Abstract
Classes in macroeconomics typically present versions of the dynamic aggregate demand/ aggregate supply framework to analyze short term fluctuations and optimal monetary policy responses to economic conditions. In these models an output market equilibrium condition is usually combined with a short run Phillips Curve and a monetary policy reaction function. Output, inflation and real and nominal interest rates are shown to respond to (exogenous) supply and demand shocks and interact with one another over time. These models fail to incorporate the fact that policymakers must be modeled as responding to their incentives given their constraints. Policy isn't usefully modeled as an exogenous variable and fifty plus years of Public Choice theory has enriched the insights gained from studying non-market decisions. This essay explains how incorporating the research from Public Choice Theory into macroeconomics can better help us understand real world political institutions and allow for a richer classroom analysis of macroeconomics and macroeconomic policy.
Recommended Citation
(2026)
"Can Public Choice Theory Help Make Classroom Macroeconomics More Useful?,"
Journal of Economics and Finance Education: Vol. 14:
Iss.
2, Article 5.
Available at:
https://scholarship.rollins.edu/jefe/vol14/iss2/5
