Speaker: Michel Devroy , Université catholique de Louvain
Title: The Lucas/Kydland and Prescott Transformation of Macroeconomics
Abstract: This seminar will be a pitch from the speaker’s book, A History of Macroeconomics from Keynes to Lucas and Beyond (C.U.P. 2016). Professor Devroy will focus on a single episode of this history, the game-changing role played by Lucas and Kydland and Prescott. Lucas’s contribution was methodological: he defined new standards for a ‘good’ research practice in macroeconomics and was able to persuade the profession to abide by them. This move can be captured as a passage from a Marshallian to a Walrasian way of doing macroeconomics. Kydland and Prescott’s contribution was to transform Lucas’s monetary-surprise model, a one-shot achievement, into an applied Ramsey-type research program alluring enough to make the whole profession starting to work on it. Professor Devroy will underline the oddity of using such a modelling strategy for the study of complex real-world economies and bring out is pros and cons.