Godley’s law, Godley’s rule and the “new Cambridge macroeconomics”

Abstract

The present paper examines a contemporary critique of British macroeconomic policy, namely that put forward by the Cambridge Economic Policy Group (CEPG) which has come to be called the “New Cambridge Macroeconomics”. Although this approach no doubt exists, thus far no formal exposition of its complete model has been published. In identifying the CEPG view it is therefore necessary to go to a number of different publications and then, in some measure, to draw inferences. Although there is risk for misinterpretation, until the GEPS’s formal model is published an attempted synthesis may be of value. According to the author’s interpretations, “New Macroeconomics” implies a considerable number of assumptions not all of which are obviously acceptable.

JEL: E60, E65