Professional Documents
Culture Documents
Incentive problems are knowledge problems and knowledge problems are incentive problems
Changing circumstances result in disturbances, but the crucial question is one of adjustment
Macroeconomic Problems
Capital goods are allocated incorrectly; capital investments are inappropriate; labor is misallocated; and as a result the economy underperformed from the point of view of realizing the mutual gains from exchange, employing resources efficiently, and satisfying the demands of consumer sovereignty.
Classical
Market discipline
Government correctives
Keynesian
After Keynes
Market equilibrium
IS
r LM
Neo-Keynesian Synthesis
r LM Goods Market equilibrium; Money Market equilibrium
IS
Y Y
Labor Market
Money Illusion
Capital Market
N N0 N1
Bayesian Learning
Methodological Rule --- economist cannot assume a level of knowledge greater than the participants in the economy
Invariance proposition
Short Run and Long Run Phillips Curve are the same Microfoundations of Macroeconomics provides coherence to the discipline General Competitive Equilibrium
Microfoundations
Rationality
Hypothesis or axiom
Logical coherence
Non-neutrality of Money
Capital Structure
Interest rates as signals between present and future Employment of scarce resources
Critique of ABCT
Theory
Bias error and bias toward particularly costly errors Incoherence of grafting a disequilibrium story on an equilibrium theory
Co-movement of investment and consumption Limited applicability of interest rate mechanism as trigger
Empirical