FALKENSTEIN ON MACROECONOMICS & THE GENIUSES AT MIT

Here.

Hayek’s early work on business cycles focused on misalignments in the structure of production. Alas, this was basically impossible to formalize. Keyenes’s model, meanwhile, was adopted into the Hansen-Hicks synthesis that looked a lot like the simple Supply/Demand equations economists were used to, so everything seemed copacetic. A bad idea, in a tractable model, has a long life, because everyone forgets about all the hand waiving assumptions that underlie such models.

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