a home
for economists
who believe
macroeconomics
can be both coherent and stabilization policy-relevant
The GEM Project blog appears weekly (Fridays). Interested economists are invited to participate by submitting comments or writing blog entries.
There are a few rules. The subject matter must be related to macroeconomics and macroeconomists, especially in their grand struggle to construct models that are stabilization relevant and internally coherent. Blog entries should be 1,000 words or fewer, and author name and association are required.
These six blogs are the cliff-notes version of the GEM eBook. In bite-sized portions, they capture the essentials of Generalized Exchange Macroeconomics:
Generalized-Exchange Macroeconomics bifurcates both households and firms, each of which rationally pursues self-interests governed by axiomatic preferences and technology. Households are constrained by heterogeneous initial endowments of financial assets. For the largest class, earnings from wealth contribute little to household …
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The aftermath of the stagflation decade featured a battle between the Early Keynesian (EK) and Rational Expectations (RE) versions of the Phillips curve: wj(t)=ao+a1(UN(t)–U(t))+pk(t) versus w(t)=ao+a1(UN(t)–U(t))+Etp(t+1). (The variables were defined last week.) Robert Lucas’s RE equation won that battle but …
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Rational-Expectations Phillips Curve
Robert Lucas and his colleagues kicked off the famous macro wars by using the stagflation decade to motivate their anti-Keynesian insurgency. From Lucas (1981):“Keynesian orthodoxy or the neoclassical synthesis is in deep trouble, the deepest kind of trouble …
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Recall Eugene Farmer’s (2010b, p.60) succinct description of the modern textbook explanation of the stagnation decade: “During the 1970s, the U.S. economy experienced high inflation and high unemployment at the same time and the data did not lie anywhere near …
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Generalized-exchange modeling has an unrivaled capacity to predict consequential macro events. This post summarizes three important stagflation-related predictions of GEM theory, each of which is out of reach of friction-augmented general-market-equilibrium (FGME) analysis.
Unstable Wage Structure
The GEM Project fundamentally alters our …
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Mainstream FGME Analysis
Mainstream friction-augmented general-market-equilibrium theory cannot explain the massive market failure that occurred during the stagflation decade. That episode featured simultaneous high unemployment and a powerful price-wage spiral that broke apart what had been a remarkably stable interindustry wage …
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This and the following three posts use the GEM Project’s generalized-exchange theory to analyze the prolonged stagflation debacle. The analysis is needed. Mainstream theorists have gotten that costly period of market failure wrong for decades. What’s worse, the academy’s economic …
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Generalizing price-mediated exchange from the marketplace to information-challenged workplaces is the most significant extension of the economic reach of the rational modeling of human behavior since the heyday of the marginalists more than a century ago. It interests me that …
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Last week’s post promised embellishment on the inclusion of rational behavior in the short list of crucial characteristics of stabilization-relevant macroeconomics. The GEM Project contends that inattention to rational behavior has greatly damaged mainstream New Keynesian (NK) modeling. Can a …
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Epistemology is defined as the investigation of the origin, nature, methods, and limits of human knowledge. In 2018, Jonathan Rauch wrote about epistemology in the context of current events in National Affairs. “The Constitution of Knowledge” argues that societies of …
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