The Efficient-Market Hypothesis

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Last week’s post outlined the GEM Project’s theory of nonstationary demand disturbances (NDD). It explains the sort of extreme instability that characterized the 2008-09 Great Recession (as well as the 1930s Great Depression). NDD macrodynamics is not understood in the … 
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The Efficient-Market Hypothesis Needs Work

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Last week’s post outlined the GEM Project’s theory of nonstationary demand disturbances (NDD). It explains the sort of extreme instability that characterized the 2008-09 Great Recession (as well as the 1930s Great Depression). NDD macrodynamics in highly specialized market economies … 
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Bare-Bones GEM Stabilization Theory

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Heterogeneous Demand Disturbances

In generalized-exchange macroeconomics, featuring microfounded meaningful wage rigidity and the rational suppression of labor-price recontracting, a broad variety of adverse shocks are centrally promulgated by nominal demand disturbances (DD). Stationary demand disturbances are the most common DD class. … 
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Downsizing Plus Proper Monetary Policy

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As described last week, the stagflation decade was a macroeconomic version of a perfect storm, generating a prolonged period of stubbornly elevated wage/price inflation and unemployment. The global disruption, of course, greatly interested economists. Their contemporaneous work produced a three-part … 
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Battling Phillips Curves: Stagflation

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As promised last week, this post digs deeper into stagflation decade. The episode of simultaneously high unemployment and inflation that began in the early 1970s was the 20th century’s second most damaging macro crisis, ranking below only the 1930s Great … 
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Michel De Vroey’s Essential Book, Part II

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This post continues last week’s admiration of Michel De Vroey. He understands, and confidently champions, the EK emphasis on involuntary unemployment and, consequently, the analytic centrality assigned in stabilization-relevant macro theory to meaningful wage rigidity (MWR) and the discretionary management … 
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Misunderstood Efficiency-Wage Theory

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A costly misunderstanding. Efficiency wages, particularly the original morale-centric formulation that Solow and I pioneered, outlined how theorists could have gone about rationally disabling Keynes’s Second Classical Postulate (i.e., the equality between the market wage and the marginal disutility of … 
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