Introduction

Preliminary remarks

Like other innovations, major ideas in economics enter the technology of economic analysis according to fairly well defined patterns, that Vernon has called “product cycles.” Consider Keynesian macromodels. The seminal study was Tinbergen's (1939) monograph for the Society of Nations, but work on this topic began in earnest just after the last war, when Klein's tiny model 1 was completed, and Tinbergen set up the rather incomplete model that was the first of a distinguished series built in the Central Planning Bureau of the Netherlands. It took about 30 years for what trade theorists would call this “Keynesian macromodels product cycle” to run its course. Today, though a number of major existing models retain their prestige, building new ones is an activity that is slightly looked down on in the academic world.

That is a sign of the success of this research. These models have established their worth in the practical world, where they are used daily, both in government and in big business. In the academic community, there continues to be considerable interest in careful investigations of such mechanisms as wage rigidity and the slowdown of the growth of productivity, better understanding of which is necessary to make Keynesian macromodels into more accurate forecasting tools but that are also so important in their own right that they must be tackled and solved irrespective of their usefulness for modeling.