ABSTRACT OF PAPER
Title: The Intriguing Role of Complexity in the History of Macroeconomics: The Highs (and Lows) of Hayekian, Keynesian, and Monetarist Economics Between the Great Depression and the Long Recession
Author: Arnon Arie
The Intriguing Role of Complexity in the History of Macroeconomics: The Highs (and Lows) of Hayekian, Keynesian, and Monetarist Economics Between the Great Depression and the Long Recession Arie Arnon April 2015 Prepared for the annual ESHET conference, May 2015, Rome Economic analysis of macro instabilities, that is, theories explaining cycles or those dealing with crises in the economy as a whole, are as old as the detection of the phenomena themselves. In the broader project I assesses the highs (and lows) of several macroeconomic analytical trends: Wicksell's framework; Hayekian monetary theory of the business cycles; Keynes's and Keynesians' theories of the macro-economy and cycles; and the Monetarist tendency. Most economists agree that what we call today macroeconomics - which includes, among other things, the economic analysis of instabilities - was really born in the twentieth century. The purpose is not only to review the major changes in the hegemonic theories economists embraced, but to elucidate why some theories rose and then fell out of favor in the common wisdom of economists. In the present paper I will attempt to read this history from a perspective based on the role of "complexity" (and its antonym "simplicity") in the area of macroeconomics. Specifically, the paper suggests possible reasons for the rapid disappearance of complexity theories while simplicity theories tend to rise in their place. If true, this may help us better understand the present state of macroeconomics both before the present Long Recession and in particular, the deficiencies in macroeconomics theories after 2007-08.
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