In the early 1980s, rational expectations and new classical economics dominated macroeconomic theory. This essay evolved from the authors' profound disagreement with that trend. It demonstrates not only how the new classical view got macroeconomics wrong, but also how to go about doing macroeconomics the right way.
On the basis of theoretical considerations and on the evidence of real-world economies, Frank Hahn demonstrates in unequivocal terms that Monetarism offers an implausible solution to the most pervasive economic problems. He confronts the central issue of current economic theory by making the case that the growth of the money supply is not a necessary cause of inflation, as the Monetarists have assumed.