Talk:New classical macroeconomics

New classical economics
Is this the same as neoliberalism? Is there a connection?

I have briefly expanded this stub - comments welcome. More will come soon (hopefully!) User:Geordieandy

Quite how is New Classical Economics different from Neo-Classical Economics (apart from the Anglicism over the Latinism)? Phlogistomania 19:18, Jun 20, 2005 (UTC) - New classical economics places a much greater emphasis on the idea of expectation.

It's not the New classical Economics
It's Neoclassical Economics

Neo and new classical models are distinct (as indicated by their different names). The two articles shouldnt be merged, this would be inaccurate.

New classical economics and neoclassical economics
The two are quite separate and distinct. Neoclassical economics is based around Marshall's work - the current article at neoclassical economics describes it well. New classical economics is the name generally used for the school of thought that developed in the 1970s and 1980s by e.g. Robert Lucas that uses neoclassical microfoundations to build macroeconomic models. The two articles should not be merged. 80.4.4.158 15:26, 26 October 2005 (UTC)

I don't think the topics should be merged.
As I understand it, neoclassical economics largely refers to the methodology introduced by Marshall, and later expanded by Samuelson, of employing mathematics and rationality in economics. "Neoclassical economics refers to a general approach (a "metatheory") to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. Mainstream economics is largely neoclassical in its assumptions. There have been many critiques of neoclassical economics, both from within orthodox economics, and from outside of it, and often these critiques have been incorporated into new versions of neoclassical theory." see Neoclassical_economics

New classical economics is a school of thought on macroeconomics, and not on economic methodology in general. Furthermore, I have no knowledge of macroeconomists conflating new classical macroeconomics and neoclassical economics; if anything, it has been the case that macroeconomics has two main competing approaches that spawn offshoots in response to each other as the discipline evolves viz. the neoclassical approach and the Keynesian approach. In an adversarial (and seemingly dialectical) manner, the demand-side view (Keynesianism) and the supply-side (Neoclassical) produce the variety of schools of thought, with the New Classical school just one of the many offspring of this interaction (Neokeynsians, Monetarism and New Keynesians some others).

In conclusion, I think this topic should remain independent and be expanded.

Don't merge
They're too different things. In particular New Classical economics focuses on supply shocks as the driving force behind macroeconomic fluctuations - which is what makes them Classical as opposed to Keynsian where it's the demand doing the work. Neoclassical is a much broader and less well defined term. Both New Classical and Keynsian economics (at least of the American kind) would fall within the broader tent of Neoclassical economics.


 * Agreed. "New Classical economics" is a general equilibrium approach to macroeconomics, while Neoclassical economics is the standard, mainstream microeconomic approach. They are completely different topics. Jackson744 20:01, 17 February 2006 (UTC)

Don't Merge
Firstly it is not the same as Neoliberalism, although there is a connection. Neoliberalism is an ideology, arguably the most dominant one in shaping the world today. New Classical Economics is, as explained above, a school of thought on macroeconomics, others being Keynesianism, monetarism and so on.

"Neoclassical" refers to the methods that arose during the "marginalist revolution" of the 1870s, and is assocated with Walras, Jevons and Menger. The approach took the mathematical tools of differential algebra and used it to model microeconomic phenomena. Gradually this approach, through the likes of Marshall and Samuelson, has come to be the mainstream microeconomics.

"New Classical" economics is a macroeconomic school associated with Robert Lucas Jnr, Sargent, Wallace and Barro. The connection is that the school claims that macroeconomic models should be built on the basis of neoclassical microeconomic foundations. This is in contrast to Keynes and monetarists who built models describing macroeconomic behaviour that could not be explained on the basis of neoclassical economics. New Classical economists claim that markets clear continuously, including the labour market, and as such unemployment is an entirely voluntary phenomenon. They also claim that government intervention, particularly discretionary monetary policy has no effect unless it is unanticipated. This is the rationale for their argument that government should not intefere in the economy. This is also the link to Neoliberalism, an ideology that holds that the free market and international free trade is the optimal solution and government intervention should therefore be minimized. Useful-idiot 21:07, 19 February 2006

Full employment assumption and search theory
The article claims

At any one time, the macroeconomy is assumed to have a unique equilibrium at full employment

If "New classical economics" refers to the return of macroeconomics to micro foundations, then surely search theory has to be included as a central part of this movement. Indeed, Lucas and Prescott -- two of the four economists listed in the article -- wrote "Equilibrium Search and Unemployment" in the Journal of Economic Theory in 1972. Moreover, search theory, which clearly makes no full employment assumptions, has remained an important branch of modern macro.

The view that "New classical economics" refers merely to a set of models that do not focus on unemployment is not (AFAICT) supported by the econlib entry cited in the article.

Therefore, I think it would be better to say something like:
 * new classical economics is the return of macro to micro-foundations.
 * some models that attempt to explain X, Y, Z find it convenient to assume full-employment.
 * some other models that attempt to explain A, B, C use search theory to describe how people look for work when they are unemployed, and how people decide whether to accept job offers, or do other things like help out with the family.

