The Most Damaging Error in NK Macroeconomics

Students are typically introduced to macroeconomics via the New Keynesian (NK) 3-equation model rooted in friction-augmented general market equilibrium. This post features the version in the popular textbook, Macroeconomics, by Carlin and Soskice (C&S).  The first equation relates inflation-adjusted total … 
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This Best Paper Is Not So Good

 

The editors of the American Economic Journal: Macroeconomics (AJE:M) have selected “Deconstructing Monetary Policy Surprises – The Role of Information Shocks” by Marek Jarocinski and Peter Karadi (hereafter J&K) as the best article appearing in their journal in 2020. The … 
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The Industrial Revolution: Hard and Soft Laws

 

The GEM Blog’s month-long series on modeling of management reveals New Keynesian (NK) theorists’ badly incomplete understanding of the Industrial Revolution. The impact on the evolution of productivity-enhancing capital equipment is adequately grasped. Many also know that those technological advances … 
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Modeling Management: Evolution of the Science

The generalized-exchange model’s large-establishment venue (LEV) provides an important role for the active management of labor. Most notably, human-resource departments, universally present in complex, highly specialized firms, are tasked to calibrate firms’ modal workplace-exchange relations. (See last week’s post.) GEM … 
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Modeling Management: Setting the Stage

The marketplace-workplace synthesis featured in this Blog addresses a lot of debilitating gaps in dominant NK macro theory. Among the most notable, the two-sector approach provides a much more robust role for optimizing management. Mainstream modeling relies on market exchange … 
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More on Woodford’s Macro-Theory Convergence

Last week’s post summarized Michael Woodford’s five key elements of the 21st-century consensus among macro theorists. He celebrates the general acceptance of the friction-augmented general-market-equilibrium (FGME) framework in modern analysis: “… the study of business fluctuations is no longer driven … 
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