Toward a Book on Macroeconomics
By Arnold Kling
Suppose I were to write a book on macroeconomics. How should it be structured?
My goals would be:
1. Explain why controversies in macroeconomics are so difficult to resolve. Explain why it is a mistake to be supremely confident in one’s macroeconomic views.
2. Describe macroeconomic fluctuations in historical and international perspective. In studying macroeconomic episodes, we can learn from differences as well as from similarities.
3. Make the case for some of the ideas that I have been pushing on this blog. Recalculation, the Minsky financial cycle, and the Garett Jones model of labor.
4. Explain what I think are the flaws in various approaches to macro, including monetarism, Keynesianism, macroeconometric models, and Dark Age macro (rational expectations, DSGE, and all that).
How to structure such a book? How can I tell a linear story that has two dimensions? One dimension is historical–how events and ideas evolved over time. The other dimension is theoretical–how macroeconomic issues look from various theoretical perspectives.
One approach would be to organize the core of the book on historical lines. However, the introduction and conclusion would deal in broad themes. Thus, the introduction would talk about issues that crop in macro, including the labor market, the capital market, monetary policy, fiscal policy, etc. It would talk about the major theoretical perspectives. But in the main part of the book I would tell a chronological story. My inclination would be to start with “pre-history” (before the 20th century), then move to the 1920’s hyperinflations, then the Great Depression, then macroeconomic impact of the Second World War, the post-war boom (which was unexpected at the time and remains somewhat mysterious), the postwar recessions, the Great Moderation, the dotcom boom and recession, and the current Great Recession. I also want to include important macro episodes in other countries, such as Japan’s lost decade. A major focus would be on how macroeconomic events at the time related to developments in macroeconomic thinking. That is, I want to include a fair amount of history of thought along with history of macro variables. Then the conclusion could wrap up my views of various theories in light of the history.