“Ball, Mankiw, Romer and others style themselves as New Keynesians. Their program is to develop improved microeconomic foundations for imperfectly flexible prices. In the process, they hope to illuminate the paradox that individually rational or near-rational behavior can result in significant collective market failures. These are certainly laudable objectives. In the end, I suspect, the program will not change the essential substance of Keynesian macroeconomics. But it will make Keynes more palatable to theorists.”

—  James Tobin

"Price Flexibility and Output Stability: An Old Keynesian View" (1993)

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James Tobin22
American economist 1918–2002

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Kenneth Arrow photo

“Not only is it possible to devise complete models of the economy on hypotheses other than rationality, but in fact virtually every practical theory of macroeconomics is partly so based. The price- and wage- rigidity elements of Keynesian theory are hard to fit into a rational framework, though some valiant efforts have been made. … But if the Keynesian model is a natural target of criticism by the upholders of universal rationality, it must be added that monetarism is no better. I know of no serious derivation of the demand for money from a rational optimization. … The use of rationality in these arguments is ritualistic, not essential.”

Kenneth Arrow (1921–2017) American economist

1970s-1980s, "Rationality of Self and Others in an Economic System", 1986

“One troublesome aspect is the place of rational expectations macroeconomics in the often political debate over Keynesian economics. At least implicitly, many people feel that what's bad for the rational expectations viewpoint is good for the Keynesian one, and vice versa. But it is hard to see how the problems in using the rational expectations approach to explain monetary nonneutrality can alleviate the theoretical and empirical shortcomings of the Keynesian model.”

Robert Barro (1944) American classical macroeconomist

Robert J. Barro, "Rational Expectations and Macroeconomics in 1984" (1984).

“Colander: What’s your view of the New Keynesian approach?
Tobin: I’m not sure what that means. If it means people like Greg Mankiw, I don’t regard them as Keynesians. I don’t think they have involuntary unemployment or absence of market clearing. It is a misnomer to call Mankiw any form of Keynesian.
Colander: How about real-business-cycle theorists?
Tobin: Well, that’s just the enemy.”

David Colander (1947) American economist

David Colander, "Conversations with James Tobin and Robert J. Shiller on the “Yale Tradition” in Macroeconomics", Macroeconomic Dynamics (1999), later published in Inside the economist’s mind: conversations with eminent economists (2007) edited by Paul A. Samuelson and William A. Barnett.
1990s

“Modern macroeconomics flourished in its pursuit of the secrets of long-run economic growth, but it neglected short-run economic problems. In the long run, prices are flexible, and the growth of the economy is determined by the growth in the ability to supply goods and services. But in the short run prices are not flexible. Growth can be held back because prices are too high and, as a result, demand is too low. Keynes made his name by analyzing short-run problems caused by the stickiness or even rigidity of some important prices. But these Keynesian ideas were abandoned by modern macroeconomics.”

Peter Temin (1937) American economist

Why Keynes is Important Today (2014)

James Tobin photo

“I shall argue that Keynesian macroeconomics neither asserts nor requires nominal wage and/or price rigidity. It does assert and require that markets not be instantaneously and continuously cleared by prices.”

James Tobin (1918–2002) American economist

"Price Flexibility and Output Stability: An Old Keynesian View" (1993)

Olivier Blanchard photo

“Lucas and Sargent’s main argument was that Keynesian economics had ignored the full implications of the effect of expectations on behavior. The way to proceed, they argued, was to assume that people formed expectations as rationally as they could, based on the information they had. Thinking of people as having rational expectations had three major implications, all highly damaging to Keynesian macroeconomics. …
The first implication was that existing macroeconomic models could not be used to help design policy. … The second implication was that when rational expectations were introduced in Keynesian models, these models actually delivered very un-Keynesian conclusions. … The third implication was that if people and firms had rational expectations, it was wrong to think of policy as the control of a complicated but passive system. Rather, the right way was to think of policy as a game between policy makers and the economy. …
To summarize: When rational expectations were introduced, Keynesian models could not be used to determine policy; Keynesian models could not explain long-lasting deviations of output from the natural level of output; the theory of policy had to be redesigned, using the tools of game theory.”

Olivier Blanchard (1948) French economist

Source: Macroeconomics (7th Edition, 2017), Ch. 24 : Epilogue: The Story of Macroeconomics

“New-classical economics has been undeniably influential, but not in the way that its three prominent creators originally imagined. Its most important contribution to macroeconomics, the assumption of rational expectations, was stolen almost immediately, and applied more fruitfully, by the new Keynesians.”

Robert J. Gordon (1940) American economist

"Fresh Water, Salt Water, and other Macroeconomic Elixirs", 1989

N. Gregory Mankiw photo

“Microeconomics and macroeconomics are closely intertwined. Because changes in the overall economy arise from the decisions of millions of individuals, it is impossible to understand macroeconomic developments without considering the associated microeconomic decisions.”

N. Gregory Mankiw (1958) American economist

Source: Principles of Economics (1998-), Ch. 2. Thinking Like an Economist; p. 27

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“Accounting for the artificial boom and the consequent bust is not part of Keynesian income-expenditure analysis, nor is it an integral part of monetarist analysis. The absence of any significant relationship between boom and bust is an inevitable result of dealing with the investment sector in aggregate terms. The analytical oversight derives from theoretical formulation in Keynesian analysis and from empirical observation in monetarist analysis. But from an Austrian perspective, the differences in method and substance are outweighed by the common implication of Keynesianism and monetarism, namely, that there is no boom-bust cycle of any macroeconomic significance.”

Roger Garrison (1944) American economist

Pages 136–137.
"Is Milton Friedman a Keynesian?" (1992)

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“Monetarism—both of the older Friedman version stressing adherence to money stock targets and of the newer rational expectations variety—has been badly discredited. The stage has been set for recovery in the popularity of Keynesian diagnoses and remedies. I do not mean to imply, of course, that there is some Keynesian truth, vintage 1936 or 1961, to which economists and policymakers will or should now return, ignoring the lessons of economic events and of developments in economics itself over these last turbulent fifteen years. I do mean that in the new intellectual synthesis which I hope and expect will emerge to replace the divisive controversies and chaotic debates on macroeconomic policies, Keynesian ideas will have a prominent place.”

James Tobin (1918–2002) American economist

James Tobin, "Keynes' Policies in Theory and Practice", Challenge (1983).
1970s and later

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