The present economics crisis - the worst since the Great Depression - has already been changing the rules for macroeconomic policies. Only a few months ago leading economic policy institutions had advocated laissez faire policies and regarded inflation targeting as the 'golden rule' for monetary policy. Today the same think tanks recommend recapitalization of banks, non-conventional monetary policies and counter-cyclical fiscal policies. The theoretical basis for mainstream economic policy is the New Neoclassical Synthesis or the New Consensus Model (NCM), which is based on utility maximising representative agents with rational expectations in a dynamic stochastic general equilibrium (DSGE) approach. Keynesian and Post-Keynesian authors have long been critical with this modelling strategy and its policy implications. As has become clear by now, the NCM model is completely inappropriate to deal with the present global financial and real economic crisis. What are the consequences for economic theory and economic policies? Will the mainstream view on the economy survive - with only minor reforms? Is there any potential within mainstream economics which will transform the free market view and the economic policy implications? Since the present situation obviously is an opportunity for Post-Keynesian and other heterodox approaches, are these schools well equipped and ready to tackle the present problems? And how can they have an impact, both on economic policies and on the future development of macroeconomics? The chapters in this book address these questions from different angles. Content IntroductionEckhard Hein, Torsten Niechoj and Engelbert Stockhammer Microfoundations?John E. King How did macro theory get so far off track, and what can heterodox macroeconomists do to get it back on track?David Colander Towards a post-Keynesian consensus in macroeconomics: Reconciling the Cambridge and Wall Street viewsMarc Lavoie Explaining European unemployment with a New Keynesian New Growth modelAnsgar Rannenberg Behavioural Macroeconomics and the New Keynesian modelJan-Oliver Menz New Consensus Macroeconomics and Keynesian critiquePhilip Arestis Whither New Consensus Macroeconomics? The role of government and fiscal policy in modern macroeconomicsGiuseppe Fontana Fiscal policy on shaky foundations: Post Keynesian and Chartalist insights for New Consensus economistsPavlina Tcherneva Money and finance: The heterodox views of Robert Clower, Axel Leijonhufvud and Hyman MinskyElisabetta De Antoni Systemic crisis, systemic risk and the financial instability hypothesisFernando J. Cardim de Carvalho Money manager capitalism and the global financial crisisL. Randall Wray Diversity of capitalism and macroeconomic policyBruno Amable Variety of economic judgement and monetary policy-making by committeeSheila Dow, Matthias Klaes and Alberto Montagnoli The continuing muddles of monetary theory: A steadfast refusal to face factsCharles A.E. Goodhart After the bust: The outlook for macroeconomics and macroeconomic policyThomas I. Palley
