Being Intemperate

The GEM Project’s weekly blog, measured in issues, is now as old as I am, measured in years. That is my excuse for being a bit reflective. The website’s co-founder as well as other friends, using homilies like vinegar versus … 
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The Stagnation Problem

Larry Summers (Washington Post, 10/9/2016) recently summarized the state of global macroeconomic policymaking: “As the world’s finance ministers and central-bank governors came together in Washington last week for their annual global financial convocation, the mood was somber. The specter of secular … 
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New Keynesians Are Stuck

The New Neoclassical Synthesis, the 1990s peace treaty among New Classical, Real Business Cycle, and New Keynesian theorists, establishes mainstream macro model-building standards. In it, New Keynesians accept the necessity of micro-coherence in their work, while New Classical/RBC schools accept … 
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Let’s Stop Fooling Journalists

Two cheers for The Wall Street Journal. In an environment of crushing revenue shortfalls for print journalism, the WSJ continues to devote resources to the analysis of important issues of public policy. This week’s post, inspired by a front-page article … 
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The Bedrock Two-Venue Theorem

 

Involuntary job loss is at the heart of macro theory’s monetary-stabilization muddle. For policymakers, the socioeconomic problems of employment and income loss rooted in market failure are central to business-cycle pathology. The GEM Project demonstrates, contrary to many critics of … 
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Krugman on Wage Cuts

A reader drew my attention to the following quote from Paul Krugman’s New York Times Blog: “Wage cuts are the last thing America needs right now: We sell most of what we produce to ourselves, and wage cuts would hurt … 
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Backward Macro Modeling

This post is an irresistible addendum to my month-long look at the Phillips curve. It keys off Robert Lucas’s quote from a 1996 interview by John Cassidy (2010, p.192). In it, Lucas modestly describes his Nobel-honored introduction of rational expectations … 
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Adjusting Wages for Inflation, Part II

This is the final installment of the three-part summary of the GEM Project’s reconstruction of the Phillips curve to be both properly microfounded and stabilization-relevant. Last week’s post demonstrated that, given a stationary central-bank inflation regime, employers and employees rationally … 
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Adjusting Wages for Inflation, Part I

As promised, this week’s post takes a critical look at Robert Lucas’s use of rational expectations in wage modeling. That innovation fundamentally transformed the Early Keynesian Phillips curve and, ultimately, macroeconomics. It is surprisingly easily shown to be fundamentally wrong.

In … 
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