wide range of methodological issues that include: equilibrium, disequilibrium, and economic theory; dynamic instability and economic models; structural instability and economic change; uncertainty, predictability, and flexibility; rationality and expectations; and probabilistic causality and economic analysis. In Chapter 2, the author defines the syntactic and semantic concepts of equilibrium and provides the epistemic reasons for equilibrium. Establishing the distinction between equilibrium and disequilibrium, the author explains the paradoxes of a pure equilibrium method. Concepts of dynamic instability and ergodic theory are introduced in Chapter 3. Collecting the views of ancient scholars such as Heraclitus, Pythagoras, Plato, and Aristotle, the issues pertaining to structural instability and economic change are explored in Chapter 4. A discussion on the role of singularities and the problem of morphogenesis is also presented. Specifying the roots of regularity in economic behavior, a lucid discussion on uncertainty, predictability, and flexibility is provided in Chapter 5. The stationary and...