Fama, Shiller, and Eula Biss

A friend argues that I need to try harder to understand the how otherwise reasonable non-economists make sense out of fundamental economic concepts like capitalism, free markets, and business cycles. He recommended a recent book, Having and Being Had by … 
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Helping a Great Idea: Michael Jensen’s Residual Rent

Residual rent, particularly when used in explaining income distribution in highly specialized economies, is a great, albeit unappreciated, idea in economic theory. Consider two facts. First, useful macroeconomics require evidence-consistent modeling of factor-income shares. Second, such modeling is inconsistent with … 
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Helping a Reluctant Theorist: Joe Stiglitz

Substantial Harm

Efficiency-wage theory (EWT) was our best hope for microfounding meaningful wage rigidity (MWR) before New Keynesians (NK) abandoned that line of research as too difficult. The abandonment was facilitated by the damage caused by Joe Stiglitz’s market-centric version of … 
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A Reprise of the GEM Pandemic Model

This post takes another look at the GEM contribution to understanding the sort of macro instability produced by COVID-19 pandemic. Some months ago, this blog summarized the newly constructed model. This reiteration has two parts. First is a brief summary … 
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The Lost Generation, Part II

We know that mainstream macro theory, rooted in friction-augmented market-centric general equilibrium, cannot accommodate meaningful wage rigidity. We know that MWR is defined by its capacity to rationally suppress wage recontracting. We know that the absence of MWR mandates the … 
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The Lost Generation

I just reread Jordi Gali’s short 2011 book, Unemployment Fluctuations and Stabilization Policies, that he based on his Zeuthen Lectures. The GEM Blog has been hard on that book in the past. I remember being especially put off by its … 
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Helping a Great Economist: Edmund Phelps

In his extraordinary body of work, Edmund Phelps was fearless in his determination to introduce labor pricing that is both micro-coherent and stabilization-relevant into modern economies. Overall, his macroeconomics reflect a grand, cheerful quest for answers to important questions. A … 
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