A friend argues that I need to try harder to understand the how otherwise reasonable non-economists make sense out of fundamental economic concepts like capitalism, free markets, and business cycles. He recommended a recent book, Having and Being Had by …
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The Biggest Stabilization Mistake in the Pandemic
The biggest mistake in the COVID-19 Pandemic is the toleration of budding sociopaths’ refusal, in the face of overwhelming evidence, to wear masks. The biggest handicap, closely tied to the biggest mistake, is Donald Trump as President. The hapless reality-TV …
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Helping a Great Idea: Michael Jensen’s Residual Rent
Residual rent, particularly when used in explaining income distribution in highly specialized economies, is a great, albeit unappreciated, idea in economic theory. Consider two facts. First, useful macroeconomics require evidence-consistent modeling of factor-income shares. Second, such modeling is inconsistent with …
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The Importance of Properly Specifying Wages
It is a tenet of the GEM Project that rational behavior is the productive way to motivate macroeconomic analysis. This is especially true for the critical issue of labor pricing. The generalized-exchange theory has importantly microfounded meaningful wage rigidity (MWR), …
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Helping a Reluctant Theorist: Joe Stiglitz
Substantial Harm
Efficiency-wage theory (EWT) was our best hope for microfounding meaningful wage rigidity (MWR) before New Keynesians (NK) abandoned that line of research as too difficult. The abandonment was facilitated by the damage caused by Joe Stiglitz’s market-centric version of …
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A Reprise of the GEM Pandemic Model
This post takes another look at the GEM contribution to understanding the sort of macro instability produced by COVID-19 pandemic. Some months ago, this blog summarized the newly constructed model. This reiteration has two parts. First is a brief summary …
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Helping NK Modeling of the Great Recession: David Romer
Over the past decade, the pile of books in which leading economists offer advice on how the macro academy should have responded to the Great Recession provides interesting snapshots of the state of macroeconomics. Of particular interest to me is …
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The Lost Generation, Part II
We know that mainstream macro theory, rooted in friction-augmented market-centric general equilibrium, cannot accommodate meaningful wage rigidity. We know that MWR is defined by its capacity to rationally suppress wage recontracting. We know that the absence of MWR mandates the …
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The Lost Generation
I just reread Jordi Gali’s short 2011 book, Unemployment Fluctuations and Stabilization Policies, that he based on his Zeuthen Lectures. The GEM Blog has been hard on that book in the past. I remember being especially put off by its …
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Helping a Great Economist: Edmund Phelps
In his extraordinary body of work, Edmund Phelps was fearless in his determination to introduce labor pricing that is both micro-coherent and stabilization-relevant into modern economies. Overall, his macroeconomics reflect a grand, cheerful quest for answers to important questions. A …
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