--Clausen 16:55, 10 March 2006 (UTC)

I generally agree. However I think it'd be more accurate to say that as so far as New Classical theory examines unemployment it focuses on "supply-side" or "structural" causes - hence the "Classical" in New Classical. So search costs, union power, minimum wage laws and other institutional features are used to explain unemployment, unlike in Keynesian economics where unemployment is seen as caused by inadeqaute aggregate demand. Microfoundations is the other side of it.radek 04:48, 12 March 2006 (UTC)

dont merge thaey are distinctly different schools of thought!

New economics???
As of Sept 2007, this page has the title 'New economics' instead of 'New classical economics' or 'New classical macroeconomics'. This is obviously wrong (did someone vandalize this?) I agree with the comment above that 'New classical' is not a synonym for 'neoclassical'. But calling it 'New economics' is even more incorrect.

To the best of my knowledge, there is no school called 'New economics'. Therefore, this page should be deleted in order not to mislead people; its content should be moved to 'New classical macroeconomics'. --Rinconsoleao 14:10, 25 September 2007 (UTC)


 * There was a school of thought called 'New Economics'. That was a label for Keynesian economic policy in the USA in the 1960s. 128.132.1.10 (talk) 17:50, 8 April 2016 (UTC)

Moving page
The capitalization of this article's title does not adhere to Wikipedia standards. I am moving the page from "New Classical Macroeconomics" to "New classical macroeconomics". --JHP (talk) 03:27, 20 December 2007 (UTC)

Lucas vs RBC
The article states:

"The most famous New Classical model is that of Real Business Cycles, developed by Robert Lucas, Jr., Finn E. Kydland, and Edward C. Prescott,..."

I argue the statement is false because there is a substantial difference between New classical model with rational expectations developed by Lucas (1972), in which unanticipated monetary shocks have an impact on the real economy, i.e. unanticipated monetary shocks, subject to certain assumptions, cause the cycle and the one know as RBC. In RBC model developed originally by Kydland and Prescott (1982) monetary shocks (even if unanticipated) do not influence real economy, i.e. do not significantly influence real GDP and therefore do not cause the cycle. According to RBC theory, exogenous, unpredictable technology shocks are the key driver of the cycle. Finally, in modern economic literature, New classical model developed by Lucas and RBC model founded by Kydland and Prescott are considered as separate theories, even though they have some common features such as rational expectations and microeconomic foundation. RBC model has not been developed by Lucas. RBC model is not a New classical model it is just build on New classical foundations but differs in assumptions, and substantially differs in conclusion about the nature of the business cycle and ability of monetary policy to influence the real economy. Pvavrinec (talk) 00:27, 27 January 2009 (UTC)

Rename to new classical economics?
I've hardly heard anybody calls it new classical macroeconomics. It's typically known as new classical economics. Its rival school, new Keynesian is called new Keynesian economics, rather than new Keynesian macroeconomics. So, let's rename the page, shall we? __earth (Talk) 13:04, 2 November 2010 (UTC)


 * Several other sources use "new classical macroeconomics" for articles on this topic. See The Concise Encyclopedia of Economics and The New School's History of Economic Thought. I know it's not a clear issue--I've found other sources that use "new classical economics"--but I'd lean towards leaving it as is.--Bkwillwm (talk)


 * My impression is that both names are used pretty frequently. Keep in mind that New classical economics and New classical macroeconomics both exist, and both direct to this page. So the only issue is what should be considered the main name of the page. Rinconsoleao (talk) 10:39, 3 November 2010 (UTC)

Assessment
It is not an assessment if the "assessment" is only based on Peter Galbacs of the Budapest Business School but leaves out a lot more prominent critics. I will shorten it. --Pass3456 (talk) 17:56, 6 May 2015 (UTC)

The New Keynesianism is not a rival school
The new Keynesianism arose after Lucas's criticism and in response to it. Lucas's competitor is the old classical Keynesianism, post-Keynesianism or simply Keynesianism, which ignored the microeconomic foundations.

"New classical macroeconomics strives to provide neoclassical microeconomic foundations for macroeconomic analysis. This is in contrast with its rival new Keynesian school that uses microfoundations, such as price stickiness and imperfect competition, to generate macroeconomic models similar to earlier, Keynesian ones." TimurMamleev (talk) 12:36, 23 May 2024 (UTC)

Milton Friedman
"New Classical and monetarist criticisms led by Robert Lucas, Jr. and Milton Friedman respectively forced a labored rethinking of Keynesian economics. In particular, Lucas designed the Lucas critique primarily as a means to cast doubt on the Keynesian model. This strengthened the case for macro models to be based on microeconomics."

Friedman's monetarism is superfluous.

At the same time, they forgot to mention Robert Barro, Prescott, Sargent. TimurMamleev (talk) 12:40, 23 May 2024 (UTC)