Monday, September 9, 2013

Define Radicalist Attack

The Radicalists reject not only the Keynesian approach to the formulation of price expectation but also the policy implications of the Keynesian economics. In brief, they reject “Keynesian economics completely and fundamentally”. In the words of Lucas, “Keynesian contributions have been completely superseded, not only from the point of view economic policy but also from the theory and methodology.” Lucas and Sergeant added, existing Keynesian macroeconomics models cannot provide reliable guidance in the formulation if monetary, fiscal, or other types of policy” and there was no hope of making Keynesian models useful by making ‘minor or even major modifications of these models’. As the radicalists consider ‘Keynesianism as temporary deviation from the mainstream of scientific progress in economics.’ the Keynesian economics succeeded because the theory of general economic equilibrium. In their view Keynesian ‘has become useless if not actually harmful’, and since it lacks ‘a rigorous foundation in terms of general economic equilibrium’, it ‘cannot predict how the economy will react to changes in economic policy, and hence cannot provide reliable criteria for choosing between different economic policies.’ 

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