Unbearable Truth

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Nietzsche believed that a person is entitled to as much truth as he or she can bear. My corollary is that people push aside truth that they cannot bear. The capacity of truth to inform is much in the news … 
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How Not to Build a Useful Macro Model

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This post continues the focus on proper macroeconomic model construction. This short piece offers advice on how not to build a useful model. Economists will unfortunately recognize the offending three-step approach as commonplace in modern research.

First, identify an interesting (preferably … 
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Simply Useless Mainstream Macro Modeling

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The following reprint the GEM Blog posted on October 28, 2016. As promised last week, it powerfully illustrates the uselessness of mainstream New Keynesian market-centric general-equilibrium explanations of the Great Recession. Robert Hall’s rigorous NK analysis (published in the respected … 
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How to Build a Useful Macro Model

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How can macro theorists construct models that are helpful in both understanding and effectively responding to real-world stabilization problems? From my experience in supporting the highest levels of policymaking during macro crises ranging from the 1970s stagflation to the 2007-09 … 
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A Hard Look at the New Keynesian Model

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A couple weeks ago, the GEM Blog restated the case that the New Keynesian model, which has dominated the macro academy for decades, is unable to explain most crucial business-cycle facts and is, consequently, stabilization-irrelevant. Given that the focus of … 
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Martin Feldstein’s Looming Recession

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In a WSJ op ed (9/28/2018), Martin Feldstein warned that “another recession is looming”. There are reasons for readers not to be alarmed. Newspaper editors are notoriously eager to publish anything that foretells the serious pain of deep macro contractions. … 
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Unapologetic Market Centricity

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The GEM Blog argues that mainstream macroeconomics is stabilization-policy irrelevant, providing consistently bad advice to policymakers. Non-economist friends tell me I must be exaggerating. They cannot believe that well-known theorists reject the core message of the GEM Project: the necessary … 
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What Stabilized the Economy in 2009

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Last week took a critical look at Andrew Ross Sorkin’s underdeveloped take on the macrodynamics of the Great Recession. What follows, originally published on April 8, 2016, looks at what actually worked in containing the 2008-09 extreme instability. Hint: It … 
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