User:Bkwillwm/New political macroeconomics

In the last part of the twentieth century, new political macroeconomics emerged at the intersection of game theory, social choice theory, and macroeconomics. In this field, macroeconomists investigate how political factors influence macroeconomic issues including business cycles and inflation. The study of political macroeconomics goes back to earlier work such as Michał Kalecki's 1943 work on political business cycle theories. "New political macroeconomics" emerged in the mid-1970s with work from William Nordhaus and Douglas Hibbs. In contrast with earlier work in this area, "new political macroeconomics" attributed a more active role to government decision making.

Political economy of economic growth
Much of the work in this area in the twentieth century has focused on economic growth and inequality and their relationship with political institutions. In the 1960s and 1970s economists including W. Arthur Lewis and Richard R. Nelson argued that "capital fundamentalism" was the key to economic growth. Based on models of economic growth like Harrod–Domar, economic growth driven by capital accumulation, which was closely related to the savings rate. Since the wealthy have higher saving rates, there was a perceived trade-off between rapid economic growth and low inequality. Economists going back to Gunnar Myrdal (1973) found that this theoretical trade-off did not have empirical support. Notably, high inequality Latin America showed stagnate growth while low inequality Asian Tigers experienced rapid growth.

Daron Acemoğlu and James A. Robinson