In the most important contribution to the fixed-wage general-equilibrium (FWGE) literature, Robert Barro and Herschel Grossman (1971), hereafter B&G, posit nominal wage rigidity in order to investigate the interdependence of rationing in the labor and goods markets. Such analysis must …
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Proper Theorist Behavior
“Like any good [theory], it provides an explanation for something that is previously unexplainable. Just as important, it makes predictions that can be tested.” That is from Mike Brown’s review of When the Earth Had Two Moons (2019) by Eric …
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Existence of Market-Centric General Equilibrium
This post digs more deeply into the New Keynesian market-centric general-equilibrium model class that has occupied the macro mainstream for a generation. It begins with a contribution that ranks among the greatest in the history of economics. In it, Arrow …
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Kalecki and 1 Kings
Today’s scripture is 1 Kings 17:16: “For the jar of flour was not used up and the cruse [jug] of oil did not run dry, in keeping with the word of the LORD spoken by Elijah.” The miraculous flour jar …
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An Early Keynesian on the State of Macroeconomics
The last two weeks took a critical look at an elite New Keynesian theorist’s optimistic take on the state of mainstream macroeconomics. This week provides some Early Keynesian perspective, focusing on the estimable Bob Solow’s assessment of the same topic …
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Galí on the State of New Keynesianism, Part II
Last week’s post looked at, and found wanting, Jordi Galí’s 2018 optimistic assessment of the state of New Keynesian macroeconomics. My negative judgment was not influenced by his downplaying of the great shame of NK macro modeling, which I planned …
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Galí on the State of New Keynesianism
Last year when Jordi Galí published “The State of New Keynesian Economics: A Partial Assessment” in the Journal of Economic Perspectives (2018), I paid attention. Galí is among the elite of New Keynesian theorists, making him a bellwether on the …
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Helping the Romer Brothers
Two decades ago, David Romer constructed the reigning New Keynesian, and therefore current mainstream, version of the Phillips curve. That contribution, which will be closely examined in a new GEM Project monograph, Resurrecting Meaningful Wage Rigidity, got me to thinking …
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What Should Happen
This is what I believe should happen. The postwar development of stabilization-relevant macroeconomics becomes divisible, like Caesar’s Gaul, into three parts. The first covers the dominance of the estimable Early Keynesians. EK theorists organized their research around the Neoclassical Synthesis, …
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Fundamental Choice
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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