On the Lucas-critique

Today, after the Lucas critique, the old-style Keynesian economics is often said to be dead. Today societies and politicians hardly accept the direct and unlimited success of countercyclical economic policy highlighted by John Maynard Keynes. For Keynes, fiscal policy has the hope of countercyclical success, though he himself also referred to some limits in the form of expectations (e.g. Ch. 12 of his General Theory). This was the problem that was examined by both Milton Friedman and Robert Lucas. However, deeply, the core idea of Keynesian countercyclical economic policy remained intact all along: there are situations in which government intervention may be successful in real terms. This is the consequence of the conditional character of the theory of new classical macroeconomics. However, the exact circumstances under which this countercyclical potential is available underwent serious modifications. Today, thanks to the new classicals, we have a deeper understanding of these limiting factors.

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