Arnold Kling  

From Keynes to Akerlof: How I would teach Macro

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While I was considering an offer to teach intermediate macro, I thought about how I would do it. I would teach it in history-of-thought terms, showing how ideas grew out of the context of their times.

1. 1920's Hyperinflations--the first big macro problem. Stanley Fischer on the how recent hyperinflations were ended.
2. The Great Depression, Keynes, and the Multiplier. Modern arguments about what caused the Depression, Roosevelt's policies, and how we got out of it. Friedman's monetarist story. Bernanke's story of real effects of financial firms' failures.
3. Elaborations on Keynes: Friedman's and Modigliani's consumption functions; Baumol's and Tobin's money demand functions; Tobin's "widow's cruse" money multiplier; Tobin's q and investment demand; E Cary Brown, the full employment surplus, and built-in stabilizers. Hicks' IS-LM model. Lawrence Klein and Multi-equation macroeconometric models
4. The Phillips Curve and its evolution. Expectations-augmented Phillips Curve. Friedman-Phelps.
5. The 1970's. The Phillips Curve becomes the aggregate supply curve. Incomes policies tried and failed. Oil shocks. Lucas and rational expectations. Barro and Ricardian equivalence.
6. The 1980's. The Fed tries monetarism. real business cycle theory. Sims, Granger, and issues with stationarity, causality, and time aggregation in macro data (in an intermediate undergraduate course, you could give at best a superficial treatment of this topic). International macro emerges (even though Mundell-Fleming was earlier)
7. New Keynesianism, the Taylor rule, central bank credibility, Fischer Black's general equilibrium.
8. Shiller, Greenspan, and irrational exuberance. The Internet Bubble. The levitating dollar and Bernanke's savings glut hypothesis.
9. George Akerlof on norms and the five neutralities.

Additions? Subtractions?

It would be a fun course to teach at Swarthmore. Probably not so much at George Mason.

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CATEGORIES: Macroeconomics

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The author at Economic Investigations in a related article titled Being Taught Macroeconomics writes:
    Both Arnold Kling (From Keynes to Akerlof: How I would teach Macro) and Michael Stastny (How to Teach Macroeconomics) think that a history-based approach is best to teach macro. This reminds me of that biology hypothesis, that the embryo matures by rep... [Tracked on January 23, 2007 6:01 PM]
COMMENTS (18 to date)
Ben writes:

You should include theories of long term growth as well. Lucas, Romer, etc...

That is the most valuable thing i learnt in my intermediate macro class, i still think back to that here in grad school.

Murad writes:

I saw your blog and I was very impressed. I would love to teach someday at a university but seem to have a difficult time finding a university that will give me a chance. I work full-time in human resource management, am finishing a PH.D. in business and write on my blog.

Ajay writes:

I love the idea of teaching it historically. I have long wanted to learn every subject this way and wish I could. Why not do this on your own? Write up what you had in mind, put it all on a blog and charge for access to what you write as you go along. I know I'd pay to read your pieces and to read your discussions/interactions with other paying members in the comments. You already have an audience who reads this blog who might be interested in something like this. Once you earned enough from the first couple of iterations, you could even make the material free for future generations of students. It's a great model. I'd even help you set it up and run the technical aspects for you if needed.

eric writes:

Funny, most of the good macro topics have subsequently blown up: ISLM, Phillips curve, Monetarism. I think the key is, stay away from business cycle dynamics, and focus on long term stuff, like the long run (or extreme) money/price relation, or the relation between freedom or property rights and growth. Money multipliers, Government multipliers, large-scale econometric models, there are simply an infinite number of bad ideas that don't need learning and then unlearning.

There's also Stiglers nice piece on how macro is so popular, but 98% of all congressional legislation is really a micro question.

Swimmy writes:

Why not start with Say's Law? I think it's tough to understand Keynes without it.

SheetWise writes:

I have a general question for economists. Maybe this should be placed elsewhere, but I don't know where that is.

