Macro mess?

The incomparable Falkenstein on some of the conceptual difficulties with typical AS/AD thinking.

I still think macro is pretty useful, but i do try and pay attention to the micro stuff as well. As Australia showed in the 90s, getting the Micro right improves Macro performance as well.

This entry was posted in Uncategorized. Bookmark the permalink.

2 Responses to Macro mess?

  1. Manny C says:

    Agree. However I thought he overreached. AD is still a valuable concept – as long as micro foundations aren’t completely gummed up. I just don’t see that.

    • Ricardo says:

      For me the subtle point he has made is that a two sector model with money and widgets is much more abstract than most think. The conclusion that depressed GDP suggests too tight money is nearly tautological – money is the ‘other side’ and lowering its price means raising the general level of prices, which means higher GDP.

      Market-monetarists like Sumner ought to be very cautious about their models in practice.

      I suppose it suits me to cite this as i am very uncomfortable with these models.

      Sent from my iPad

please comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s