ABSTRACT
Many philosophers have endeavoured to find a foundation for knowledge —that is, to outline a well-defined reliable scientific method which provides access to the facts of the matter under study. While operating on a less grand scale, economists have adopted a parallel style of inquiry. When the traditional models were gradually revealed to shed only a dim light on many aspects of macroeconomic and monetary phenomena, the hue and cry went up for foundations. The problem, many economists believe, is that these models are ad hoc and at odds with other approaches in the body of economic thought. Economists turned to the elegant and relatively recently ‘perfected’ Walrasian ‘general equilibrium’ framework (to be discussed below) as the saviour from the difficulties attributed to the ad hoc approach. Grounding our inquiry in this highly regarded model of microeconomic interaction would thus be the way in which to structure our study of macroeconomic and monetary phenomena.
