კონფერენცია

∘ Lasha Tabatadze ∘
Modern comprehensionof Macroeconomic Theory

Summary

The present article discusses the issues of modern understanding of macroeconomic science in global economy, development aspects of macroeconomics as a science from decision of specific tasks to the formation of theory. There is overviewed on the one hand, the key issues of Keynesian models, macroeconomics research problems and their actuality, and on the other hand, the theory of new neoclassical synthesis, which is widely used in modern monetary policy studies

The article describes some methodological contradictions between the two main macroeconomic directions – in the context of interaction of Keynesian and neoclassical macroeconomic theories. For example, Classical economists believed in the perfect market and “the invisible hand” managing the market equilibrium. The term ‘invisible hand’ was used by Adam Smith to denote un-observable market force that helps the demand and supply to reach equilibrium automatically. The theory rightly says that individuals out of their interests will indulge in productive work that will create economic growth.

Classical economics says that government intervention in the market can be detrimental as it will discourage private sector. It says that for long run growth of the economy the growth should come from the market forces. As for the Keynesian theory, its recommendation of government’s intervention to stimulate growth got wide attention and was followed by major economies to bring them out of the great depression of 1930’s. They recommended that government intervention is required to stimulate growth in the economy and short-run survival/growth is must for performing in the long-run. In present scenario the idea of “less government more governance” is to encourage private sector to lead the economic growth while government creates an environment to grow. This is similar to classical theory. At the same time creating fiscal deficit and managing (lower) interest rates to spur the economic growth is similar to Keynesian theory.

However, it should be noted that the successful development of macroeconomic science is possible as a result of dialogue between theorists and practitioners. The conclusions for future successful development of macroeconomic science are presented, too.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Lasha Tabatadze ∘ Modern comprehensionof Macroeconomic Theory Summary The present article discusses the issues of modern understanding of macroeconomic science in global economy, development aspects of macroeconomics as a science from decision of specific tasks to the formation of theory. There is overviewed on the one hand, the key issues of Keynesian models, macroeconomics research problems and their actuality, and on the other hand, the theory of new neoclassical synthesis, which is widely used in modern monetary policy studies The article describes some methodological contradictions between the two main macroeconomic directions – in the context of interaction of Keynesian and neoclassical macroeconomic theories. For example, Classical economists believed in the perfect market and “the invisible hand” managing the market equilibrium. The term ‘invisible hand’ was used by Adam Smith to denote un-observable market force that helps the demand and supply to reach equilibrium automatically. The theory rightly says that individuals out of their interests will indulge in productive work that will create economic growth. Classical economics says that government intervention in the market can be detrimental as it will discourage private sector. It says that for long run growth of the economy the growth should come from the market forces. As for the Keynesian theory, its recommendation of government’s intervention to stimulate growth got wide attention and was followed by major economies to bring them out of the great depression of 1930’s. They recommended that government intervention is required to stimulate growth in the economy and short-run survival/growth is must for performing in the long-run. In present scenario the idea of “less government more governance” is to encourage private sector to lead the economic growth while government creates an environment to grow. This is similar to classical theory. At the same time creating fiscal deficit and managing (lower) interest rates to spur the economic growth is similar to Keynesian theory. However, it should be noted that the successful development of macroeconomic science is possible as a result of dialogue between theorists and practitioners. The conclusions for future successful development of macroeconomic science are presented, too.