Involuntary job loss is more than cyclical unemployment, despite such layoffs being exclusively featured in textbook IJL analysis. Macro theorists ignore noncyclical joblessness for no better reason than not knowing how to model the rational firm downsizing that induces …
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THE SIMPLE, SAD STORY
The founding of the GEM Project is a simple story, rooted in the recognition that information-challenged workplaces are an inherently unique, substantial venue of price-mediated exchange in modern, highly specialized economies. Such is the power of Akerlof’s lemons that …
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Keystone Rational Behavior, Part II
This essay elaborates on the previous post’s argument that theory carefully constructed on rational behavior provides powerful roadmaps for evidence-consistent macro modeling. Setting the stage, recall a crucial fact: in mainstream market-centric general equilibrium. wage recontracting cannot be rationally …
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Keystone Rational Behavior, Part I
The GEM Project’s case for the criticality of a second (workplace) venue of price-mediated exchange boils down to a single question. Is rationality indispensable in useful macro model-building? Affirmative arguments cite clarity and persuasive power as well as the …
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GEM Theory and Macro Methodology
The 30-year macro war, in which the New Classical/RBC insurgents defeated the Early Keynesians, was fought over how properly to do macroeconomics. Today, in order to pass muster with gatekeepers in the academy, model-building must be rooted in the …
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The Iron Law of Wage Recontracting
Macroeconomists after the 1930s Great Depression invested heavily in labor-market research. Franco Modigliani’s 1944 Econometrica article organized the Early Keynesian (EK) research program around nominal wage rigidity, a market failure that crucially enables causation from nominal demand disturbances to …
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Mainstream Macro Theorists Have Got It Wrong
Here’s a really important question: Why do leading New Keynesian (NK) model-builders ignore so much relevant macro evidence? The poster child of this willful ignorance is, of course, mass involuntary job loss in the circumstance of contracting aggregate nominal …
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GEM IMPLICATIONS: FACTOR-INCOME DISTRIBUTION
Textbook macro thinking on rational-behavior factor-income distribution has long been deeply flawed. The enduring, elegant Wicksell-Wicksteed approach has, at least for a hundred years, not been a useful general theory. Fortunately, a replacement already exists …
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SHODDY EARLY RECORD OF MARKET-CENTRIC MACRO THEORISTS
This post begins with an egregious mainstream blunder in the macro model-building that still flies below the radar. Seeking to navigate the tricky terrain produced by coherent Friction-Augmented General Market Equilibrium (FGME) fundamentals, many influential theorists turned to emphasizing …
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Is the New Neoclassical Synthesis Acceptable Macroeconomics
Background. A powerful late 20th-century run of model-building choices by New-Classical, Real Business Cycle (RBC), and New-Keynesian (NK) theorists culminated in the New Neoclassical Synthesis, which is constructed wholly within the coherent friction-augmented general-market-equilibrium (FGME) framework. Most modern macroeconomists …
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