Stabilization Policy, Part IV

This post concludes the GEM Blog’s four-part overview of the public policy on how to prevent future Great Recessions. The consensus quickly emerged in the aftermath of the 2008-09 extreme instability. First, the three pillars of Washington’s curious thinking on … 
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Stabilization Policy, Part III

This post continues examining the stabilization policy that emerged in the aftermath of the Great Recession. It provides more detail on some of the mistakes made in pursuit of a flawed strategy.

First pillar mistake. Dodd-Frank’s prohibition of injections of public … 
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Stabilization Policy, Part II

As promised last week, this post provides a thumbnail description of the GEM Project’s explanation of extreme instability. Such instability is defined as contractions in total nominal spending that are too powerful to be reversed by automatic fiscal stabilizers and … 
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Stabilization Policy, Part I

The greatest damage done by the Ptolemaic intent of mainstream macro theorists is providing support for ill-conceived stabilization policymaking. Exhibit A is the manifestly wrong policy consensus on how to prevent future Great Recessions that emerged after the 2008-09 crisis. … 
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Summarizing the Generalized-Exchange Theory

Two venues. Building on fundamental heterogeneities that feature information asymmetries and routinized jobs, rational workplace exchange in both the large- and small-establishment venues has been derived from axiomatic preferences and technology. Each demonstrates distinct  decision rules, constraints, and mechanisms of … 
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Culling the Canon

 

It is time to wrap up, for now, the GEM Blog’s forceful argument that the development and dissemination of consensus macroeconomics has been greatly damaged by Ptolemaic intent. To reiterate, research is Ptolemaic if its central objective is the defense … 
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Ptolemaic Woes: Misusing Search Theory

Search theory has long provided an appealing, albeit incomplete, explanation of the natural rate of unemployment. However, when extended to employment/unemployment fluctuations at cyclical amplitudes, an ambitious expansion of the search-model agenda pioneered by Mortensen, Pissarides, and Diamond, the theory … 
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Ptolemaic Woes: Mankiw, Reis, Gali

 

 In the most recent updating of the Handbook of Monetary Economics, Greg Mankiw and Ricardo Reis (2010, p.222) are thoroughly New Keynesian in how they frame the question of why money matters. The framing restricts, and ultimately defeats, an adequate … 
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Ptolemaic Woes: Prescott, Cole, Ohanian

 

An interim message of the on-going series of posts on Ptolemaic woes is bad news. Mainstream macro modeling is trapped in practical irrelevance by the profession’s gatekeeper acceptance of the presumption of market clearing. The troubled nature of consensus market-centric … 
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