What Was and Is the Real Macroeconomic Research Frontier?: Daily Focus

The last time I taught graduate macroeconomics to students about to take their pre-thesis oral exams was way, way, way, way back in 2003. This was what I thought then was the real research frontier in macroeconomics–the papers and directions which people should be extending and in which people should be working if they wanted to do economic research that would truly add to our stock of useful tools and boost our understanding of the macroeconomy.

Which of the bets that I wanted people to place more than a decade ago now have paid off? Which have not? What are the papers from which people should start thinking about further progress in these directions now? And what bets should I have advised graduate students a decade and more ago to make, but did not?

Brad DeLong : Economics 236: Your Last Course in Macroeconomics

PART I: A QUICK OVERVIEW

January 22: Introduction

• Olivier Blanchard (2000), “What Do We Know About Macroeconomics that Fisher and Wicksell Did Not?” Quarterly Journal of Economics 115:4 (November), pp. 1375-1410.
• Olivier Blanchard (1990), “Why Does Money Affect Output? A Survey”, in B.M. Friedman and F. Hahn eds, Handbook of Monetary Economics, 1990, Vol 2, 779-835.

January 29: Unemployment and Institutions

• Dale Mortensen and Christopher Pissarides (1994), “Job Creation and Job Destruction in the Theory of Unemployment,” Review of Economic Studies 61, pp 397-416.
• Olivier Blanchard and Justin Wolfers (2000) “The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence,” Economic Journal, 110 (March), pp. C 1 —33.
• Olivier Blanchard and Lawrence Katz (1997), “What We Know and Do Not Know About the Natural Rate of Unemployment”, Journal of Economic Perspectives 11-1 (Winter), pp. 51-73.
• Steven Nickell (1997), “Unemployment and Labor Market Rigidities: Europe versus North America”, Journal of Economic Perspectives 11-3 (Summer), pp. 55-74.

February 5: Contracts and Aggregate Output

• Robert Townsend (1979) “Optimal Contracts and Competitive Markets with Costly State Verification”, Journal of Economic Theory 21 (October), pp. 265-293.
• Benjamin Bernanke and Mark Gertler (1989), “Agency Costs, Net Worth, and Business Fluctuations,” American Economic Review 79 (March), pp . 14-31.

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February 12: Taking Technology-Shock Theories Seriously

• Susanto Basu and John Fernald (2000), “Why Is Productivity Procyclical? Why Do We Care?” (Cambridge: NBER Working Paper W7940, October).
• Andrei Shleifer (1986), “Implementation Cycles,” Journal of Political Economy 94-6 (December), pp. 1163-1190.
• Dale Jorgenson and Kevin Stiroh (2000), “Raising the Speed Limit: U.S. Economic Growth in the Information Age,” Brookings Papers on Economic Activity 2000-1 (Spring), pp. 125-235.

PART II: THE GROWING STRENGTH OF BEHAVIORALIST APPROACHES

February 19: The Rationale for Behavioralist Approaches

• George Akerlof and Janet Yellen (1985), “Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?” American Economic Review 75-4 (September), pp. 708-20.
• J. Bradford DeLong, Andrei. Shleifer, Lawrence Summers, and Robert Waldmann (1990), “Noise Trader Risk in Financial Markets,” Journal of Political Economy 98-4 (August), pp. 703-38.
• Richard Thaler (1986), “The Psychology and Economics Conference Handbook,” Journal of Business 59-4 part 2 (October), pp. S279 – 284.

February 26: Unemployment and Behavioral Economics

• George Akerlof (1982), “Labor Contracts as Partial Gift Exchange”, Quarterly Journal of Economics pp. 543-69.
• Truman Bewley (1998), “Why Not Cut Pay?” European Economic Review pp. 459-490.
• Matt Rabin (1998), “Economics and Psychology,” Journal of Economic Literature 36-1 (March)pp. 11-46.

March 5: Money Illusion and Aggregate Output

• George Akerlof and Janet Yellen (1985), “A Near-Rational Model of the Business Cycle, with Wage and Price Inertia,” Quarterly Journal of Economics pp. 823-838.
• Robert Shiller (1997) “Public Resistance to Indexation: A Puzzle”, Brookings Papers on Economic Activity 1997-1 (Spring), pp. 159-228.
• E. Shafir, P. Diamond, and A. Tversky (1997), “Money Illusion”, Quarterly Journal of Economics 112-2 (May), pp. 341-374.
• George Akerlof, William Dickens, and George Perry, “The Macroeconomics of Low Inflation”, Brookings Papers on Economic Activity, 1996-1 (Spring), pp. 1-76

March 12: Savings and Economic Psychology

• David Laibson (1997), “Golden Eggs and Hyperbolic Discounting,” Quarterly Journal of Economics, 112-2 (May), pp. 443-77.
• D Laibson, A. Repetto, and J. Tobacman (1998), “Self-Control and Saving for Retirement”, Brookings Papers on Economic Activity, 1998-1 (Spring), pp. 91-196.
• D Laibson, A. Repetto, and J. Tobacman (1998), “A Debt Puzzle” http://www.economics.harvard.edu/faculty/laibson/papers.html.
• E. Duflo and E. Saez (2001), “Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues’ Choices” (Cambridge: NBER Working Paper W7735).

