Monetarist, Keynesian, and new classical economics

The past decade has witnessed a breakdown in the consensus in Western, macro economic theory. Where once Keynes reigned supreme, three competing schools of economic thought now co-exist, each offering very different explanations for inflation, unemployment and the decline in growth. Even the techniques and vocabulary they use differ so much that communication between the poles has almost ceased.

In his controversial and penetrating new analysis, Professor Stein examines the disagreements between the Monetarists, Keynesians and New Classical economists. Each group has distinct views about the impact of anti-inflationary monetary policy on employment and GNP. While Keynesians and Monetarists differ on the timing and magnitude of the effects, New Classical economists claim that anticipated monetary and fiscal stabilization policies are simply ineffectual. They have developed a powerful theory of 'rational expectations' to account for this impotence.

The author uses the same general macrodynamic model to derive a set of statistical hypotheses for each school. He then tests these hypotheses empirically. The results and conclusions are startling and sure to stimulate further debate.