new classical economics

Definition

Body of macroeconomic thought based on the role of rational economic agents and the theory of rational expectations, emerging during the 1970s. It is characterized by an extreme form of monetarism which argues that demand-management intervention by governments is ineffective even in the short run, and instead advocates far reaching tax cuts. It is based largely on the ideas of the US economists John Muth (1930-2005) and 1995 Nobel laureate Robert Lucas, Jr. (born 1937), and the co-recipients of 2004 Nobel prize in economics – US economist Edward Prescott (born 1940) and Norwegian economist Finn Kydland (born 1943). Not to be confused with neo classical economics.