A History of Modern Macroeconomics

Tracing the development of macroeconomic theory from Keynes onwards, this book explores the intellectual shifts, methodological choices, and theoretical consolidations that have shaped contemporary mainstream macroeconomics. The main thesis of the book is that the intellectual foundations of modern macroeconomics can be traced back to the writings of Milton Friedman, particularly his contributions to macroeconomic theory and his views on the design and conduct of monetary policy. Robert E. Lucas incorporated Friedman’s core insights into a more formal and rigorous framework, thereby laying the foundations of New Classical macroeconomics. Taken together, the contributions of Friedman and Lucas combined with New Keynesians emphasis on imperfections paved the way for what would later become the modern macroeconomic mainstream: the New Neoclassical Synthesis (NNS), centred on Dynamic Stochastic General Equilibrium (DSGE) modelling. Nevertheless, not all macroeconomists have endorsed the mainstream approach. In particular, heterodox traditions, perhaps most notably Post-Keynesian economics, have raised sustained critiques of its theoretical and empirical foundations. Post-Keynesians argue that for macroeconomics to retain relevance, it must adequately account for time, money, and, above all, fundamental uncertainty. Uncertainty plays a central role in economic behaviour and decision-making, yet it remains insufficiently understood and inadequately modelled within mainstream macroeconomics. The book provides an accessible overview of the history of modern macroeconomics for students and scholars of the history of economic thought and for macroeconomists with an interest in the methodological and intellectual foundations of their discipline.