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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Market Myopia

Why doesn’t the modern macro consensus organized around the market-centric, general-equilibrium model class simply self-destruct? Doesn’t the embarrassment of having to having to push aside the most critical business-cycle facts, especially after experiencing a huge dose of involuntary job loss … 
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Robert Lucas: Figuring It Out

Robert Lucas was a towering figure in the anti-Keynesian revolution that eventually installed market-centric general-equilibrium as the mainstream macro model class. He insisted that acceptable models be rooted in rational behavior. In particular, he forcefully argued that inconsistent foundations for … 
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Collapse of Political Will

This post takes a break in the GEM Blog’s mission to explicate generalized-exchange modeling, substituting a policy update. With the constant political turmoil in Washington, some really important recent news got lost. The Congressional Budget Office released projections indicating that … 
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More on Woodford

 

This post continues last week’s look at Michael Woodford’s macroeconomics, largely because I just re-read his far-ranging interview with Douglas Clement in The Region (September 2014). A couple points came quickly to mind. First, Woodford’s attention to the most fundamental … 
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Woodford’s Really Bad Advice

This post looks at some monetary-policy advice from Michael Woodford, an acknowledged leader of mainstream New Keynesian macroeconomics. His leadership role demands attention. The advice is featured in the first chapter of Woodford’s 2003 New Keynesian bible (Interest and Prices); … 
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Edmund Phelps

Following last week’s post on Don Patinkin, the GEM Blog next acknowledges the Project’s debt to Edmund Phelps and his extraordinary body of work. He was fearless in his determination to introduce into macroeconomics labor pricing that is both micro-coherent … 
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Don Patinkin

In graduate school, I became interested in stabilization theory and the relation of Keynesian macroeconomics to beautiful marginalist general-market-equilibrium microeconomics. Amelioration of the human cost of periodic episodes of more or less severe involuntary loss of jobs and income seemed … 
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What’s Essential in Macro Theory

I admire Jean-Pascal Bénassy’s text Macroeconomic Theory (2011). But its New Keynesian roots cause him to get some significant things wrong. A troubling example is his identification of a “particularly important issue, that of government policy effectiveness. It is shown … 
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