IDEAS home Printed from https://ideas.repec.org/p/trn/utwpas/1217.html
   My bibliography  Save this paper

Towards a Political Economy of the Theory of Economic Policy

Author

Listed:
  • K.Vela Velupillai

Abstract

The theory of economic policy, in its mathematical modes, may be said to have had two incarnations, identified in terms of pre-Lucasian and ultra-Lucasian on a time-scale, whose origin can be traced to the Scandinavian works of the 1920s and early 1930s, beginning with Lindahl (1924, 1929), Frisch (1933) and Myrdal (1933). The end - mercifully (meant perversely) - of the ultra-Lucasian period, in Frances Fukuyama senses, might well have been the date of Prescott's Nobel Prize Lecture (Prescott, 2004). The codification of what may be called the `classical' theory of economic policy was initiated in the pioneering formalisations by Frisch (1949, a, b), and Tinbergen (1952), elegantly summarised in Bent Hansen's early, advanced, text book (Hansen, 1955). The launching pads for the ultra-Lucasian period were the Lucas Critique (Lucas, 1975), the elementary saddle-point dynamics based policy ineffectiveness `theorem' in a Rational Expectations context by Sargent and Wallace (1976) and the Dynamic Programming based Time-Invariance proposition in Kydland and Prescott(1977). In this essay I try, first of all, to trace a path of the mathematisation of the theory of economic policy, from this specific origin to the stated culminating point. Secondly, an attempt is made to expose the nature of the Emperor's New (Mathematical) Clothes in which the mathematisation of the theory of economic policy was attired. Finally, it is shown that the obfuscation by the mathematics of efficiency, equilibrium and the fundamental theorems of welfare economics can be dispelled by an enlightened, alternative, mathematisation that makes it possible to resurrect the poetic tradition in economics and ‘connect the prose in us with the passion’ for policy in the manner in which Geoff Harcourt has `connected' them.

Suggested Citation

  • K.Vela Velupillai, 2012. "Towards a Political Economy of the Theory of Economic Policy," ASSRU Discussion Papers 1217, ASSRU - Algorithmic Social Science Research Unit.
  • Handle: RePEc:trn:utwpas:1217
    as

    Download full text from publisher

    File URL: http://www.assru.economia.unitn.it/files/DP_6_2012_II.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. K. Vela Velupillai & Stefano Zambelli, 2010. "Computation in Economics," ASSRU Discussion Papers 1001, ASSRU - Algorithmic Social Science Research Unit.
    2. Edward C. Prescott, 2006. "The Transformation of Macroeconomic Policy and Research," The American Economist, Sage Publications, vol. 50(1), pages 3-20, March.
    3. K. Vela Velupillai, 2008. "The Mathematization of Macroeconomics: A Recursive Revolution," Department of Economics Working Papers 0807, Department of Economics, University of Trento, Italia.
    4. G. C. Harcourt, 2008. "The Structure of Post-Keynesian Economics," Palgrave Macmillan Books, in: Mathew Forstater & L. Randall Wray (ed.), Keynes for the Twenty-First Century, chapter 0, pages 185-197, Palgrave Macmillan.
    5. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720, October.
    6. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    7. Sargent, Thomas J. & Wallace, Neil, 1976. "Rational expectations and the theory of economic policy," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 169-183, April.
    8. Kumaraswamy Vela Velupillai, 2008. "The Mathematization of Macroeconomics. A Recursive Revolution," Economia politica, Società editrice il Mulino, issue 2, pages 283-316.
    9. Olav Bjerkholt, 2009. "Some Unresolved Problems of Mathematical Programming," World Scientific Book Chapters, in: Dipak Basu (ed.), Economic Models Methods, Theory and Applications, chapter 1, pages 3-19, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michel DeVroey, 2012. "Dead or Alive? The Ebbs and Flows of Keynesianism Over the History of Macroeconomics," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 4, Edward Elgar Publishing.
    2. Daniel Heymann & Gabriel Montes-Rojas, 2018. "On model-consistent expectations in macroeconomics," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 64, pages 22-45, January-D.
    3. Leijonhufvud, Axel, 1983. "What would Keynes have thought of rational expectations?," Discussion Papers, Series I 177, University of Konstanz, Department of Economics.
    4. Baranzini, Mauro L. & Mirante, Amalia, 2021. "Pasinetti's theorem: A narrow escape, for what was to become an inexhaustible research programme," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 470-481.
    5. Michel De Vroey, 2010. "Getting rid of Keynes ? A survey of the history of macroeconomics from Keynes to Lucas and beyond," Working Paper Research 187, National Bank of Belgium.
    6. Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 47-68, Fall.
    7. Kevin D. Hoover & Òscar Jordà, 2001. "Measuring systematic monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 113-144.
    8. Chen, Been-Lon & Lai, Chih-Fang, 2015. "Effects of labor taxes and unemployment compensation on labor supply in a search model with an endogenous labor force," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 300-317.
    9. repec:hum:wpaper:sfb649dp2006-023 is not listed on IDEAS
    10. Kevin D. Hoover & Òscar Jordà, 2001. "Measuring systematic monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 83(Jul), pages 113-144.
    11. Riccardo Fiorito & Giulio Zanella, "undated". "Labor Supply Elasticities: Can Micro be Misleading for Macro?," Working Papers 4, Department of the Treasury, Ministry of the Economy and of Finance.
    12. Sundar Sarukkai, 2012. "Mathematics In Economics: Reducibility And/Or Applicability?," New Mathematics and Natural Computation (NMNC), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 81-93.
    13. G. C. Harcourt, 2015. "On the Cambridge, England, Critique of the Marginal Productivity Theory of Distribution," Review of Radical Political Economics, Union for Radical Political Economics, vol. 47(2), pages 243-255, June.
    14. V. Pandit, 2001. "Structural Modelling Under Challenge," Working papers 98, Centre for Development Economics, Delhi School of Economics.
    15. Trabandt, Mathias & Uhlig, Harald, 2006. "How far are we from the slippery slope? The Laffer curve revisited," SFB 649 Discussion Papers 2006-023, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    16. Up Sira Nukulkit, 2018. "Neutral Technical Progress and the Measure of Value: along the Kaldor-Kennedy line," Working Paper Series, Department of Economics, University of Utah 2018_05, University of Utah, Department of Economics.
    17. Antonio Aznar & Mª Teresa Aparicio & Francisco Javier Trivez, 1991. "Modelo LSW versus modelo NRH-GAP, aplicación de una nueva metodología de selección de modelos," Investigaciones Economicas, Fundación SEPI, vol. 15(3), pages 575-599, September.
    18. Cripps, Francis & Izurieta, Alex & Singh, Ajit, 2011. "Global imbalances, under-consumption and overborrowing: the state of the world economy & future policies," MPRA Paper 39049, University Library of Munich, Germany.
    19. Andres Frick & Michael Graff & Jochen Kurt Hartwig & Boriss Siliverstovs, 2010. "Discretionary Fiscal Policy," KOF Working papers 10-253, KOF Swiss Economic Institute, ETH Zurich.
    20. G.C. Harcourt, 2011. "Post-Keynesian theory, direct action and political involvement," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 117-128.
    21. Mathias Trabandt & Harald Uhlig, 2006. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," SFB 649 Discussion Papers SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trn:utwpas:1217. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: assru.tm@gmail.com (email available below). General contact details of provider: https://edirc.repec.org/data/detreit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.