Recent Perspectives in and on Macroeconomics

The experience of costly disinflation in the early 1980s has contradicted the central policy promise of the new classical macroeconomics just as sharply as the experience of accelerating inflation in the l970s contradicted the chief promise of earlier thinking. Much of the attractive appeal of each approach rested on its holding out the prospect of successfully dealing with the foremost macroeconomic policy issue of its time -unemployment in the earlier case, and inflation more recently -without incurring the costs that previous thinking associated with effective solutions. Inflation did accelerate in the 1970s, however, and now the real economic costs of disinflation have proved remarkably in line with conventional estimates antedating the new classical macroeconomics. The implication of this unfortunate outcome is not, of course, simply to return to earlier approaches,but to retain what is theoretically appealing about the methodology of the new classical macroeconomics i a form that does not lead to falsified policy conclusions.