Introduction

Besides equilibrium and stability there is a third crucial property which helps to confer some order on the vagaries of economic phenomena: rationality. No one denies that economic behaviour may be irrational, although there are different opinions on the actual impact of irrational drives on economic behaviour. But most economists agree that, at this stage of our knowledge, economic analysis should focus primarily on rational behaviour. This is in any case a necessary benchmark for understanding economic behaviour, even when it deviates from rationality. From this point of view, there is not such a big chasm dividing Keynesian economics from classical economics (old and new). Though Keynesian economists are more prone to allow for irrational elements (like money illusion, animal spirits, shifts in long-term expectations, etc.), most of them prefer to restrict the analysis to rational behaviour. For the sake of comparison, I will thus limit my analysis in both cases to patterns of behaviour which are rational or amenable to some concept of rationality.