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 GEM Project is all about the crucial need to restore meaningful wage rigidity to its Early-Keynesian centrality in macroeconomics. MWR is defined by its capacity to rationally suppress wage recontracting. EK theorists made it the keystone of their stabilization-relevant modeling, putting MWR microfoundations at the top of their research agenda. Decades later, the GEM Project finally completed the EK quest. Deriving MWR from optimizing behavior organized by general decision-rule equilibrium wasn’t easy. It was necessary to construct a second venue of rational exchange that operates in tandem with markets to price and allocate resources.
The new venue is populated by workplaces that are inherently restricted by costly, asymmetric employer-employee information. It has been long understood that such constrained information renders the labor market unable to rationally price employee time. Given that intuitive workplace venue, MWR is easily shown to be an outcome of optimization and equilibrium, preserving the fundamental tenets of economic theory.
The Project’s generalized-exchange model has antecedents in multiple branches of the economics literature, including:
Even less attention has been paid to the macro contributions made by Nobel Laureates Ronald Coase and Herbert Simon. Coase (1937) and the new-institutional theorists he inspired have made substantial contributions to GEM modeling by investigating the rational choice between market and intra-firm exchange. Simon (1951)...