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Expectations, Employment and Prices 1st Edition

4 out of 5 stars 2 customer reviews
ISBN-13: 978-0195397901
ISBN-10: 0195397908
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Editorial Reviews


"This is an ambitious book. We need to develop new approaches to business cycles and unemployment. Roger Farmer's attempt is refreshing, insightful and bold."--Daron Acemoglu, Charles P. Kindleberger Professor of Applied Economics, MIT and Co-Editor of Econometrica

"This book is modestly represented by its author as an extension to Keynesian economics. But I am more inclined to represent it as a new tradition, 'Farmerian economics.' While both are intended to provide justification for active countercyclical policy in the face of market failure, the microfoundations for Farmerian economics are much stronger than those of John Maynard Keynes. Farmerian economics is as distinct from Keynesian and New Keynesian economics as Lucasian economics is from Classical and New Classical Economics."--William A. Barnett, Oswald Distinguished Professor of Macroeconomics, University of Kansas, and Editor, Macroeconomic Dynamics

"In this important book, Roger Farmer challenges the commonly accepted structure of modern DSGE models. Since these models are still, at their core, neoclassical constructs they miss much of the intuition of Keynes' original contribution. Farmer builds microfounded dynamic equilibrium models that can generate persistent inefficient equilibria with high levels of unemployment. He confronts these models with data, and uses them to argue for vigorous government policies to avoid those situations. In this way, Farmer not only greatly enriches our understanding of dynamic macroeconomics, but shows how its tools can be applied to many different environments with a surprising level of flexibility and power. An insightful work that all macroeconomists interested in business cycles should read."--Jesus Fernandez-Villaverde, Associate Professor of Economics, University of Pennsylvania

"What did Keynes really mean? How much of Keynesian intuition can be formulated using the language of modern macroeconomics? If you want to find out, read this creative and fascinating book. It uses tools from search theory and self-fulfilling equilibria to breathe new life into old debates. Keynes is dead. Long live Roger Farmer!"--Harald Uhlig, Professor and Chair, Department of Economics, The University of Chicago and Co-Editor of Econometrica

About the Author

Roger E. A. Farmer is Professor and Department Chair of the UCLA Department of Economics. He is a Research Associate of the National Bureau of Economic Research and the Centre for Economic Policy Research, and co-editor of the International Journal of Economic Theory. He is a member of the Financial Times Economists' Forum, a specialist on macroeconomic theory, and the author of six books and numerous scholarly articles. His book How the Economy Works, a companion to this book, is available from Oxford University Press. Written in clear, accessible language, it makes an argument that no one should ignore. How the Economy Works is suitable for general readers with an interest in business and the economy; students at all levels in undergraduate and graduate economics courses; and academics and practicing economists in business and policy institutions.

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Product Details

  • Hardcover: 208 pages
  • Publisher: Oxford University Press; 1 edition (March 31, 2010)
  • Language: English
  • ISBN-10: 0195397908
  • ISBN-13: 978-0195397901
  • Product Dimensions: 9.3 x 0.8 x 6.2 inches
  • Shipping Weight: 1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (2 customer reviews)
  • Amazon Best Sellers Rank: #120,469 in Books (See Top 100 in Books)

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Format: Hardcover
Roger Farmer constructs a new theory by merging Keynes's ideas into the modern macroeconomics framework. Keynes argued that the state of long term expectations determines the level of economic activity. Keynesian economics, however, lacks a microfoundation, which modern macroeconomics exploits. Farmer fills the gap and explores the role of Keynes's state of long term expectations to the macroeconomy in the language of dynamic general equilibrium theory. In Farmer's theory, this concept is represented by self-fulfilling beliefs on values of the capital good, and those beliefs select an equilibrium. As a consequence, it could be the case that high unemployment is an equilibrium phenomenon and persists for a long time due to market pessimism. This book is written in the style of academic economic research, and it contains Farmer's original and creative arguments and policy suggestions.
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Format: Hardcover
Farmer commits the exact same error that has been committed by practically every other economist ,in the 20th and 21st centuries ,who has written on Keynes's General Theory.The basic claim,first made by Richard Kahn and Joan Robinson ,was that Keynes provided no worked out technical,mathematical model of his theory of effective demand in the GT.This mistaken evaluation has resulted in an economics profession that,be it 1936 or 2006, believes that Keynes's "analysis" was contained in a chapter,chapter 3, that Keynes told Dennis Robertson in Febtuary,1935 DID NOT contain his analysis.

The theory of effective demand involved the D and Z functions .These functions were presented in a purely introductory manner in chapter 3 of the GT by Keynes. Keynes provided no microeconomic foundation in this chapter and/or worked out analysis.He warned th ereader that it might be unintelligible until the model was fully developed later in the book.Keynes made it very clear that he presented his formal, microeconomic analysis in chapter 20,not chapter 3 ,of the GT.This fact has never been understood by the economics profession .Together ,the D and Z functions specified the Aggregate Supply Curve( The Employment Function),which was a locus of multiple expected equilibria.

Farmer also accepts the basic claims made by the mathematically illiterate,inept,and innumerant English economist,Dennis Robertson,who insisted that chapters 3 and 10,respectively,contained Keynes's major contributions to microeconomics and macoeconomics,respectively, in the GT.
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