Do the rest of you play Windows Minesweeper while waiting for pages to load and during any other 3+ second gap in response from the computer? Are you as anxious as I am for immediate response, and find 3+ second waits to be interminable? Or do you play pinball ... inquiring minds want to know ...

Gabriel M. writes:

I don't think that [8] and [9] are a good idea. They're too new, and possibly (most likely) irrelevant in 5-10 years time.

Go with growth and endogenous growth instead.

Also, I see no point in doing so much history in an intermediate class. Maybe you could do one class, with a great overview of the history and references to further reading. Maybe that's because I prefer classes structured around the notions, not around the history.

If I were you I'd so a baseline RBC/New Classical model, with indivisible labor and maybe a cash-and-credit constraint. Get people used to impulse response functions and comparing variances.

Don Boudreaux writes:


Darn! I'm especially sorry now that you'll not teach macro at GMU. Your course would be a fine one for our students.

dearieme writes:

1920 is too late. You should surely start with the strange business of the Jews, Christians, Moslems and "usury"? Then move to the Genoa municipal bond crisis of whenever it was. Then limited companies, mercantilism, the Corn Laws, and modern times.

Bob writes:

Most of the economists that we know do tend to be a little on the wishy washy side of the decision making process. Also people who teach generally cant do it so thats why they teach. So, should be listening to them anyway?

Jason Briggeman writes:

Nothing specifically against this plan for teaching macro, because it is a fair reflection of the history of what "macro" has been -- but part of me wishes this field were called "economy management". It's the history of attempts to provide technical guidance to government economy managers -- all of which is some attempt to take fundamentally irreducible data and represent it in aggregates, and then planning on how to react to changes in the aggregates. In that light, it's no wonder that so much of it, as theory, has fallen apart.

pgl writes:

Lord Keynes might direct you to periods before the 1920's but then getting data on these periods might be difficult. Didn't a young Milton Friedman coathor some 1963 book with Anna Schwartz that might prove useful?

Snark writes:

Dr. Kling,

The other Fisher would be a more interesting case study in terms of historical economics (Equation of Exchange, Fisher Hypothesis, and the Separation Theorem). And I’m surprised you would forego an opportunity to incorporate the once popular fancy of supply-side economics and the Laffer Curve into your curriculum. Beyond these, it appears you’ve pretty much boxed the economics compass.

Bill Conerly writes:

To eric who wrote: "I think the key is, stay away from business cycle dynamics, and focus on long term stuff,"

You'd have an economics student NOT learn about recessions, inflation, and the Great Depression?

To Jason who wrote: "It's the history of attempts to provide technical guidance to government economy managers."

Macro is often taught that way, but it's tremendously important for managers of businesses, non-profits and government bureaus to understand the basic nature of business cycles. If the course spends too much time on how government might manage the economy, the professor is at fault. Most students of intermediate macro will never manage a company, but they will manage some part of an enterprise. (That's the motivation for my forthcoming macro book, Businomics.)

radek writes:

"You'd have an economics student NOT learn about recessions, inflation, and the Great Depression?"

No, that stuff needs to be covered but currently the bias is waaaaayyyyyy in the other direction. Most macro texts have a chapter (at most two) on long run stuff usually done in a very superficial wishy washy way. Then like 60 chapters on fluctuations without ever bothering to explain why, or if, these matter in the first place.

cash writes:

The methodology appears nice and I like the idea overall, especially since I that's how colleges tautht most subjects many years ago. I was wondering if you had a text book in mind?

James writes:

I think this is a tremendous idea. I wish that my intermediate macro class had been taught in this way. I think the historical approach would put the ideas into context very well and would give the student a strong sense of where macroeconomic thought is headed in the future. Also, have you thought about turning this into a textbook?

If I course like that had existed, I might have taken intermediate macro. (One advantage of being an English major was that I didn't have to.)

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