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Hayek, Keynes, and Modern Macroeconomics

20 Pages Posted: 31 Mar 2010 Last revised: 30 Jun 2011

Roger Koppl

Syracuse University

William J. Luther

Kenyon College; American Institute for Economic Research

Date Written: March 28, 2010

Abstract

The Great Recession seems to be creating a change in the trend of macroeconomic thinking. Prior to the financial crisis of 2008, dynamic stochastic general equilibrium (DSGE) models dominated the macroeconomics literature without any apparent challengers on the horizon. Since then, however, we have seen an increasing interest in macroeconomic models that address the state of confidence (“animal spirits”), complexity, cognition, and radical uncertainty. Most of the renewed interest in animal spirits, complexity, cognition, and radical uncertainty has come from a more or less “Keynesian” perspective. We discuss the potential to emphasize these elements from a more “Hayekian” perspective and argue that Austrian approaches to macroeconomics along these lines are more likely to resonate with mainstream economists than in years past.

Keywords: animal spirits, cognition, complexity, Great Recession, Hayek, Keynes, radical uncertainty, state of confidence

JEL Classification: B53, E32, G12, E5, E6

Suggested Citation

Koppl, Roger and Luther, William J., Hayek, Keynes, and Modern Macroeconomics (March 28, 2010). Available at SSRN: https://ssrn.com/abstract=1580145 or http://dx.doi.org/10.2139/ssrn.1580145

Roger Koppl

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States
3154434535 (Phone)
3154421449 (Fax)

HOME PAGE: http://whitman.syr.edu/faculty-and-research/faculty/showInfo.aspx?id=468

William Luther (Contact Author)

Kenyon College ( email )

Gambier, OH 43022
United States

HOME PAGE: http://www.wluther.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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