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Classical macro-economists and stabilisation policies The "policy inefficacy" principle is probably one of the most famous and controversial assertions of the New Classical School which is often regarded as a (counter)revolution in macroeconomic theory. We shall see, however, that despite the important insights and innovations of the approach, most of its conclusions including the invariance postulate are based on quite restricted and unrealistic assumptions and assertions which may make them of doubtful practical use. The NC approach is characterised by its "relentless drive for microfoundations" and in particular the desire to base their theories on the assumption of the Rational Economic Man as a reaction perhaps to such Keynesian theories as "animal spirits", money illusion or the liquidity trap which seemed to imply "irrational" individual behaviour. Economic agents are, thus, seen as consistent and successful optimisers to the limits of their information which implies that agents are continuously in equilibrium. This coupled...

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