Crises and paradigms in macroeconomics

Abstract

Contrasts are drawn between mainstream macroeconomics (with the ›New Consensus in Macroeconomics‹ taken as the current manifestation) and heterodox macroeconomics and their abilities to comprehend the financial crises and world wide recession of 2007 – 09 for macroeconomic paradigms is discussed. Specifically, the contrasting ways in which the two schools of thought treat unemployment, human behaviour, aggregate demand and money and credit are discussed. It is concluded that the events of 2007 – 09 once again cast doubt on the abilities of mainstream macroeconomics to confront the realities of capitalist economies.