The 2026 'Nobel' prize in economics goes to Robert E. Hall and Michael Woodford. I happen to already have an opinion that Woodford's work, and 'New Keynesianism', is misconceived.
Woodford's textbook is widely cited, as I understand it. Robert Solow was Woodford's thesis advisor. He acknowledges Axel Leijonhufvud for introducing him to Wicksell's approach to monetary theory. New Keynesianism is widely drawn on, I gather, by the Federal Reserve and other monetary authorities.
New Keynesianism is named in a misleading way. Keynes, in the General Theory tries to explain persistent unemployment when wages and prices are flexible. The explanation of persistent unemployment with sticky wages or prices or other imperfections is pre-Keynesian. We now know that no tendency can exist for the labor market to clear in any run, even under ideal conditions.
Another issue is confusion about the role of money in neo-Walrasian General Equilibrium Theory. Prices in terms of an arbitrary numeraire are not nominal, that is, money prices. The pure theory is one of barter. Money has no 'essential' role. The Hahn problem is how to modify the theory so that the equilibrium depends, in some essential way, is known as the Hahn problem. You can claim that some commodity or another is stored across time periods, talk about banks, and so on. Rhetorically, money makes the transition to equilibrium smoother. But this way of talking is disconnected with, perhaps contradicted by, the mathematical theory.
Another approach is to model money as a friction. I once explored a cash-in-advance model for a bit. This approach seems confused, too.
I draw heavily on Colin Rogers in this post.
Selected References- Frank Hahn. 1965. On Some Problems of Proving the existence of an equilibrium in a monetary economy. In Hahn & Brechling (eds.). Theory of Interest Rates
- Frank Hahn and Robert Solow (1995). A Critical Essay on Modern Economic Theory, MIT Press
- Colin Rogers. 1989. Money, Interest and Capital: A Study in the Foundations of Monetary Theory . Cambridge University Press.
- Colin Rogers. 2024. Whitehead's fallacy of misplaced concreteness and the unfortunate uselessness of all monetary-macro theory micro-founded on Walrasian-Pareto general equilibrium theory. Cambridge Journal of Economics 48(2): 235-256.
- Colin Rogers. 2026. Understanding the General Theory after 90 Years. Review of Political Economy
- Michael Woodford. 2003. Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton University Press.
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