Thomas Palley writes at TPM Cafe:
Are Heterodox Economists Just Unhappy Whiners? | TPMCafe: I was not planning to make further formal contributions to this discussion. However, Diane Coyle’s... claim is that heterodox economists are just unhappy whiners (a.k.a. whingers)..... I would like to give a couple of concrete examples that counter Diane Coyle’s claim that heterodox economists have nothing to complain about. So please bear with me.
The last time a paper on macroeconomics with a Keynesian structure was published in the American Economic Review was in the early 1980s. Send in such a paper and it will be immediately rejected as “old” economics. That is a matter of taste. There is simply no scientific basis for rejecting the Keynesian description of how the economy works.... Whereas the orthodox cup is filled with hard-core orthodox theory, the lip of orthodox policy practice quickly and easily slips into Keynesian thinking. This suggests Keynesians may be more right than the orthodox.
One example of such slippage is the scare with deflation during the last recession. Suddenly, the orthodoxy started arguing at the policy level that [de]flation could be damaging and the economy might get trapped with sustained unemployment (as happened in Japan). This was exactly what Keynes claimed, yet the orthodoxy dismissed (and still dismisses) Keynesian theory on the grounds that perfectly flexible prices and wages will automatically solve real world unemployment...
What am I, chopped liver? Apparently. Not only am I chopped liver, but others are chopped liver as well. Google MIT for its advanced macroeconomics reading lists and one of the first things that pops up is Jordi Gali's module: http://web.mit.edu/14.461/www/part1/readinglist.pdf. This looks to me to be nearly 200-proof modern Keynesianism--it may not be the kind of Keynesianism Palley likes, but Keynesianism it is.
Here are some of the readings:
Calvo, Guillermo (1983): “Staggered Prices in a Utility Maximizing Framework,” Journal of Monetary Economics, 12, 383-398. Yun, Tack (1996): “Nominal Price Rigidity, Money Supply Endogeneity, and Business Cycles,” Journal of Monetary Economics 37, 345-370. King, Robert G., and Alexander L. Wolman (1996): “Inflation Targeting in a St. Louis Model of the 21st Century,” Federal Reserve Bank of St. Louis Review, vol. 78, no. 3. (NBER WP #5507). Fuhrer, Jeffrey C. and George R. Moore (1995): “Inflation Persistence”, Quarterly Journal of Economics, Vol. 110, February, pp 127-159. Galí, Jordi and Mark Gertler (1998): “Inflation Dynamics: A Structural Econometric Analysis,” Journal of Monetary Economics, vol 44, no. 2, 195-222. Sbordone, Argia (2002): “Prices and Unit Labor Costs: A New Test of Price Stickiness,” Journal of Monetary Economics, vol. 49, no. 2, 265-292. Galí, Jordi, Mark Gertler, David López-Salido (2001): “European Inflation Dynamics,” European Economic Review vol. 45, no. 7, 1237-1270. Galí, Jordi, Mark Gertler, David López-Salido (2005): “Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve,” Journal of Monetary Economics, forthcoming. Eichenbaum, Martin and Jonas D.M. Fisher (2004): “Evaluating the Calvo Model of Sticky Prices,” NBER WP 10617. Mankiw, N. Gregory and Ricardo Reis (2002): “Sticky Information vs. Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve,” Quartely Journal of Economics, vol. CXVII, issue 4, 1295-1328. Rotemberg, Julio (1996): “Prices, Output, and Hours: An Empirical Analysis Based on a Sticky Price Model,” Journal of Monetary Economics 37, 505-533. Chari, V.V., Patrick J. Kehoe, Ellen R. McGrattan (2000): “Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?,” Econometrica, vol. 68, no. 5, 1151-1180. Wolman, Alexander (1999): “Sticky Prices, Marginal Cost, and the Behavior of Inflation,” Economic Quarterly, vol 85, no. 4, 29-48. Dotsey, Michael, Robert G. King, and Alexander L. Wolman (1999): “State Dependent Pricing and the General Equilibrium Dynamics of Money and Output,” Quarterly Journal of Economics, vol. CXIV, issue 2, 655-690. Dotsey, Michael, and Robert G. King (2005): “Implications of State Dependent Pricing for Dynamic Macroeconomic Models,” Journal of Monetary Economics, 52, 213-242. Golosov, Mikhail, Robert E. Lucas (2005): “Menu Costs and Phillips Curves” mimeo. Gertler, Mark and John Leahy (2005): “A Phillips Curve with an Ss Foundation,” mimeo...