Over the past four weeks, the GEM Blog has pounded mainstream NK theorists. They deserve it, in no small part because their market-centric dynamic stochastic general-equilibrium model class was useless in explaining the 2007-09 Great Recession. Even worse, …
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More on Complex and Problematic Fluctuations
There is something suspicious about Evolution or Revolution? (2019) that is shared by the earlier entries in the academy’s annual series on macro theory after the Great Recession. Few of the contributing authors explicitly use the mainstream market-centric DSGE model …
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Lesson Three: Low Neutral Interest Rates
This post is the third installment of the GEM critique of lessons of the Great Recession according to Olivier Blanchard and Lawrence Summers, editors of Evolution or Revolution? (2019). Their third lesson is the challenge presented by chronically low neutral …
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Lesson Two: Complex and Problematic Fluctuations
The Lesson
This post continues to look at lessons from the Great Recession identified in Evolution or Revolution? (2019). From the editors, Blanchard and Summers: “The second lesson is the complex nature of fluctuations, from the role of nonlinearities in leading …
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Lesson One: Centrality of Finance
Evolution or Revolution, the macro academy’s most recent installment in its annual series on the lessons from the Great Recession, was just released. Edited by Olivier Blanchard and Lawrence Summers (hereafter B&S), the book illustrates the box in which mainstream …
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About the GEM Project
The GEM Project is all about the crucial need to restore meaningful wage rigidity to its Early-Keynesian centrality in macroeconomics. MWR is defined by its capacity to rationally suppress wage recontracting. EK theorists made it the keystone of their stabilization-relevant …
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Unhappy News about Knut Wicksell
Along with Philip Wicksteed, the Swedish economist Knut Wicksell (1851-1926) constructed an elegant neoclassical model of factor-income distribution that has been remarkably enduring. I have long admired Wicksell and admit to feeling sad that the GEM Project’s generalized-exchange macro model …
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Two Important Growth Models
This post is the last of the five-part series on the contribution of the GEM Project to growth macroeconomics. What follows looks at two powerful theories of trend macrodynamics that aren’t a good fit in market-centric modeling and are, as …
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Use and Abuse of the Solow Residual
Robert Solow’s neoclassical growth theory, to his surprise, provided the framework that rigorous general-market-equilibrium modeling has long used to explain trend and cyclical economic performance. This post, the fourth in a 5-part summary of the GEM Project’s contribution to growth …
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Generalizing Solow’s Growth Model
Providing the mainstream literature’s go-to explanation for trend macrodynamics is Robert Solow’s (1956, 1957) neoclassical growth theory. Along with Sir Arthur Lewis’s two-venue theory featured last week, Solow broke the problematic mechanical link between saving and growth.
Basic model. Recall last …
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