What Do We Teach in Macroeconomics? Evidence of a Theoretical Discrepancy

The aim of our article is to assess what we call the “discrepancy hypothesis.” It states that the transformation of macroeconomics triggered by Lucas, Kydland, and Prescott has failed to percolate into the contents of undergraduate textbooks. In the theoretical part of the paper, we draw a contrast between AS-AD and DGE modeling based on three benchmarks: the presence of microfoundations, the expectations assumption, and the presence of intertemporal substitution. In the article's empirical part, we measure how undergraduate textbooks fare with respect to the AS-AD/DGE divide. We use two sources: the WorldCat database and a survey of undergraduate textbooks used for teaching at leading universities. The discrepancy hypothesis was confirmed. Thirty-four out of the thirty-nine textbooks retained from the WorldCat catalog were based on the AS-AD, and only three were based on the DGE core model. Furthermore, eleven out of the twelve most used undergraduate textbooks in the teaching sample were found to adopt the AS-AD line.