What's Wrong with Modern Macroeconomics? Why its Critics have Missed the Point (original) (raw)

This paper argues the case for modern macroeconomics. It explains the reasons why it has replaced previous ways of doing macroeconomics and why it deals with empirical evidence in a different way from conventional econometrics. It is claimed that, far from being in a state of crisis as a result of recent events, modern macroeconomics has received a huge stimulus. The current critics of macroeconomics, like many of those of the past, take its assumptions too literally and misunderstand how the theory should be interpreted for practical use. The financial crisis was brought about more by a failure to employ modern macroeconomics than by its failings. If used sensibly, it will lead us out of the crisis.