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MIT. Graduate Macroeconomics 14.451. Blanchard. Spring 1997.

Because the Washington Post story, dated Oct 2 2015, by Steven Pearlstein about Olivier Blanchard (“The smartest economist you’ve never heard of” [sic]) has picked up considerable social media attention, I decided to post (way out of sample for me–Blanchard hardly deserves to be transported into the defunct class of academic scribblers) a transcription of a copy of his course outline and readings for the first half-semester course of macroeconomics in the MIT graduate program during the academic year 1996-97. The copy can be found in Robert Solow’s papers in the Economists’ Papers Project at Duke. Solow taught the same course in 1998 and undoubtedly wanted to see what material Blanchard had covered.

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14.451 Macroeconomics I                            Spring 1997

Olivier Blanchard, […]
TA: Brian Sack, […]

The purpose of this first course is to introduce the workhorses of the field, and use them to analyze current issues.

I shall assume familiarity with macroeconomics at the level of undergraduate macro-textbooks (you will get much more out of the course if you are very familiar with macroeconomics at the intermediate undergraduate level.) Two such textbooks, taken completely at random, are:

Dornbusch, R. and S. Fischer, Macroeconomics, McGraw Hill, 6th edition

Blanchard, O. Macroeconomics, Prentice-Hall, 1996

You should before you graduate, and preferably sooner, read some of the classics in the field. Three essential readings are:

Keynes, J. M. The General Theory of Employment, Interest, and Money, Harcourt Brace, New York, 1964 (first edition, 1936)

Hicks, J. R., Value and Capital, Oxford University Press, 1968 (first edition, 1939)

Modigliani, F., “Liquidity Preference and the Theory of Interest and Money”, Econometrica 12, January 1944, 45-88 (reprinted in Collected papers, Volume 1, MIT Press, 1982)

The textbook for the course is:

Blanchard, O. and Fischer, S. Lectures on Macroeconomics, MIT Press, Cambridge, 1989 (BF in what follows)

A text, which covers roughly the same set of issues at a slightly lower level, is:

David Romer, Advanced macroeconomics, McGraw Hill 1996.

 

A star denotes required reading.

 

1. Basic macroeconomic facts.

* BF, Chapter 1

Gordon, R., “Postwar Macroeconomics: The Evolution of Events and Ideas”, in The American Economy in Transition, Martin Feldstein ed., NBER and the University of Chicago, 1980, 101-182

Stock, J. and Watson, M., “Variable Trends in Economic Time Series”, Journal of Economic Perspectives, Summer 1988, 147-174

Blanchard, O. and Quah, D., “The Dynamic Effects of Aggregate Demand and Supply Disturbances”, AER, September 1989, 655-673

Abraham, K. and J. Haltiwanger, “Real Wages and the Business Cycle”, JEL, September 1995, volume 33-3, 1215-1264

Christiano, L., Eichenbaum M., and C. Evans, “The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds”, Working paper, 1994.

 

2. The Ramsey Model and RBC’s.

*BF, Chapter 2 (Romer, Chapters 2, Part A, and 4)

Prescott, E., “Theory Ahead of Business Cycle Measurement”, Quarterly Review, Fed of Minneapolis, Fall 1986, 9-22

*Cooley, T. and E. Prescott, “Economic Growth and Business Cycles”, in Frontiers of Business Cycle Research, T. Cooley (ed), Princeton University Press, Princeton, 1995, 1-38

Evans, C. and F. Santos, “Monetary Policy Shocks and Productivity Measures in the G-7 countries”, WP 93-12, November 1993, Federal Reserve Bank of Chicago

 

3. The Diamond Model, and Capital Accumulation.

*BF, Chapter 3 (or Romer, Chapter 2, Part B)

*Kotlikoff, L., “Privatization of Social Security: How it Works and Why it Matters”, mimeo, Boston University, October 1995

Barro, R., “World Real Interest Rates”, NBER Macroeconomics, 1990, 15-60

Orr, A., Edey M. and M. Kennedy, “The Determinants of Real Long-Term Interest Rates: 17 Country Pooled-Time-Series Evidence”, OECD Working Paper 155, 1995

 

4. The Cagan Model, and Hyperinflations.

*BF, chapters 4-7, and 10-2 (Romer Chapter 9-7)

Dornbusch, R., Sturzenegger, F. and H. Wolf, “Extreme Inflation: Dynamics and Stabilization”, BPEA, 1990-2, 1-84

 

5. The AS-AD Model; Money, Prices and Output

*BF, chapter 8 (Romer, Chapters 5 and 6)

*Friedman, M., “The Role of Monetary Policy”, AER, March 1968, 1-17

*Lucas, R., “Some International Evidence on Output-Inflation Trade-offs”, AER, June 1973, 326-334

*Taylor, J., “Staggered Wage Setting in a Macro Model”, AER, May 1979, 69-2, 108-113

Tobin, J., “Keynesian Models of Recession and Depression”, AER, May 1975, 195-202

Chari, V.V., Kehoe Patrick, and Ellen McGrattan, “Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?”, Staff Report 217, Minneapolis Fed, September 1966

Blanchard, O. and L. Summers, “Hysteresis in Unemployment,” European Economic review, 31, 1987, 288-295

Ball, L., “Disinflation and the Nairu,” NBER Working Paper 5520, March 1996

OECD, The OECD Jobs Study, Part I. Labour Market Trends and Underlying Forces of Change, 1994.

