The new techniques that were brought about by the previously mentioned economists provoked great battles. However, these new methods eventually won out over the old. The gains in understanding were to great to ignore. This didn't mean that everyone agreed on everything. In fact it ended up dividing people into two different camps, the New Classicals and New Keynesians.
New Classicals emphasized the convenience of the assumption of perfect competition, and the different kinds of government failure. New Keynesians embraced the new methods and stressed the same types of problems that had been addressed by their predecessors. Their methods preferred some sort of regulation to solve problems in the economy.
At some point people started to distinguish between Freshwater macroeconomics and Saltwater macroeconomics. Freshwater macro dominated inland universities situated near rivers and lakes; Saltwater macro ruled among coastal universities. Freshwater challenged the prevailing theories while Saltwater stuck more to those methods.
Regardless of what theories economists chose to believe, it was hard to argue with the fact that economic theory was learning to say much more about the real world
A for Will.
ReplyDeleteOn pg. 175, Warsh uses the phrase "Lost Patrol". I tried to find where he explained this on both my first and second reading of this book, and I couldn't do it (extra credit to anyone who can point me to the explanation in a comment, but I'm not sure it's even there so don't waste a lot of time on it). Anyway, he will use that phrase again.
I believe by "Lost Patrol" he means the graduate students and young professors who drove to the growth conferences in Chicago and Palo Alto in the summer of 1965, and who abandoned growth theory because it was seen as a field that was played out.