Reprising the Modern Theory of Wages

Now that the GEM Project website has been up and running for a while and traffic has increased, it is probably useful to reprise the initial blogs that summarize the foundational ideas of generalized-exchange macroeconomics. What follows is the first … 
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Practical Macro Core

The GEM Project intuitively generalizes rational, price-mediated exchange from the marketplace to the workplace. That powerful innovation identifies three principles that constitute the practical core of macroeconomics. Two are recognized as hypotheses from which Samuelson cobbled together his Neoclassical Synthesis … 
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Deconstructing Macro Theory

I am writing this from a summer house situated in beautiful sand dunes and beach on the Eastern Shore of Lake Michigan. It is a fitting venue for musing about freshwater macroeconomics. This week’s blog has been stimulated by my … 
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Much Ado about Match Capital

This blog continues last week’s look at Robert Shimer’s Labor Markets and Business Cycles (2010). I like that the author is upfront about two problematic labor-market restrictions that are frequently attached to consensus market-centric DSGE modeling. First is the assumption … 
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Ignored Phenomena: Involuntary Job Loss

In the 2007-09 Great Recession, involuntary job loss (IJL) exceeded six million, accounting for more than three-quarters of the overall increase in unemployment. The centrality of IJL in that contraction is typical.  For each of the seven recessions since detailed … 
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My Mistake

In 1988, I published an article in the Journal of Macroeconomics that used the Hicksian IS-LM apparatus, already falling out of favor, to extend some of the macro instability ideas of my 1984 efficiency-wage book. I was exploring inherent problems … 
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Iron Law of Wage Recontracing

Macroeconomists after the 1930s Great Depression invested heavily in labor-market research. Franco Modigliani’s 1944 Econometrica article organized the Early Keynesian (EK) research program around nominal wage rigidity, a market failure that crucially enables causation from nominal demand disturbances to involuntary … 
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Current Events: Two-Tier Wages

Economic behavior in highly specialized economies must often be frustratingly inexplicable to mainstream economists. Given the substantial share of rational exchange that occurs in large-establishment workplaces excluded from consensus market-centric general-equilibrium models, the profession is stuck with a badly truncated … 
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Gem Theory and Macro Methodology

The 30-year macro war, in which the New Classical/RBC insurgents defeated the Early Keynesians, was fought over how properly to do macroeconomics. Today, in order to pass muster with gatekeepers in the  academy, model-building must be rooted in the coherent … 
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Misunderstood Nature of Workers

Macro theorists do not understand employee preferences. Worse, they are arrogant in their ignorance. A large, best-practices management literature provides a great deal of information on the nature of workers, but economists do not care enough to look at it. … 
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