 

6. The IS-LM Model; Goods and Financial Markets Revisited.

*Blanchard, O., “Output, the Stock Market, and Interest Rates”, AER, 1981, 71-1, 132-143.

*Dornbusch, R., “Expectations and Exchange Rate Dynamics”, JPE, 84-6, December 1976, 1161-1176

Kashyap, A. and J. Stein, “Monetary Policy and Bank Lending”, in Monetary Policy, G. Mankiw (ed), NBER and the University of Chicago Press, 1994, 221-262

*Giavazzi, F. and M. Pagano, “Can Severe Fiscal Contractions Be Expansionary; Tales of Two Small European Countries”, NBER Macroeconomics Annual, 1990, 75-122

Alesina, A. and R. Perotti, “Fiscal Expansions and Adjustments in OECD Countries”, Economic Policy, 1995 (mimeo, Harvard, June 1995)

Obstfeld, M., “International Currency Experience: New Lessons and Lessons Relearned,” Brookings Papers on Economic Activity, 1995-1, 119-220

King, R. and A. Wolman, “Inflation targeting in a St Louis model of the 21st Century”, NBER WP 5507, March 1996

 

7. The Bigger Machines.

Bryant, R. et al, Empirical Macroeconomics for Interdependent Economies, Brookings Institution, Washington, 1988, chapters 1 to 3.

Taylor, J., Macroeconomic Policy in a World Economy, Norton, New York, 1993, chapters 3 to 5

 

Source: Robert M. Solow papers, Duke University Rubenstein Library, Box 69, Folder “Teaching Materials (2 of 2)”.

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Economists Funny Business M.I.T.

From the 200th Anniversary of Wealth of Nations Roast of Adam Smith at MIT. 1976

The Graduate Economics Association of MIT held a celebration in honor of Adam Smith and the 200th anniversary of the publication of The Wealth of Nations.  The event took place April 12, 1976 at the Sheraton Commander Hotel in Cambridge, Massachusetts. I chaired the organizing committee for the event that was run like a Friar’s Club Roast. It featured a star-studded cast that included Alan Blinder (Princeton), William Parker (Yale), Paul Samuelson (MIT), Robert Solow (MIT), and James Tobin (Yale) and special surprise guest-of-honor to receive the Invisible Hand Award, Adam Smith a.k.a. Jerry Goodman. Before Mr. Goodman entered dressed in Adam Smith attire, the MIT economics children’s choir (i.e. a sample of graduate students who could carry a tune, sort-of) sang the following hymn set to the tune of “Rock of Ages” with a new text written by my old professor of American economic history at Yale, William Parker.

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WEALTH OF NATIONS!

Text by William N. Parker

Wealth of Nations! Writ for me!
Let me hide myself in Thee.
Not the Profits, nor the Rent,
But the Labour Time that’s spent,
Be of Value the true source.
Make me better; no one worse.

Every man looks to his need,
Counting on the butcher’s greed.
Public goods are little prized,
Model that is dynamized.
Half the world is cold and bare,
Still we cling to Laissez-faire.

Hand invisible whose love
We believe that we can prove!
With thy panapoly of saints,
Mill, Ricardo, Marshall, Keynes,
Save us all from Marxist sins.
Keep us gaily making pins!

When our earthly race is run,
Will we soar to Samuelson?
Will we sink to realms below,
There to meet with our So-low?
Was it neo-classic myth?
Tell us, tell us, Adam Smith!
Wealth of Nations, write for me,

Let me hide myself in Thee!

Source: From the back of the program to the celebration.

Below, my autographed copy of the program:

Jerry Goodman’s journalistic attempt at making sense of the economists at play when he was observer-participant.

Image Sources: Portrait of William Parker from the Proceedings of the American Philosophical Society, Vol. 151, No. 2, June 2007; Adam Smith program, personal copy; Jerry Goodman’s account from New York (May 3, 1976).

Categories
Bibliography Courses M.I.T.

MIT, Business Cycles Reading List. Samuelson, 1943

 

 

This reading list comes from Paul Samuelson’s second year at M.I.T. While not designated on the reading list itself, from its location in his papers (filed with other Business Cycle course materials) and according to the courses he taught that in the second term of 1943 (according to the MIT Course Catalogue), this is almost certainly for the course Ec26: Business Cycles.

