Pedro Garcia Duarte

In Search of Lost Time: The Neoclassical Synthesis

Abstract Present-day macroeconomics has sometimes been dubbed “the new neoclassical synthesis”, suggesting that it constitutes a reincarnation of the neoclassical synthesis of the 1950s. This paper assesses this understanding. To this end, we examine the contents of the “old” and the “new” neoclassical syntheses. We show that the neoclassical synthesis originally had no fixed content, but two meanings gradually became dominant. First, it designates the program of integrating Keynesian and Walrasian theory. Second, it designates the methodological principle that in macroeconomics it is better to have alternative models geared towards different purposes than a hegemonic general equilibrium model. The paper documents that: (a) the first program was never achieved; (b) Lucas’s criticisms of Keynesian macroeconomics eventually caused the neoclassical synthesis program to vanish from the scene; (c) the rise of DSGE macroeconomics marked the end of the neoclassical synthesis mark II; and (d) contrary to present-day understanding, the link between the old and the new synthesis is at best weak.

The Growing of Ramsey's Growth Model

Frank Plumpton Ramsey (1903–1930) was a Cambridge mathematician who made important contributions not only to philosophy, mathematics, logic, and probability, but also to economics. Ramsey made two major contributions to economics, both published in the Economic Journal in 1927 and 1928, which became popular only in the 1950s and 1960s. In both cases, economists portrayed Ramsey as a sleeping giant: a mathematician who had almost no impact on the economics profession prior to 1950 because his mathematical analysis was out of the reach of the typical economist of his time. My goal in this article is to understand how Ramseys growth model became part of the neoclassical literature on economic growth in the 1950s and 1960s and how Ramsey became a sacred predecessor of this field. In order to better understand the stabilization of Ramseys growth model in postwar economics, I conduct a JSTOR search and consult a few book references. Based on this dataset, I conclude that Ramsey was in fact “awake” in the economic growth literature pre-1950. I discuss as well the main economists who transported Ramsey from the Cambridge milieu of the 1920s to the North American economics of the postwar period.

Beyond Samuelson's Chapter on Ramsey

Paul Anthony Samuelson proposed and practiced a program for the Whig history of economics. One such example is his account of Frank Ramsey’s contribution to optimal taxation in 1927. For him, and mainly for the public finance economists who rediscovered later Ramsey’s contribution, Ramsey was a genius ahead of his time who used a mathematics too advanced for his contemporaries and was thus rediscovered only in the 1970s, when economists became more mathematically literate. In such rediscovery, a memorandum that Samuelsom wrote in 1951 for the us Treasury became central. I examine Samuelson’s account and challenge it in some respects and explore the historical context of the emergence of the optimal taxation literature in the 1970s. Additional, I analyze the canonization of Ramsey in this field, stressing Samuelson’s role in this process as a professor who liked telling stories about economists, especially about Ramsey, to his graduate students.

A Feasible and Objective Concept of Optimal Monetary Policy: The Quadratic Loss Function in the Postwar Period

Monetary economists argue that they adopted quadratic loss functions because the latter delivered easy solutions to complex stochastic models. In that narrative, Simon (1956) and Theil (1957) are mentioned by their proofs that models with quadratic objective functions have the certainty equivalence property, which made their solutions feasible for the computers available at that time. Appearing in that narrative are Poole (1970) and Sargent and Wallace (1975), who were among the first to apply the tool to monetary economics. In this article I argue that in addition to offering “solutions feasibility,” the use of a quadratic loss function to characterize the behavior of central banks also inaugurated an objective way of talking about optimality. In this respect, the tool stabilized the discourse on optimal monetary policy.

Frank P. Ramsey: A Cambridge Economist

Frank Plumpton Ramsey was a Cambridge mathematician who produced profound work in logic, philosophy, mathematics and economics in the first-half of the twentieth century. He died at the age of twenty six, in 1930, and his contributions, despite being few in number, have been bearing fruits since then. Practitioners across those areas share the view that Ramsey was a genius ahead of his time. I explore in this article how Ramseys image of a genius was created among eminent economists. I then discuss the main point of this essay: whether or not Ramsey may have had a research agenda in economics. His two major articles in this field seem to be unrelated. A common impression from these works and from Ramseys interaction with other economists is that he was mostly a mathematician who was distracted by economists who from time to time sought his help with certain problems. Here I argue that Ramsey did have an economics research agenda, born out of his close relationship with Arthur Cecil Pigou. I support my thesis mostly with an archival evidence not explored thus far: some notes deposited at the University of Pittsburgh, here published for the first time.

