Job Loss in Mainstream Modeling, Part I

 

Modern macro theory is a quagmire of seemingly insoluble puzzles. A prime example is that the New Neoclassical Synthesis (NNS), the consensus macro framework organized around dynamic market-centric general equilibrium, produces much more mild recessions than is consistent with the … 
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The GEM Project and Aggregate Demand

The GEM Project’s fundamental contribution to stabilization-relevant macroeconomics is its reworking of aggregate supply. In particular, it derives meaningful wage rigidity, capable of rationally suppressing wage recontracting, from axiomatic principles. GEM aggregate supply better reflects the highly-specialized, large-scale production of … 
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GOBBLEDYGOOK

 

My choice for this morning’s beach reading (with coffee) was William Fellner’s 1976 essay, “Theoretical Foundations of the Failure of Demand-Management Policies” in the Journal of Economic Literature. I hoped that Fellner would provide some respite from consistently discouraging mainstream … 
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Robots and Macro Stability

 

I just read a provocative paper, “Technology at Work: The Future of Innovation and Employment” (Oxford Martin School, University of Oxford, 2015) by Carl Frey and Michael Osborne. The authors conclusion is eye-catching: Within a decade or two, roughly half … 
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Crushed Retirements

The retirement-funding vehicle, 401(k), may be the most recognizable name-in-numbers in the country. In a transition that began in the 1980s, defined-contribution, self-managed 401(k)’s replaced (outside of government employment) defined-benefit, employer-managed plans. Among workers who participate in firm-sponsored retirement plans, … 
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Meta-Externalities: Pigou and Coase

 

This post takes an admittedly wonkish look at the nature and consequences of externalities in coherent general equilibrium macroeconomics. My particular interest here is meta-externalities, the under-appreciated macro application of the textbook literature long associated with the pioneering work of … 
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Ronald Coase

 

Ronald Coase, a 20th-century economic theorist, is the intellectual Godfather of generalized-exchange macroeconomics. The opening passage of his 1981 Nobel Lecture could be used to introduce the GEM Project: “My contribution to economics has been to urge the inclusion in … 
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Black-Box Firms

 

 The GEM Project generalizes rational exchange from the marketplace to highly specialized workplaces that are restricted by costly asymmetric employer-employee information. Economists know that in such circumstances markets cannot efficiently price labor. That is why large complex establishments price labor … 
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Ultimatum Game

A small set of core innovations support the generalized-exchange theory. Perhaps the most critical is the axiomatic employee proactive preference for fair treatment by management. That employers have long ago accepted that fact about their employees is broadly indicated in … 
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