Foreword by David Colander

Summary

True macroeconomists are hard to find these days. They seem to have dug themselves into the woodwork in response to the new classical, and their new Keynesian clone, population explosion. When you find a true Keynesian, you have found a treasure, and the Cornwalls are true, unrepentant Keynesians.

I call their analysis ‘true New Keynesian’. (I can't simply call it New Keynesian, because that term has been hijacked by a set of writing that often has little to do with either Keynes or macro, but is actually a combination of partial equilibrium analysis and new monetarism going under a Keynesian label.) It is Keynesian because it retains a framework within which aggregate demand can play a role in affecting the long-run performance of the economy. It is new because it incorporates new ideas that are relevant for the exposition. The Cornwalls have carefully followed the modern developments in macroeconomics, adapted those aspects of it they consider advances, and eliminated those aspects of it that they find fads.

In this well-structured book they present, in a wonderfully clear style, a framework that ‘explains’ the stylized facts of macroeconomic development of the industrial nations during the past hundred years. They consider these stylized facts in historical sequence, arguing that the facts trace out a pattern of alternating episodes of poor and superior macroeconomic performance. The framework they use is evolutionary; it is neither completely self-regulating nor knife-edge. The system adapts, but adapts slowly, to events and disturbances.