Douglass North died three years ago, at the age of 95. He received the Nobel Prize in Economics in 1993 for his pioneering work in cliometrics and the application of rigorous neoclassical theory to the analysis of institutions. The GEM …
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Axiomatic Assumptions and Employee Utility
As made clear las week, the GEM Project properly constructs employee preferences on axiomatic assumptions. Enter utility functions, the wonkish vehicle economic theorists typically employ to organize their analyses of human behavior. Noneconomists hate the mechanistic sound of “utility function”. …
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Axiomatic Assumptions
This post continues the grand theme of the GEM Project. How to best construct theories of macro phenomena that actually explain the range of costly instability that occurs in highly specialized economies? Readers know that Project guidelines begin with rationality. …
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Unbearable Truth
Nietzsche believed that a person is entitled to as much truth as he or she can bear. My corollary is that people push aside truth that they cannot bear. The capacity of truth to inform is much in the news …
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How Not to Build a Useful Macro Model
This post continues the focus on proper macroeconomic model construction. This short piece offers advice on how not to build a useful model. Economists will unfortunately recognize the offending three-step approach as commonplace in modern research.
First, identify an interesting (preferably …
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Simply Useless Mainstream Macro Modeling
The following reprint the GEM Blog posted on October 28, 2016. As promised last week, it powerfully illustrates the uselessness of mainstream New Keynesian market-centric general-equilibrium explanations of the Great Recession. Robert Hall’s rigorous NK analysis (published in the respected …
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How to Build a Useful Macro Model
How can macro theorists construct models that are helpful in both understanding and effectively responding to real-world stabilization problems? From my experience in supporting the highest levels of policymaking during macro crises ranging from the 1970s stagflation to the 2007-09 …
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A Hard Look at the New Keynesian Model
A couple weeks ago, the GEM Blog restated the case that the New Keynesian model, which has dominated the macro academy for decades, is unable to explain most crucial business-cycle facts and is, consequently, stabilization-irrelevant. Given that the focus of …
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Martin Feldstein’s Looming Recession
In a WSJ op ed (9/28/2018), Martin Feldstein warned that “another recession is looming”. There are reasons for readers not to be alarmed. Newspaper editors are notoriously eager to publish anything that foretells the serious pain of deep macro contractions. …
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Unapologetic Market Centricity
The GEM Blog argues that mainstream macroeconomics is stabilization-policy irrelevant, providing consistently bad advice to policymakers. Non-economist friends tell me I must be exaggerating. They cannot believe that well-known theorists reject the core message of the GEM Project: the necessary …
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