New classical economics
New Classical Economics emerged as a school in Macroeconomics during the 1970s. As opposed to Keynesian macroeconomics, it builds its analysis on an entirely neoclassical framework. Specifically, New Classical Macroeconomics (NCM) emphasises the importance of rigorous microfoundations (where the macroeconomic model is built up from the actions of individual agents, whose behaviour is modelled by microeconomics). New Keynesian economics was developed partly in response to NCM - it strives to provide microfoundations for Keynesian economic analysis.Several assumptions are common to most New Classical models. Primarily, all agents are assumed to be rational (utility-maximising) and possess rational expectations. New Classical Economics has also pionneered the use of representative agent models.
The most famous New Classical model is that of Real business cycles, developed by Robert Lucas Jr, who later received the Nobel Prize for his work.
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| Macroeconomic schools |
| Keynesian economics | Monetarism | New classical economics | New Keynesian economics | Austrian School | supply-side economics |