New Classical Macroeconomics

Rational-expectations macro that rebuilt cycle theory on optimizing agents and market clearing.

Specifications & Metrics

era

1970s onward

founders

Robert Lucas, Thomas Sargent

signature

Rational expectations and micro-founded equilibrium cycles

Core Principles & Analysis

• Lucas's 1976 critique held that policy changes shift estimated relationships, dooming naive forecasting.
• Real business cycle theory explained fluctuations as optimal responses to technology shocks.
• Its micro-foundations discipline was inherited by the new Keynesian DSGE mainstream.

Sources

• Econlib Concise Encyclopedia of Economics: New Classical Macroeconomics