Understanding Modern Macroeconomic Schools : A Comparative Analysis

In this book, we attempt to make a comparative evaluation of modern macroeconomic
schools: Monetarism and New Classical School based on the Classical System that envisage
automatic full employment or natural rate of unemployment (NRU) equilibrium (AFNE or
ANRUE) vs. New Keynesian and Post-Keynesian Economics based on the Keynesian System
which gives unemployment equilibrium (UNE) or non-automatic NRU equilibrium
(NANRUE) due to insufficiency of aggregate demand.
In order to determine which school is relevant, first the basic assumptions of these
systems are compared: i) rational vs. adjusted vs. heterogeneous expectations, ii) existence of
perfect competition in all markets leading to flexibility of prices and wages vs. imperfect
competition giving rise to rigidities, and iii) presence or lack of coordination between
markets.
In the final phase of our evaluations the performance of the developed economies are
surveyed to establish whether we meet with AFNE or ANRUE or else UNE or NANRUE; and
whether policy prescriptions devised by respective schools solve or alleviate the problem at
hand when implemented.
Our investigations point out that New Keynesian and Post-Keynesian schools are more
relevant compared to Monetarism and New Classical School. The choice between New
Keynesian and Post-Keynesian Economics, however, is more difficult to make although New
Keynesian Economics seems more widespread than Post-Keynesian Economics. Objectively,
Post-Keynesian assumptions seem more realistic; normatively, however, New Keynesian
stands seems more fit to the present day move towards globalization.