ABSTRACT
Barro and Grossman’s aim in their 1971 paper and 1976 book was to synthesise and generalise Patinkin’s and Clower’s models.1 To work out this synthesis, they had to do violence to both Patinkin and Clower. They abandoned Patinkin’s governing-idea, that involuntary unemployment could only exist during the process of price formation, to replace it by an end-state analysis of the existence of equilibrium. Fixed prices were thus substituted to slowly adjusting prices. Clower for his part attributed the sub-optimal end-result of his model to a signalling defect occurring in a context of perfectly flexible prices. This claim also vanished from their synthesis.
