Historical Development of Time in Macroeconomic Models

Abstract

The development of time as a concept in macroeconomic models influenced theoretical models, the adjustment process, and causal relationships. While both the Classical and Keyttesian models imply that changes in economic activity may occur, these models differ as·to the time adjustment to equilibrium. The early classical theorists developed essentially static long run equilibrium models. These models were only vaguely concerned with intra-equilibrium fluctuation. Early critics of the mainstream thought such as Malthus and Marx ventured into shorter-run analysis. However, even these models essentially struggled both with economic and time concepts. This paper attempts to outline the development of time concept in macroeconomics from the classics to Keynes. The paper broadly tries to show the importance of time in the understanding of these models. In particular, the paper is concerned with the development of period analysis, definition of the length of time periods, identification of important intra-period adjustment process, and the development of lag relationship. In no way does this paper pretend to be a definitive history of time in the macro model. Rather, this paper attempts to begin the process of studying the development of the concept of time and its impact to macro models.