Beyond the Natural Rate: Stephen Marglin on the Instability of Market Economies
Journal of Economic Literature (Forthcoming)
In Raising Keynes: A Twenty-First Century General Theory, Stephen Marglin offers a provocative reformulation of Keynes’ theoretical framework, stressing the importance of modeling the dynamics of wage and price adjustment. This review explains and assesses Marglin’s argument for the possibility of a persistent equilibrium in which goods and/or labor markets continue not to clear, in the absence of active stabilization policy. It also compares Marglin’s analysis with that of New Keynesian models, and shows that the two approaches are more similar than might be immediately evident.