March 19: What Should Investors Do?

• Hal Varian (1987), “The Arbitrage Principle in Financial Economics,” Journal of Economic Perspectives, 1-2 (Fall), pp. 55-72.
• Stephen LeRoy (1989), “Efficient Capital Markets and Martingales,” Journal of Economic Literature 27, pp. 1583-1621.
• Narayana R Kocherlakota (1995), “The Equity Premium: It’s Still a Puzzle,” Journal of Economic Literature, 1996-1, pp. 42-72.
• John H. Cochrane (1991), “Volatility Tests and Efficient Markets: A Review Essay, Journal of Monetary Economics 27, pp. 463-485.

April 2: What Do Investors Do?

• Terence Odean (1998), “Are Investors Reluctant to Realize Their Losses?” Journal of Finance, pp. 1775-1798
• Terence Odean (1999), “Do investors trade too much?” American Economic Review (December).
• Andrei Shleifer and Robert Vishny (), “The Limits of Arbitrage”, Journal of Finance 52, 25-55.

April 9: Whither Behavioral Macro?

• Matt Rabin (2001), “Risk Aversion and Expected-Utility Theory: A Calibration Theorem”, Econometrica http://emlab.Berkeley.EDU/users/rabin/wpapers2.html
• John Gruber and Botond Koszegi (2001), “Is Addiction ‘Rational’?: Theory and Evidence,” Quarterly Journal of Economics 116-4 (Fall), pp. 1261-1305.
• Xavier Gabaix and David Laibson (2001) “Bounded rationality and directed cognition” http://web.mit.edu/xgabaix/www/papers.html.
• E. Fehr, E. S. and Gachter (1998), “Reciprocity and Economics: The Economic Implications of Homo Reciprocans”, European Economic Review pp.845-59 http://www.iew.unizh.ch/home/fehr/.
• Matt Rabin (1993), “Incorporating Fairness into Game Theory and Economics”, American Economic Review 103, pp.1058-82.

PART III: GROWTH ONE LAST TIME

April 16: Corruption and Political Blockages to Growth

• Andrei Shleifer and Robert Vishny (1992), “Corruption,” Quarterly Journal of Economics 108, pp. 599-618.
• Paulo Mauro (1995), “Corruption and Growth,” Quarterly Journal of Economics 110-3, pp. 681-713.
• Jonathan Temple and Paul Johnson (1998), “Social Capability and Economic Growth,” Quarterly Journal of Economics 113, pp. 965-990.
• William Easterly and Ross Levine (1997), “Africa’s Growth Tragedy: Policies and Ethnic Divisions,” Quarterly Journal of Economics 112, pp. 1203-1250.

April 23: Trade and Growth

• Paul Krugman and Anthony Venables (1995), “Globalization and the Inequality of Nations,” Quarterly Journal of Economics 110, pp. 857-880.
• Paul Krugman (1991), “Increasing Returns and Economic Geography,” Journal of Political Economy 99-3 (June), pp. 483-499.
• Gene Grossman and Elhanen Helpman (1990), “Comparative Advantage and Long-Run Growth,” American Economic Review 80-4 (September), pp. 796-815
• Jaume Ventura (1997), “Growth and Interdependence,” Quarterly Journal of Economics 112-1 (February), pp. 57-84.
• Daron Acemoglu and Jaume Ventura (2001), “The World Income Distribution” (Cambridge: NBER Working Paper W8083, January).

April 30: Institutional Roots of Growth

• Lant Pritchett (1997), “Divergence, Bigtime,” Journal of Economic Perspectives 11-3 (Summer), pp. 3-18.
• Daron Acemoglu, Simon Johnson, and James Robinson (2002), “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution,” Quarterly Journal of Economics 117 (November).
• Daron Acemoglu, Simon Johnson, and James Robinson (2001), “The Colonial Origins of Comparative Development,” American Economic Review 91-5 (December), pp. 1369-1401.
• Stanley Engerman and Kenneth Sokoloff (1997), “Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economies,” in Steven Haber, ed., How Latin America Fell Behind (Palo Alto: Stanford University Press).