THE PLACE OF THE HISTORY OF ECONOMIC THOUGHT IN MAINSTREAM ECONOMICS, 1991–2011, VIEWED THROUGH A BIBLIOGRAPHIC SURVEY

This paper offers a bibliographic survey of the literature in the history of economic thought (HET) in eight major economics journals, using the JEL classification to retrieve and analyze the relevant literature. Our study shows that, though contributions to HET are still found in top economics journals, the rate of publication of such papers has become increasingly uneven, and the methods and narrative styles they adopt are remote from those used by historians of economics. We show that the widespread idea that historians should address current economists by using their (mostly mathematical) tools and techniques is hardly present in mainstream journals, and discuss the role of editors and editorial boards of the different journals we survey in shaping these changes over time. We conclude that historians should focus on doing good work on their own, rather than try to figure out what the economists’ preferences are, and undertake research accordingly.

Frank Ramsey's Notes on Saving and Taxation

There are two sets of undated and until now unpublished notes by Ramsey that support the idea that both of his papers published in the late 1920s, which are the predecessors of modern discussions on economic growth, optimal taxation, and monetary economics, were part of a common research agenda, as discussed in the preceding article. These notes are deposited at the Archives of Scientifi c Philosophy of the University of Pittsburgh, Hillman Library (Papers of Frank Plumpton Ramsey, series “Undergraduate Materials,” box 6, folder 7, “Ramsey Economics”) and are published here for the fi rst time by permission of that university (all rights reserved). The fi rst set of notes contains two sections (numbered IV and V) that most likely were the ones cut out by Keynes from the published version of Ramsey’s 1928 paper that is divided into three sections. In the next section I reprint these notes, leaving out most of the passages struck out by Ramsey in his manuscript. I sometimes include additional notes explaining some passages, mostly as footnotes to Ramsey’s text. Lastly, in a few instances Ramsey underlined words, which are here italicized.

Introduction: Privileging Micro Over Macro? A History of Conflicting Positions

Mainstream macroeconomists agree that we live in the age of microfoundations. The recent worldwide financial crisis may have emboldened critics of this microfoundational orthodoxy, but it remains the dominant view that macroeconomic models must go beyond supply and demand functions to the level of “deep parameters.” Microeconomics on this view is prior to macroeconomics. The standard narrative of the rise of microfoundations locates their origins in the work of Lucas and his new classical friends and followers in the 1970s. Our purpose is to step back and to reexamine the history of the relationship of microeconomics and macroeconomics without presupposing the truth of the standard narrative, challenging the association of microfoundations with Lucas and rational expectations.

Chasing the B: A Bibliographic Account of Economics’ Relation to its Past, 1991-2011

Some historians argue that the history of economic thought (HET) is useful and important to economists and that historians should remain in economics departments. Others believe that historians’ initiatives toward economists are doomed in advance to failure and that they should instead ally themselves with historians and sociologists of science located in humanities departments. Generally, the contributions that are devoted to reviewing the state of HET take a firm side for either one of these two positions and therefore have a prescriptive view on how history should be written. By contrast, our paper proposes a descriptive account of the kind of contributions to HET that have been published in major economics journals over the past two decades. To avoid definitional issues over HET, we use the B category of the JEL classification to retrieve and analyze the relevant literature. We show that, though contributions to HET are still found in top economics journals, the rate of publication of such papers has become increasingly uneven and the methods and narrative styles they adopt are increasingly remote from that advocated in the sub-disciplinary literature. For this reason, historians who are still willing to address the economics’ community should be more interested in expanding the frontiers of their field rather than in trying to anticipate their targeted readers’ preferences.

The Early Years of the MIT PhD Program in Industrial Economics

The immediate postwar period witnessed not only a considerable expansion of economics graduate education in the United States but also its reformulation. Graduate education at MIT became more technical, with shorter theses on narrowly defined problems. This occurred as economics was going through important changes, informed by its mathematization, by the stabilization of a neoclassical way of doing economics, by the advancement of econometrics and the “Keynesian revolution,” and by the Americanization of economics. The MIT PhD program in economics was created only in 1941 but very quickly became a major producer of PhDs. The new training offered by MIT to economists not only followed larger changes in US academe but also contributed to them, and this makes it an important case study of the transformation of American economics more generally. My aim here is to scrutinize the formative years of this graduate program, mostly the 1940s and 1950s.