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Following in Patinkin and Clower's footsteps: Barro, Grossman, and the development of disequilibrium macroeconomics

Plassard Romain, Duke University

During the 1970s, most macroeconomists developed “fixed-price” equilibrium models. They usually focused on the static properties of equilibria with market rationing. However, this was not the original project. “Fixed-price” equilibrium models emerged out of Don Patinkin ([1956] 1965), Robert Clower (1965), and Axel Leijonhufvud’s (1968) interpretation of the General Theory (1936). All three considered that John Maynard Keynes (1936) was concerned with the dynamic of markets when individuals behaved under rationing constraints. From there, they all tried to provide microfoundations to a model capable of portraying disequilibrium adjustment processes occurring in capitalist economies. The question is whether “fixed-price” theorists abandoned this project. My paper shows that Robert Barro and Herschel Grossman did not. When elaborating the seminal “fixed-price” model (1971), they had a second step in mind. It was to build a dynamic disequilibrium model. It turns out to be very much in the spirit of Patinkin ([1956] 1965) and Clower’s (1965). I present its main features and discuss its scope. By doing so, I account for the richness and limits of the research line that Patinkin ([1956] 1965) and Clower (1965) initiated but barely explored.

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Keywords: dynamics, disequilibrium, microfoundations of macroeconomics, Barro and Grossman.

Paper file