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This book assesses major schools of thought in macroeconomic theory between the Great Depression and the Long Recession, focusing on their analysis of cycles, crises and macro-policy. It explores the road from the dominance of Keynesian ideas to those of New Classical Macroeconomics (NCM) toward the end of the millennium. The book covers the early influential work of Knut Wicksell; the economic debates of the 1930s, with core contributions from John Maynard Keynes and Friedrich von Hayek; the rise of Keynesianism in the 1950s and its decline since the 1970s; the rise of Monetarism in the 1960s; and NCM's subsequent rise to prominence. Finally, the book outlines how macroeconomics has evolved from its birth in the 1930s as a theory separate from microeconomics, resulting in a split between macro- and micro-theories, and ended up with a new hegemonic paradigm based on microfoundations. The ensuing policy thinking witnessed a transformation from "active" macro-policy after the Great Depression to a far more "passive" macro-policy during the last quarter of the twentieth century, which may have contributed to missing the signs of the impending Long Recession of 2008. "When the 2008 crisis struck, macroeconomists were caught with models that were theoretically elegant yet inappropriate to the needs of the moment. A broader historical perspective may have prevented the jettisoning of Keynesian models that had proved useful in the past and might have done so again. This highly readable book by Arie Arnon is a wonderful antidote to economists' short time horizon and contributes mightily to restore the profession's "collective memory" of the diversity of ideas within macroeconomics." Professor Dani Rodrik, Harvard Kennedy School.

Introduction -- Part I: Guggenheim Prize Lecture -- The Myth of Money as a Veil -- Part II: Financial History -- British Investment Trusts 1868 to 1928: Portfolio Diversification and the Beginnings of Institutional Investment -- Early Reflections on the Democratization of Organized Markets and Their Regulations -- Keynes as Trader in Commodity Futures -- High-Frequency Trading and the Material Political Economy of Finance -- Part III: Lessons from History and Great Economists -- Marx and Hayek on "Real" Versus "Less Real": Explanations for the Fragility of Capitalism -- Financial Instability and Crises in Keynes's Monetary Thought -- Debt and Debt Management: Reflections on a Fable by Kalecki -- Part IV: Income Distribution and the Social Roots of Economic Crisis -- Desperation by Consent: Inequality and Financial Crises -- Inequality, Economic Policy and Household Credit in the US: The Roots of Unsustainable Finance -- Profitability, Stimulus Policy and Finance -- Part V: Today's Macroeconomics Confronts Economic Crises -- Some Reflections on Financial Instability in Macro Agents-Based Models: Genealogy and Objectives -- Financial Instability and Frictions: Can DSGE Models Finally Address the Critical Issues? -- Instability and Structural Dynamics in the Macroeconomy: A Policy Framework.

Intro -- Foreword -- Introduction -- Contents -- List of Participants -- Part I Guggenheim Prize Lecture -- Unfulfilled Expectations: One Economist's History -- 1 What Did You and I Expect? -- 2 M.I.T. and Miguel Sidrauski -- 3 Rational Expectations -- 4 Dynamics and Complexity -- 5 Two Sorts of Expectations -- 6 Boundedly Rational Expectations -- 7 Hindsight: Intellectual Odyssey or Wild Goose Chase? -- References -- Part II Expectations and Economic Thought: Classics and Moderns -- Expectations and Its Variants: The Nuanced Role of Expectations in Classical Economics -- 1 Introduction -- 2 Expectational Fallacies -- 2.1 Expectations Regarding the Beneficial Nature of Competitive Institutions -- 2.2 Moral Expectations -- 2.3 A Note on the Dynamic Aspect of Expectations -- 3 Expectations and Anticipations in Smith's Narrative -- 4 Conclusions -- References -- Expectations, Conjectures and Beliefs. The Legacy of Marshall, Kahn and Keynes -- 1 Introduction -- 2 Marshall -- 3 Kahn -- 4 Keynes -- 5 The Role of Expectations in Generating Market Instability -- 6 Observation-Based Expectations -- 7 Expectations as Dividing Issue -- 8 Some Concluding Remarks -- References -- Between Pigou and Keynes: Champernowne on Employment and Expectations -- 1 Sorting Out Cambridge Expectations -- 2 Labour Supply and Money-Wage Dynamics -- 3 Monetary Policy and the Trend of Real Wages -- 4 Keynes Versus Pigou on the Role of Expectations -- 5 The Champernowne Puzzle -- References -- Keynes and Friedman on Expectations Mismatches During the Great Depression -- 1 Introduction -- 2 Friedman and the Case for Purely Monetary Disorders -- 2.1 Friedman's Narrative of the Great Depression -- 2.2 Expectations and Friedman's Rationale for the Great Depression -- 3 Keynes and the Case for Self-feeding Real Disorders.

This volume integrates historical and policy-oriented papers dealing with the relevance of the Keynesian approach for economic theory, policy, and crisis analysis. The first part of the volume focuses on historical, theoretical, and methodological issues, putting them in current codex. The second part focuses on the application of the Keynesian approach to modeling the economy, policy-making, and analyzing the ongoing crisis of the early 21st century. Papers by leading macroeconomists, such as Laidle, Cukierman, Colander and Boyer are complemented by those of leading historians of economics, such as Hollander, Boianovsky, Marcuzzo, Dimand, Witztum, Young, deVroey and Arnon and provide a comprehensive evaluation of the current relevance of Keynesian Economics. One of the important features of the volume are the commentaries on the papgers, which provide a cross-fertilisation between macroeconomists and historians of economics, which in conjunction with the paper themselves, provide a fair and balanced outlook on the current relevance of Keynesian Economics.

This book combines historical and policy-oriented perspectives on the relevance of the Keynesian approach for economic theory, policy, and crisis analysis. The first part focuses on historical, theoretical, and methodological issues, and puts them in context with current developments. The second part focuses on the application of the Keynesian approach to modeling the economy, policy-making, and analyzing the ongoing crisis of the early 21st century. Bringing together contributions by leading macroeconomists such as Laidler, Cukierman, Colander and Boyer, and leading historians of economics su.

Reform in Institutional Framework and Economic Policies, by Hisham Awartani The Conditions of Economic Viability, by Ephraim Kleiman Back to Negotiating the Final Status - The Economic Dimension. An independent trade regime would lead to a competitive Palestinian environment, by Arie Arnon and by Saeb Bamya The Gaza Economy: Current Status and Future Prospects, by Mahmoud K. Okasha How to Grow a Cucumber (and How It is Connected to the Railway). What to invest in for more cooperation and a better understanding? Infrastructure, by Gideon Eshet]

The volume is divided into three parts. Part one focuses on the models, men, and institutions involved in the development of the international macroeconomic model. In this section, the contributors examine the two monetary approaches to the balance of payments, as well as the relationship between long-term fluctuations in real exchange rates and inflation. Part two deals with the present state of the models by looking at Robert Mundell's theory of optimum currency areas (OCAs) and its relationship with key currencies. The chapters in this section also consider the impact of exchange rate variability on labor markets, as well as the interactions between theoretical developments and real-world behavior in the open economy macromodel. The third and last part of this volume provides a perspective on the future by looking at alternate models and institutional perspectives. Several contributors examine the relationship between asset prices, the real exchange rate, and unemployment in a small economy via what they call "a medium-run structuralist perspective". The future of institutional structures necessary to conduct international economic policy is the subject of the last chapters in part three of the volume