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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Microfoundation Research Programs

A cornerstone of the GEM Project is macro model coherence. Optimizing price-mediated exchange among agents with rational expectations is organized around continuous general decision-rule equilibrium. Prior to the 1975 invitation-only International Economic Association conference on “The Microeconomics of Macroeconomics” (initiated … 
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What to Do about Thomas Piketty?

Last week’s blog featuring Michael Jensen’s powerful model of factor income distribution sets the stage for this week’s examination of Thomas Piketty’s more celebrated, but decidedly less good, treatment of the same subject. Worldwide attention paid to the French economist … 
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Jensen’s Modern Income-Distribution Model

Thomas Piketty’s recent polemic on labor-versus-capital shares of national income excited a flurry of public debate on the venerable issue. Greater attention here is a good thing. While the Piketty analysis is easily dismissed, the GEM Project more significantly demonstrates … 
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Listening to Warsh on Stabilization Policy

In my long association with the U.S. central bank, I encountered no more thoughtful, conscientious Fed Governor than Kevin Warsh. I have just reread “Rethinking Macro: Reassessing Microfoundations”, his chapter in the collection edited by Martin Baily and John Taylor … 
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Taking the Pledge

Along with being sidelined by stabilization authorities in the 2007-09 Great Recession, the most embarrassing feature of today’s macro consensus is the pile of obviously important evidence that must be ignored. Most damaging, mainstream theorists have somehow agreed to sweep … 
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