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Course Description from 1942-43 Catalogue.

Ec26. Business Cycles (A). A statistical, historical, and theoretical examination of the determinants of income, production and employment. Modern methods are brought to bear on problems of analyses, forecasting, and control.

Prerequisite: Ec40 (Money & Banking). Primarily for graduate students, 2nd term

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February, 1943     READING LIST     P. A. Samuelson

Asterisks indicate required reading, other items suggested reading

 

I    NATIONAL INCOME, EMPLOYMENT & PRODUCTION

M. Gilbert, “War Expenditures & National Production,” Survey of Current Business, March, 1942.

S. S. Kuznets, National Income & Its Composition, 1919-1938, Vol. I.

W. L. Crum, J. F. Fennelly, L. J. Seltzer, Fiscal Planning for Total War.

S. Fabricant, Productivity of American Manufacturing Industries, [sic, probable or at least related publication: Solomon Fabricant, Employment in Manufacturing, 1899-1939: An Analysis of Its Relation to the Volume of Production, NBER, New York, 1942.]

Federal Reserve Board Bulletin, August & September, 1940.  [New index of industrial production]

R. A. Nixon & P. A. Samuelson, “Estimates of Unemployment in the U. S.,” Review of Economic Statistics, August, 1940.

 

II        NATURE OF BUSINESS CYCLE

*A. H. Hansen, Fiscal Policy & Business Cycle, Ch. 1-4

*Wesley C. Mitchell, Business Cycles, 1941 Reprint of 1913 edition, Ch. V, part I.

*J. P. Wernette, The Control of Business Cycles, pp. 3-23 and Conclusion.

*J. R. Meade & H. Hitch, Economic Analysis & Policy, Ch. I.

*G. Haberler, Prosperity & Depression, Ch. 9, 1 & 2.

*S. H. Slichter, Towards Stability, Ch. I.

A. H. Hansen, Business Cycle Theory, Chs. I, II, IV, & VI.

S. H. Slichter, Towards Stability, Chs. II & IV.

G. Haberler, Prosperity & Depression, any part.

 

III      SAVING AND INVESTMENT

*Joan Robinson, Introduction to the Theory of Employment.

*T.N.E.C. testimony of Hansen & Currie.
[Hearings Before the Temporary National Economic Committee, Seventy-Sixth Congress, First Session. Part 9. Savings and Investment. May 16, 17, 18, 22, 23, 24, 25, and 26, 1939]

*A. H. Hansen, Fiscal Policy, Chs. 11, 12, 15, & 24.

*L. V. Chandler, Introduction to Monetary Theory, Chs. VI & VIII.

O. Altman, T.N.E.C. monograph #37, Saving & Investment.

 

IV THE PROPENSITY TO IMPORT & THE FOREIGN TRADE MULTIPLIER

*R. F. Harrod, International Economics, (Rev.Ed.) 6, 7. (8 & 9, optional)

*W.A. Salant, “Foreign Trade Policy in the Business Cycle,” in Public Policy II (editor E. S. Mason)

*J. M. Keynes, General Theory, Preface, Chs. 23 & 24

I. DeVegh, Review of Economic Statistics, 1940 [De Vegh, Imre. “Imports and Income in the United States and Canada.” The Review of Economics and Statistics 23, no. 3 (1941): 130-46. ]

C. Clark & J. Crawford, National Income of Australia
[Colin Clark and John G. Crawford,National Income of Australia.Sydney and London: Angus & Robertson limited, 1938.]

L. Metzler, Journal of Political Economy, 1942
[Metzler, Lloyd A. “The Transfer Problem Reconsidered.” Journal of Political Economy 50, no. 3 (1942): 397-414.]

 

V        INTERNATIONAL PROPAGATION OF BUSINESS CYCLES

*G. Haberler, Prosperity & Depression, Ch. XII, pp. 455-473

*J. Viner, Studies, pp. 432-436
[Studies in the Theory of International Trade.]

*League of Nations, Annual Survey, 1939-40

*Sir A. Salter, Recovery, pp. 27-66, (101-195 optional)
[Recovery. The Second Effort. London: G. Bell and Sons, 1932]

R. Bennett, National Bureau, manuscript [Rollin F. Bennett, Columbia University: might be a paper presented at the 1940 or 1941 meeting of the NBER Conference of Income and Wealth which were not published (insufficient general interest to warrant publication) ]

P. Einzig, Bankers, Statesmen & Economists

League of Nations, B. Ohlin, Course & Phases of the World Economic Depression, especially pp. 116-215

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Source: Paul A. Samuelson Papers, Box 33, Folder “14.451 Business Cycles, 1943-1955”. David M. Rubenstein Rare Book & Manuscript Library, Duke University.