Until his retirement early this year, Robert Hetzel was Senior Economist and Research Advisor at the Federal Reserve Bank of Richmond. He was one of the surprisingly few Fed economists attempting to make comprehensive sense out of the Great Recession. …
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Evidence Interpretation Gone Bad
I was culling my library last week and ran across Peter Chinloy’s Labor Productivity (1981). I remembered that the book, nearly four decades ago, clearly illustrated the difference between insightful and misleading interpretation of evidence. Its lesson is even more …
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What Bothers Jordi Galí
When will New Keynesian theorists accept that the intuitive generalization of rational price-mediated exchange from the marketplace to workplaces restricted by asymmetric employee-employer information solves their thorniest problems? The best NK theorists are not innocent of the fundamental EK failure. …
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Another Post on Involuntary Job Loss
The GEM Blog has largely devoted July to demonstrating the criticality of meaningful wage rigidity (MWR) in any serious effort to making sense out of the plentiful evidence on involuntary job loss (IJL). The critical facts are three-fold: IJL significance …
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Job Loss in Mainstream Macro Modeling, Part II
Two weeks ago, the GEM Blog advised macro theorists, wishing to solve longstanding job-loss puzzles and satisfy their desire for stabilization-policy relevancy, to abandon Ptolemaic tinkering with endogenous market frictions. They must instead turn their attention to solving the fundamental …
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Will Tariffs Cause Another Great Recession?
Part two of the macroeconomics of forced job loss, promised last week, has been postponed. The reason is a neighborhood 4th-of-July party, at which the buzz was about ill-considered tariffs and whether they would lead to another Great Recession. (A …
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Job Loss in Mainstream Modeling, Part I
Modern macro theory is a quagmire of seemingly insoluble puzzles. A prime example is that the New Neoclassical Synthesis (NNS), the consensus macro framework organized around dynamic market-centric general equilibrium, produces much more mild recessions than is consistent with the …
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The GEM Project and Aggregate Demand
The GEM Project’s fundamental contribution to stabilization-relevant macroeconomics is its reworking of aggregate supply. In particular, it derives meaningful wage rigidity, capable of rationally suppressing wage recontracting, from axiomatic principles. GEM aggregate supply better reflects the highly-specialized, large-scale production of …
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GOBBLEDYGOOK
My choice for this morning’s beach reading (with coffee) was William Fellner’s 1976 essay, “Theoretical Foundations of the Failure of Demand-Management Policies” in the Journal of Economic Literature. I hoped that Fellner would provide some respite from consistently discouraging mainstream …
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Robots and Macro Stability
I just read a provocative paper, “Technology at Work: The Future of Innovation and Employment” (Oxford Martin School, University of Oxford, 2015) by Carl Frey and Michael Osborne. The authors conclusion is eye-catching: Within a decade or two, roughly half …
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