The IS-LM Model

The IS-LM Model: Its Rise, Fall, and Strange Persistence. 2004. Edited by Michel De Vroey and Kevin D. Hoover. Supplement to volume 36 of HOPE. Durham, NC: Duke University Press.

"Introduction: Seven Decades of the IS-LM Model," by Michel De Vroey and Kevin D. Hoover (pp. 1–11). Although not as central as it once was, the IS-LM model continues to be a mainstay of undergraduate textbooks, figures widely in applied macroeconomics, and lies at the conceptual core of most commercial and governmental macroeconomic models.

"Keynote Address to the 2003 HOPE Conference: My Keynesian Education," by Robert E. Lucas Jr. (pp. 12–24). Keynes wrote the "General Theory" to convince people that there was a way to deal with the Depression and save capitalism at the same time.

"What Was Lost with IS-LM," by Roger E. Backhouse and David Laidler (pp. 25–56). From the late 1930s onward, the fact that economic activity takes place in time began to lose its central place in what by then had come to be called macroeconomics.

"The History of Macroeconomics Viewed against the Background of the Marshall-Walras Divide," by Michel De Vroey (pp. 57–91). Any valid critical analysis of economic theories must take into account the trade technology assumptions on which they are based.

"The IS-LM Model and the Liquidity Trap Concept: From Hicks to Krugman," by Mauro Boianovsky (pp. 92–126). The development of the liquidity trap concept was associated with the interpretation of the IS-LM model in general and the LM curve in particular.

"IS-LM-BP: An Inquest," by Warren Young and William Darity Jr. (pp. 127–64). The IS-LM-BP (balance of payments) model has a history parallel to that of Mundell's models and J. Marcus Fleming's model, with a distinction needing to be made between the Mundell-Fleming model synthesized by Dornbusch and the more general IS-LM-BP framework.

"James Tobin and the Transformation of the IS-LM Model," by Robert W. Dimand (pp. 165–89). Tobin played a leading role in the transformation of IS-LM into a modelling framework with a much more fully developed treatment of asset markets and investment.

"Patinkin on IS-LM: An Alternative to Modigliani," by Goulven Rubin (pp. 190–216). Patinkin's originality lies in his analyzing the IS-LM model with a Walrasian methodology.

"IS-LM and Monetarism," by Michael D. Bordo and Anna J. Schwartz (pp. 217–39). Friedman's main criticism of Keynes—that money matters—is today at the heart of the synthesis model and the emphasis on low inflation.

"How Have Monetary Regime Changes Affected the Popularity of IS-LM?," by Scott Sumner (pp. 240–70). The changing popularity of IS-LM has more to do with changes in the external policy environment than with the internal logic of progress within macroeconomic theory.

"Money and the Transmission Mechanism in the Optimizing IS-LM Specification," by Edward Nelson (pp. 271–304). The modern optimizing version of IS-LM addresses the criticisms made against it over the last forty years.

"The Strange Persistance of the IS-LM Model," by David Colander (pp. 305–22). Because IS-LM is a creature of pedagogy, it is unlikey to persist as macro becomes more depedent on data extraction and agent-based simulation.