Notes for Week 1

Notes – ECON 488: 1/20

 

Is macroeconomics broken? Has the discipline failed? 

• Broken…
  • Macro failed to predict the Great Recession
  • Is Macro still relevant to issues of welfare?
    • Economic inequality, poverty, environmental degradation
      • Greater the inequality, slower the growth rate
      • Measurements like the GDP don’t count for things like pollution, inequality, etc.

• Theory does not equal reality

• Politics is not included enough in macroeconomics
  • Shock variables include political effects
  • DAD/DAS model includes shocks which could be political

• What about the models?
  • Maybe these are incorrect
  • We are so reliant on macroeconomic models that we cannot adjust to changing landscapes

• What is Macro?
  • Macro is a view of the economy as a whole
  • What models are we using?
    • DSGE models

• What are the “contemporary” schools of thought in Macroeconomics?
  • Classical
    • Monetarists
    • Neoclassical
    • Classical
    • Real Business Cycle models
    • New Classical (most recent)
    • “Freshwater”
  • Keynesian
    • Keynes
    • Keynesian
    • New Keynesian (most recent)
    • “Saltwater”

• Heterodox
  • Austrian economics
  • Marxism
  • Post Keynesianism

Going further…

• Who are the critics of Macroeconomics since the Great Recession?
  • Who are they? What do they have to say? What school of thought are they from?
  • Where have the New Classical economists gone?