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THE NEW CLASSICAL COUNTER-REVOLUTION: FALSE PATH OR ILLUMINATING COMPLEMENT?

INTRODUCTION

In his recent interesting paper in this journal, Laurence Seidman [2005] argues that the 'new classical counter-revolution that began in the 1970s has been a false path for macroeconomics.' Professor Seidman's argument is based on five main points, namely:

1. in their critique of Keynesian economics, Lucas and Sargent [1978] highlighted the failure of Keynesian models to explain the stagflation of the 1970s but failed even to mention the OPEC oil shock in their discussion; in contrast, once Keynesian economists had adapted the AD-AS framework to take into account the OPEC oil shock induced shifts of the AS curve, not only could Keynesian economics explain US economic history ...

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