Introduction

The widespread belief among macroeconomists and the informed public in the failure of macroeconomics became so acute in the years after 2008 that many observers leveled the more stringent criticism that economics as a discipline had developed in a way that had emptied it of empirical content. Among the criticisms was that economics had largely become an axiomatic discipline consisting of highly unrealistic assumptions and mathematical derivations but with limited empirical content and validity. Further, most mainstream macroeconomic theoretical innovations in recent decades tended to be “self-referential and inward-looking distractions,” with research motivated by internal logic, intellectual sunk capital, and aesthetic puzzles rather than by the need to understand how the economy works, let alone how the macroeconomy works during times of stress and financial instability (Krugman, 2009). Krugman claimed that a more or less Keynesian viewis the only plausible game in town: in hiswords, “Keynesian economics remains the best framework we have for making sense of recessions and depressions.” In the views of the critics of the existing macroeconomic analysis, the empirical failure of macroeconomics had its roots in the adoption since the 1970s of doctrines/approaches such as Ricardian equivalence, rational expectations, policy ineffectiveness, foundations of macroeconomics in microeconomics, real business cycle (RBC) theory, the (strong-form of the) efficient markets hypothesis, and dynamic stochastic general equilibrium (DSGE) models, etc…