What Bothers Jordi Galí

When will New Keynesian theorists accept that the intuitive generalization of rational price-mediated exchange from the marketplace to workplaces restricted by asymmetric employee-employer information solves their thorniest problems? The best NK theorists are not innocent of the fundamental EK failure. … 
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Another Post on Involuntary Job Loss

The GEM Blog has largely devoted July to demonstrating the criticality of meaningful wage rigidity (MWR) in any serious effort to making sense out of the plentiful evidence on involuntary job loss (IJL). The critical facts are three-fold: IJL significance … 
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Job Loss in Mainstream Macro Modeling, Part II

Two weeks ago, the GEM Blog advised macro theorists, wishing to solve longstanding job-loss puzzles and satisfy their desire for stabilization-policy relevancy, to abandon Ptolemaic tinkering with endogenous market frictions. They must instead turn their attention to solving the fundamental … 
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Job Loss in Mainstream Modeling, Part I

 

Modern macro theory is a quagmire of seemingly insoluble puzzles. A prime example is that the New Neoclassical Synthesis (NNS), the consensus macro framework organized around dynamic market-centric general equilibrium, produces much more mild recessions than is consistent with the … 
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The GEM Project and Aggregate Demand

The GEM Project’s fundamental contribution to stabilization-relevant macroeconomics is its reworking of aggregate supply. In particular, it derives meaningful wage rigidity, capable of rationally suppressing wage recontracting, from axiomatic principles. GEM aggregate supply better reflects the highly-specialized, large-scale production of … 
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GOBBLEDYGOOK

 

My choice for this morning’s beach reading (with coffee) was William Fellner’s 1976 essay, “Theoretical Foundations of the Failure of Demand-Management Policies” in the Journal of Economic Literature. I hoped that Fellner would provide some respite from consistently discouraging mainstream … 
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Robots and Macro Stability

 

I just read a provocative paper, “Technology at Work: The Future of Innovation and Employment” (Oxford Martin School, University of Oxford, 2015) by Carl Frey and Michael Osborne. The authors conclusion is eye-catching: Within a decade or two, roughly half … 
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Crushed Retirements

The retirement-funding vehicle, 401(k), may be the most recognizable name-in-numbers in the country. In a transition that began in the 1980s, defined-contribution, self-managed 401(k)’s replaced (outside of government employment) defined-benefit, employer-managed plans. Among workers who participate in firm-sponsored retirement plans, … 
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Meta-Externalities: Pigou and Coase

 

This post takes an admittedly wonkish look at the nature and consequences of externalities in coherent general equilibrium macroeconomics. My particular interest here is meta-externalities, the under-appreciated macro application of the textbook literature long associated with the pioneering work of … 
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