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:
Nietzsche believed that a person is entitled to as much truth as he or she can bear. My corollary is that people push aside truth that they cannot bear. The capacity of truth to inform is much in the news today with the rise of Trump, his reliance on a breathtaking range and quantity of lies (who can forget his torrent of falsehoods leading up to the midterm elections), and his continuing rock-solid support in the Republican Party. The startling shift to the unchecked, shockingly effective trashing of truth over the past three years is immensely damaging and is easily recognized as an existential challenge for American democracy. And, most surprising to me, we don’t know what to do about it.
I am familiar with how confounding the effective trashing of truth can be. The particular manifestation of the problem that has bedeviled me is, of course, not nearly as damaging and consequential as Donald Trump. But it is not unimportant, and I cannot figure out what to do about it.
My concern is a class of unbearable truth that is at the heart of an existential challenge to the policy-relevance of mainstream macroeconomics. My concern is what is taught in our best graduate schools and what provides the framework required for research published in our most prestigious journals. Macro theory derives much of its importance from its role in guiding the actions of stabilization policymakers. The guidance produced by today’s consensus thinking isn’t just useless, it is downright harmful.
What follows is an illustrative dozen critical facts, clearly supported by available evidence, that mainstream New Keynesian theorists simply ignore. They represent unbearable truths that the macro academy cannot abide.