Core neoclassical principles that govern macro modeling are optimization, general equilibrium, and market centricity. The GEM Project argues that the third tenet, the restriction of rational exchange to the marketplace, long ago outlived its usefulness. The emergent ubiquity of complex, …
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On the Structure of Macro Theories
The impetus for this post comes from two good economists, David Colander and Harry Landreth (1996, p.13): “… it is useful to separate out a deep structure of a theory and what might be called a surface structure. The deep …
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New Keynesian Hybrid Phillips Curve
As promised, this post looks the hybrid version of the Phillips curve (PC), identified last week as the New Keynesian standard for explaining inflation persistence. What follows briefly recounts the PC origin story and examines the GEM Project’s superior version.
Adaptive …
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Inertia in New Keynesian Modeling
I cannot just yet let the GEM Blog examination of Carlin and Soskice’s Macroeconomics (2015) go. It is very interesting to me how much rational-behavior generalized-exchange modeling would enhance that text, making it uniquely important. The advantage of the 2nd …
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Getting Efficiency-Wage Theory Wrong
Last week’s post elaborated on consequences produced by the mainstream macro theory’s absence of rational meaningful wage rigidity (MWR). Overall, the greatest damage has come from model-builders being deprived of crucial guidance in their attempts to construct stabilization-relevant macroeconomics. Surely …
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Answering an Important Question
GEM Blog posts vary widely in importance. This one really matters. It elaborates on last week’s identification of the crucial flaw in the second edition of Wendy Carlin and David Soskice’s Macroeconomics (2015). Readers must wonder how the existence of …
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Macroeconomics, the Two Editions
This post looks the ambitions and evolution of Wendy Carlin and David Soskice’s Macroeconomics, the first edition of which was published in 2006 by Oxford University Press to immediate acclaim, and the second in 2015. It is an instructive story.
The …
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Evolution of New Keynesian Macroeconomics
Over the past four weeks, the GEM Blog has pounded mainstream NK theorists. They deserve it, in no small part because their market-centric dynamic stochastic general-equilibrium model class was useless in explaining the 2007-09 Great Recession. Even worse, …
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More on Complex and Problematic Fluctuations
There is something suspicious about Evolution or Revolution? (2019) that is shared by the earlier entries in the academy’s annual series on macro theory after the Great Recession. Few of the contributing authors explicitly use the mainstream market-centric DSGE model …
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Lesson Three: Low Neutral Interest Rates
This post is the third installment of the GEM critique of lessons of the Great Recession according to Olivier Blanchard and Lawrence Summers, editors of Evolution or Revolution? (2019). Their third lesson is the challenge presented by chronically low neutral …
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