Macro Themes

On my fourth round of teaching macroeconomics, I am really able to tie much of the course together around the theme of "upholders of Say's Law" versus "Keynesians" (with "Keynesians" acting as a synecdoche for "all general glut theorists").

For instance, I was just teaching the chapter of our text on unemployment. When we discussed structural unemployment, I told the class about how the general glut debate initially launched in the wake of the Napoleonic Wars. "The defenders of Say's Law were not idiots: they saw that there were idle resources. But their explanation was that after 20 years of fighting, the European economy was structured around war: it would take time to change factories for making cannons into factories for making sweaters."

And then I explained how a similar structural explanation was offered for the recent housing-led downturn. And I noted that the Keynesians needn't deny that these structural imbalances occur, but only need hold that they are just an aspect of (and perhaps even the trigger for!) a more widespread malaise that affects business in general.

Our chapter on supply and demand was similarly linked to this topic by noting that the diagrams imply instantaneous achievement of equilibrium -- in which case Say's Law must always hold! But what if the adjustments to changed conditions take time? What if they take years?

I daresay few groups of college freshmen will have Say's Law more on their minds than will my macro students!

1 comment:

  1. Your classes sound fun!

    My college macro professor was not a distinguished economist or someone with published papers, but he had a lot of energy and came up with extremely interesting thoughts and examples from real world and history in class. We were a class of extremely uninterested, unmotivated students, but man, did he spark a fire and an interest in us. The result was teenagers often talking about how an internal devaluation is worse than an external devaluation, and how the former was worsening Europe - which should not happen!

    Your post reminds me that kind of enthusiasm. It certainly is the case that the biggest role teachers have to play in society is exciting a student's enthusiasm so that they can pursue the topic on their own.