A note on time periods in macroeconomics.
Document Type
Article
Publication Date
6-2006
Abstract
The concept of time has been central in economics since at least Alfred Marshall. The distinction between the short-run and the long-run is rather well-accepted and uniform in microeconomics and depends on the ability of a firm to adjust or vary its factors of production. The short-run is nearly always defined in microeconomics as that time period in which at least one factor of production is fixed while the long-run is conceived as a time horizon sufficient such that all factors of production may be changed.
A survey of some principles and intermediate-level textbooks suggests that no such standard definitions of time horizons exist within macroeconomics, and the corresponding treatments of aggregate supply are also quite diverse. Perhaps the most common distinction between time periods is based on price flexibility. Indeed, Gwartney, Stroup, Sobel and Macpherson [Economics: Private and Public Choice, 2006], Hall and Papell [Macroeconomics: Economic Growth, Fluctuations, and Policy, 2005], Mankiw [Macroeconomics, 2003], McConnell and Brue [Economics: Principles, Problems, and Policies, 2005], O'Sullivan and Sheffrin [Economics: Principles and Tools, 2006], and Samuelson and Nordhaus [Economics, 2005] all define the short-run as that time period in which some prices are fixed while the long-run is specified as a time period sufficient enough that all prices are variable. Blanchard [Macroeconomics, 2006], Gordon [Macroeconomics, 2003], and Williamson [Macroeconomics, 2005], however, distinguish between the short-run and long-run based on calendar time, and Froyen [Macroeconomics: Theories and Policies, 2005] provides alternative conceptions of the two time horizons.
Publication Information
Kyer, Ben L. and Maggs, Gary E. (2006). "A note on time periods in macroeconomics.." Atlantic Economic Journal 34.2.
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