Tuesday, January 22, 2013

A Brief History of Macroeconomics by a Microeconomist

Although I'm not sure exactly what my career will focus on, one thing is pretty clear at this point. I'm a Microeconomist.

For those of you looking in from outside the profession, I'm about to let you in on something you probably do that annoys 90% of the economists you meet (hyperbole). It goes something like this:
You: So Corbin, what do you do?
Corbin: I'm an economist.
You: Oh, I see...How about that recession...what a doozy!
(I apologize if you would never actually use the word doozy)
Corbin: Actually, I'm not that kind of economist.
Asking a microeconomist about the economy is like asking your mechanic about travel plans for an exotic getaway. He might know something about it, but chances are it's not his forte.

OK, it's really not that big of a deal, and not your fault, since most of your experience with economics probably comes from the news and politics. But, as a microeconomist, I honestly don't know much more than you do about the economy as a whole. Then again, after studying economics for the next 5 years I might pick up a thing or two.

I didn't get into economics because I love studying money or how society distributes scare resources. As it turns out, there is more to it than that. In the broadest sense, I see economics as a study of how people make choices. If you want to know more about the kinds of questions I want to answer with the tools of economics, ask me sometime.

With that said, here's a quick history of Macroeconomic Theory we went through on my first day of Macro class this semester. It's pretty brief, and I'm not attesting to its accuracy (see previous section about my lack of macro knowledge), but I thought it was a nice overview. I also thought that Irving Fisher was quite a dashing looking man.

    • Key Players: Adam Smith, Irving Fisher
    • Main Idea: Free markets regulate themselves, when free of any intervention.
    Irving Fisher
    • Key Players: John Maynard Keynes, John Hicks, Paul Samuelson
    • Main Idea: Private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, particularly monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.
John Maynard Keynes
    • Key Players: Milton Friedman
    • Main Idea: Variation in the money supply has major influences on national output in the short run and the price level over longer periods and objectives of monetary policy are best met by targeting the growth rate of the money supply.
    Milton Friedman
    • Key Players: Robert Lucas, Tom Sargent, Ed Prescott
    • Main Idea: We can determine prices, outputs, and income distributions in markets through supply and demand, by solving the utility maximization problem of income-constrained individuals in accordance with rational choice theory.
    Tom Sargent
    • Key Players: Greg Mankiw, Dan Romer, Ben Bernanke
    • Main Idea: Due to imperfect competition in price and wage setting, prices and wages can become "sticky" and not adjust instantaneously to changes in economic conditions.
Ben Bernanke
    • Key Players: Who knows?
    • Main Idea: Thanks to the Great Recession we have a great natural experiment that we'll be analyzing and drawing conclusions from for probably the next 20 years.
If you're still reading by now, I hope you found this as interesting as I did. 

Here's to a new semester of new things to learn!

1 comment:

Todd Jones said...

It appears you payed attention in class.