Mechanism
Demand shortfalls cause recessions; fiscal and monetary policy should actively stabilize the economy
Dispute
Demand management versus nominal-anchor discipline; Persistent demand failure versus fast expectation-led adjustment
Macroeconomics Schools
Macro schools disagree about the mechanism, not just the policy preference. Use this page to see which assumptions each tradition starts from, where it breaks with others, and which models carry the argument.
Reading guide
Ask what each school thinks failed first
Then check the evidence it would need: demand data, monetary aggregates, expectations, price rigidities, credit conditions, institutions, or power
School map
Where the schools split
Map reading: read the map as a disagreement over the binding channel: demand, money, expectations, prices, balance sheets, institutions, or power
MainstreamShared premiseFault line
Mainstream
Mechanism
Inflation is primarily a monetary phenomenon; stable money-supply growth matters more than fine-tuned intervention
Dispute
Demand management versus nominal-anchor discipline
Mechanism
Markets clear more quickly than Keynesians allow, and systematic policy has little room to surprise the economy into producing more
Dispute
Persistent demand failure versus fast expectation-led adjustment; Nominal rigidities and imperfect competition versus near-frictionless clearing; Power, institutions, money creation, and distribution belong inside the model
Mechanism
Markets are forward-looking but still imperfect; sticky prices and wages give policy real short-run effects
Dispute
Nominal rigidities and imperfect competition versus near-frictionless clearing