Friday, September 18, 2009

How Did Economists Get It So Wrong? Act 3

Paul Krugman's "complaint" about macroeconomics in general and "freshwater" types in particular has generated an avalanche of response. I posted Krugman's article twice on this blog.

From the University of Chicago, the "cathedral" of Freshwater guys, Professor Cochrane returned the salvo with "How Did Paul Krugman..." You get the drift. I also posted that too.

To sort out the rights from the wrongs, you really need to have had Intermediate/advanced Macro plus a decent dose of history of economic thoughts in the 20th century.

Assuming you have that background, here are two longish, relatively technical articles by two respected economists that are relatively non-polemical for your long plane rides. Laidler's is less technical than Gordon's.

If you find them rough going, go back to your 201 Maccro textbook to revisit terms such as IS-LM curves, liquidity preference, liquidity trap, real business cycles and most importantly Rational Expectations Theory by Lucas. Of course it would help to have John Maynard Keynes' classic: General Theory of Employment, Interest and Money. Lucas has plenty of writings available online.

Enjoy!

1) Professor David Laidler
2) Robert Gordon at Northwestern University

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