The Alarming S/M/B Model, Part I

I find the ubiquity and ambition of Search/Match/Bargaining theory alarming. Nearly all macro analysis that touches on the labor market relies on modern search theory that has been extended from its original focus on frictional joblessness to the stationary behavior … 
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Useful Advice from Lucas

The GEM Project has figured out how to reconcile macroeconomic coherence and stabilization-relevance. The key is its microfounding of meaningful wage rigidity, comprised of downward inflexible nominal labor pricing over the business cycle and chronic labor rents. MWR enables causality … 
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Generalizing Solow’s Growth Model

Providing the mainstream literature’s basic explanation for macrodynamics is Robert Solow’s (1956, 1957) neoclassical growth theory. His model is recognized as one of the most important of the 20th century, breaking the Harrod-Domar mechanical link between saving and growth by … 
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The Other Growth Model

Robert Solow’s neoclassical growth theory, to his surprise, provides the mainstream framework for the coherent market-centric DSGE model used today to explain highly stylized versions of actual trend and cyclical economic performance. Arthur Lewis’ two-sector growth model, after some generalization, … 
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Modeling Acute Instability

The most costly macro breakdowns are always associated with extreme nominal-demand instability, making mainstream inattention to that problem class a puzzle. The GEM Project is an exception, supporting a coherent acute-instability model consistent with relevant evidence. (Chapter 6) Beginning with … 
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Hayek Finally Got It Right

In his The Clash of Economic Ideas (2012), Lawrence White nicely captures the essence of the Austrian School of business cycles:  “The Mises-Hayek theory was first and foremost a theory of the ‘upper turning point’; it aimed to explain why … 
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