Paul Krugman: Microfoundations and the Parting of the Waters: Phelps… [made] two observations… nominal shocks had large real effects… [and] with everyone acting rationally, money should have been neutral even in the short run. Traditional Keynesian analyses… [only provided] ex-post rationalizations…. So the Phelps crowd came up with a lovely story…. Individuals and firms couldn’t … Continue reading Morning Must-Read: Paul Krugman’s Take on the History of Macroeconomic Thought