Transcript Macroeconomics Lectures Stephen Jay Silver, Ph.D. The Citadel

Macroeconomics Lectures
Stephen Jay Silver, Ph.D.
The Citadel
Shandong University
Center for Economic
Research
November, 2010
Outline of Macroeconomic Lectures
• In this lecture I will introduce myself and the topics I
•
•
•
plan on discussing over the next four weeks
The preparation for these talks have been extremely
useful for me in relearning macroeconomic topics that I
have not looked at in many years as well as several new
issues that have become “hot” since my Ph.D. program
I hope you will find what I have to say about the various
topics and issues as I have
Think of these lectures as a short modern history of
economic thought course
Lecture I – Self Introduction and
outline of upcoming lectures
Discussion of approaches to teaching
graduate macroeconomics at U.S.
universities
• Saltwater versus freshwater debates
• New Emphasis on growth theory
• Brief discussion of the major issues and
approaches taken by each school of
thought
Lecture II – The Classical approach
to economics
• The legacy of Adam Smith and his
followers: David Ricardo, John Stewart Mill
and Alfred Marshall
• Challenging Mercantilism with the idea of
specialization, laissez-faire markets, and
free trade
• Classical explanations of the business
cycle
• The Austrian School
Lecture III – JM Keynes and Keynesianism
• Why Keynes took his new approach: the Great
•
•
•
•
•
Depression and the threat of Marxism
Keynes’ explanation of the business cycle and
depression
Development of the Keynesian model
Keynes on money and why he preferred fiscal to
monetary policy
Deficiencies of his model
Attacks of the model
Lecture IV – Monetarism and Milton Friedman
• Friedman’s emphasis on monetary effects on
•
•
•
•
aggregate demand
Weaknesses in the General Theory of Keynes
Empirical evidence that money, and only money,
can influence the economy over the business
cycle (except for “real” shocks)
The Phillips curve and the Natural Rate
Hypothesis
Permanent Income Hypothesis
Lecture V – New Classical Approach to the
business cycle and Robert Lucas
• Rational Expectations: history and
application to macroeconomics
• Efficient market hypothesis
• Lucas solution to applying RET theory to
macroeconomic modeling
• The Lucas Critique
• Challenge to Keynesians
• Challenges to RET
Lecture VI – Real Business Cycle Models
• RBC explanation of the business cycle; mostly
•
•
•
•
due to technology shocks
Kydland and Prescott
70% – 30% (No, not Mao!)
Like monetarists and New Classicists, RBC
argues against the use of discretionary fiscal and
monetary policies
Most economists are unconvinced about the
primacy of supply shocks over demand shocks in
explaining the business cycle
Lecture VII – The New Keynesians
• New explanations for why the economy
will not necessarily arrive at full
employment general equilibrium
• Many, but not all, of these theories
assume “sticky” prices
• Others rely more on search theory
• This year’s Nobel Prize went to a New
Keynesian, Peter Diamond
Lecture VIII – Public Choice Economics and
James Buchanan
• Many of those belonging to this group are of the
•
•
•
•
Austrian School
Strong belief that attempts by policy makers to influence
the economy generate a mal-distribution of resources
that may push the economy beyond full-employment
level before elections only to have the economy fall
below its full-employment level afterward
This creates the so-called “political business cycle”
Public choice economists, like their Austrian
predecessors, tend to be classical libertarians with little
regard for politicians
James Buchanan won the Nobel Prize for his work in this
field
Lecture IX – Growth Theory and Robert Solow
• Growth theory was a very “hot” topic back in the 1960’s
•
•
and 1970’s, but lost its popularity relative to
Keynesianism, monetarism, and New Classical Theories
It has re-emerged as the focus of analysis in many major
Economics Ph.D. programs in the United States
After the introduction of RBC explanations of the
business cycle, economists once again looked at growth
models to explain the kinds of technology shocks that
RBC models use to explain the cyclical behavior of the
economy
Lecture X – The Post Keynesians
• This may be a misnomer for two reasons:
•
a. Many of the economists that belong to this group
are not “post” Keynes at all, but were actually Keynes’
contemporaries. For example, Joan Robinson
b. This group is very heterodox with all kinds of
varying views, many of which can hardly be called
Keynesian at all
I will present several of these views in this lecture
Lecture XI - Current state of macroeconomic
theory and current world economic conditions
• What some of my contemporaries are saying
• The great debates that are raging within the U.S. (see
•
•
•
Krugman vs. Cochrane)
Personally, I am concerned for the integrity of my
chosen professional field when economists are about as
civil toward each other as Democrat and Republican
politicians
“Outsiders” will continue to view economics as a very
imperfect “science” even though we agree at least 90%
of the time
Some new developments in the theory and practice of
macroeconomics, for example, new targeting
mechanisms: nominal GDP and the Taylor rule
Lecture XII – Up to You
• Possible topics:
- Monetary approach to the balance of
payments and empirical models
- China
- Demographics
- ???
About myself
• Current Position
Professor of Business Administration at The
Citadel, The Military College of South Carolina
• Previous Academic Employment
Assistant Professor at two other institutions:
- Virginia Military Institute
- Bentley College
More about myself - Other Work Experience
• 1976 – 82 Graduate Research Asst. Economics
•
•
•
•
Dept. and College of Behavioral and Social
Sciences, Univ. of Maryland
1974 – 76 Researcher Institute for Defense
Analyses, Arlington, VA and Phnom Penh
1972 – 74 Programme Officer, UNDP New York
and N’djamena, Chad
1969 – 70 High School math teacher, New York
City
1966 – 68 Peace Corps Volunteer, secondary
school teacher in Kenya
Education
• Ph.D. Economics, University of Maryland,
College Park, 1983
• M.A. Economics, Queens College, New
York, 1972
• B.S. Mathematics, University of Maryland,
1966
• Academic Diploma, Central High School of
Philadelphia, 1962
Interesting facts about my youth
• Born, Washington, DC 1943, where I lived from
•
•
1943 – 1957
Father was Program Officer with US Agency for
International Development USAID
- We lived in Ankara, Turkey 1957 – 59
- and in Seoul, Korea, 1959 – 61
I returned to Philadelphia to complete high
school and university in 1961
Research Interests - Publications
• Educational Testing; six or seven statistical articles on
•
•
attention deficits and their impacts on IQ scores
Two macroeconomic articles on the cyclicality of real
wages, one for the post-war years (Journal of Political
Economy, June 1989) and the other for the interwar
years (Southern Economic Journal, January 1995) both
with Scott Sumner
Two finance articles in Journal of Financial
Transformation: one on the impact of demographics on
financial markets, the other on optimal portfolio
management, both with Sykes Wilford
Current Research Interests
• Revaluation of the Renminbi (with Wilford and
•
•
•
•
Blu Putnam)
Potential output modeling using R (with Wilford
and Putnam)
Exchange rate forecasting using the monetary
approach to the balance of payments (with
Wilford and Putnam)
Effects of demographic changes on economic
performance
History of Modern Macroeconomic Theory