A home for economists who believe macroeconomics can be both coherent and stabilization-policy relevant
The GEM website is a home for economists who believe that mainstream macroeconomics cannot usefully explain the costly instability that periodically rocks modern economies.
In particular, consensus thinking failed to guide policymakers' efforts to deal with the enormous welfare costs of the 2007-09 Great Recession – especially six million involuntarily lost jobs.
That failure is not surprising. Forced unemployment is beyond the reach of coherent market-centric theory that today dominates macro research.
The GEM Project offers an alternative approach that intuitively explains instability while maintaining both coherence and stabilization-relevance. In its central innovation, the Project generalizes rational exchange from the marketplace to the large-firm workplace, crucially microfounding meaningful wage rigidities – the key to policy-useful modeling.
Generalization of price-mediated exchange is offered as the next big idea in macroeconomics. We invite economists dissatisfied with the stabilization-policy limitations of mainstream theory to join us in constructing a better model.
The interactive GEM website provides a variety of ways to contribute:
The most recurring theme of the GEM Blog has two parts. First, mainstream macroeconomics, rooted in market-centric general equilibrium and therefore unable to accommodate meaningful wage rigidity, cannot be stabilization-relevant. Second, the generalization of rational exchange from the marketplace to information-challenged workplaces paves the way for solving that problem. That cyclical focus, however, is not meant not to imply that GEM theory, with microfounded MWR, does not also contribute significantly to growth theory. This post introduces a larger role for the workplace venue in explicating trend macrodynamics. It will be followed by four elaborating posts.
Analytic framework. In most applications, economic growth is most usefully measured by the trend behavior of labor productivity (X/H). By definition:
X denotes output, H is total labor hours at work, and Έ measures cooperative labor input that is always in 1-1 technical correspondence with X. By definition, Ź(t)=Έ(t)/H(t). Labor productivity has two distinct components:
The transformation of labor hours (H) into cooperative input (Έ) and the determinants of trend behavior of X/Έ are elemental economic activity sets that were greatly altered by the Second Industrial Revolution and...