Victory for the Chicago School

In this post I make a perhaps startling claim for the GEM Project. Its two-venue general-equilibrium (TVGE) model class is more consistent with the famous Chicago-School credo than is the coherent market-centric DSGE theory that occupies the modern mainstream. From … 
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Natural Rate of Unemployment

This post is the third in a series on how the GEM Project enhances mainstream models of labor-market behavior in highly specialized economies. Today I use generalized-exchange theory to take a fresh look at the natural rate of unemployment (NRU), … 
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The Criticality of the Harris-Todaro Model

GEM Project innovations, especially microfounded meaningful wage rigidity (MWR) and same-direction causality from nominal demand disturbances to employment and output, have motivated an ambitious research agenda that reworks a substantial portion of mainstream market-centric general-equilibrium economics. I’ll admit it has … 
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How to Model “Churn”

Theorists are always alert for interesting phenomena that lack a name. Lazear and Spletzer (L&S) recently called attention an unlabeled labor-related fact that they named “churn”: the hiring of replacements for employees who have left their jobs. Much of the … 
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The Great Fact and the GEM Project

Michael Mandelbaum (2002, p.277) described the Industrial Revolution as “the most influential development in human history since the invention of agriculture ten thousand years ago”. Scholars have divided the economic transformation into two parts. The first part began toward the … 
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Challenging MWR Significance, Part II

This post carries on last week’s look at NK theorists who argue that meaningful wage rigidity is not a necessary condition of coherent, stabilization-relevant macroeconomics. It has two parts. The first directly responds to the seminal article (Greenwald and Stiglitz, … 
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Challenging MWR Significance, Part I

Anti-Keynesian insurgents in the 30-year macro war made no secret about their central objective. They sought to banish from acceptable model-building the widespread use of assumptions of convenience. They particularly targeted free parameters used by Early Keynesian to introduce meaningful … 
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Blanchard and Wage Rigidities, Part II

As promised, this week’s post looks at Olivier Blanchard’s treatment of efficiency-wage theory (EWT). It is a companion piece to last week’s analysis of his stylized bargaining theory (BT). Blanchard believes that a useful NK model of wage determination can … 
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