How did Phelps's work challenge Keynesian economics?
My work challenged Keynesian orthodoxy by emphasizing the importance of microfoundations and expectations in understanding macroeconomic phenomena like inflation and unemployment. Instead of focusing solely on aggregate demand, I built models from the ground up, considering the decisions of individual households and firms. This approach highlighted how expectations, especially adaptive expectations, and structural frictions could explain persistent unemployment and inflation in ways that traditional Keynesian models struggled to address.
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