Review of Michel de Vroey’s A History of Macroeconomics from Keynes to Lucas and Beyond. New York, NY: Cambridge University Press, 2016, 429 pp.

Abstract

Review of Michel de Vroey's A history of macroeconomics from Keynes to Lucas and beyond. New York: Cambridge University Press, 2016, 429 pp.Michel De Vroey's A history of macroeconomics from Keynes to Lucas and beyond is an important contribution to the history of economic thought. Standing upon the shoulders of two giants of the twentieth century, John Maynard Keynes and Robert Lucas, De Vroey sets out a clear-cut narrative. The modern history of macroeconomics is the result of a two-step process. The step corresponds to the transition from Keynes's actual writing in his General theory (1936) to Keynesian macroeconomics, which roughly occurred between the 1940s to the 1970s (sections 1 to 8, or part I). The second step corresponds to the of DSGE macro, i.e., dynamic stochastic general equilibrium, which started in the mid-1970s with the Lucasian revolution and culminated in the 2000s with the new neoclassical synthesis (sections 9 to 18, or part II).With the primary ambition of helping economists and teachers ponder the origin of the kind of modeling with which they are familiar (p. xiii), De Vroey endorses the canonical textbook reading of the history of macroeconomics-a reading that he himself argued for in a long series of papers-which highlights models developed by the main protagonists of both Keynesian and classical approaches. This list includes models of Nobel Prize-winning economists (e.g., John Hicks, Franco Modigliani, Laurence Klein, Edmund Phelps, Milton Friedman) as well as new classical economists (e.g., Robert Lucas, Finn Kydland, and Edward Prescott) and new Keynesians (e.g., Joseph Stiglitz and Georges Akerlof), among many others. Undoubtedly, any economist who wants to learn more about the theoretical connections between these models will be enthralled with the book.However, by sticking to an official account of the development of macroeconomics, De Vroey limits himself. Because his account pays attention to logical transitions from one model to another, it neglects authors and groups of scholars whose impact has been retroactively marginalized. Yet, revisiting these authors may prove to be fruitful. While they may be considered marginal when compared to canonical authors, such authors left undeniable marks in the development of mainstream macroeconomics. I do not mean that De Vroey's analysis is questionable because of subject matter, which-for instance-chooses not to discuss developments in applied economics or heterodox economics. Rather, by paying more attention to historical developments, the book would have provided a more complete picture of macroeconomic development.Three examples based on recent works on the history of macroeconomics can help make that point clear. I do not aim to be exhaustive here, but only to draw attention to elements that, in my opinion, would have dramatically helped complement the narrative. The example relates to the emergence of macroeconomics in the context of the Cowles Commission in the United States, the second brings us back to the notion of neoclassical synthesis in the 1960s, and the third has to do with the development of the new neoclassical synthesis. In these three cases, I show that a broader historical account sheds a new light on the development of macroeconomics.De Vroey's reading of the first era of macroeconomics is defined by Keynesians who challenged the core concepts of Keynes with several modeling strategies. Keynes's attempt to prove the existence of an equilibrium with involuntary unemployment, under the assumption that wage-rigidity was not responsible for it, touched off a long theoretical controversy. The generation of Keynesian economists-led by Hicks, Modigliani, and Klein-admitted that Keynes had failed in his enterprise and argued that involuntary unemployment was, in fact, due to wage rigidity. This recognition became the corner stone of Keynesian macroeconomics embedded in the IS-LM model. …