Economics 236: Your Last Course in Macroeconomics

Brad DeLong; Evans 601; 3-4027; delong@econ.berkeley.edu

PART I: A QUICK OVERVIEW

January 22: Introduction

• Olivier Blanchard (2000), "What Do We Know About Macroeconomics that Fisher and Wicksell Did Not?" Quarterly Journal of Economics 115:4 (November), pp. 1375-1410.

• Olivier Blanchard (1990), "Why Does Money Affect Output? A Survey", in B.M. Friedman and F. Hahn eds, Handbook of Monetary Economics, 1990, Vol 2, 779-835.

January 29: Unemployment and Institutions

• Dale Mortensen and Christopher Pissarides (1994), "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies 61, pp 397-416.

• Olivier Blanchard and Justin Wolfers (2000) "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, 110 (March), pp. C 1 —33.

• Olivier Blanchard and Lawrence Katz (1997), "What We Know and Do Not Know About the Natural Rate of Unemployment", Journal of Economic Perspectives 11-1 (Winter), pp. 51-73.

• Steven Nickell (1997), "Unemployment and Labor Market Rigidities: Europe versus North America", Journal of Economic Perspectives 11-3 (Summer), pp. 55-74.

February 5: Contracts and Aggregate Output

• Robert Townsend (1979) "Optimal Contracts and Competitive Markets with Costly State Verification", Journal of Economic Theory 21 (October), pp. 265-293.

• Benjamin Bernanke and Mark Gertler (1989), "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review 79 (March), pp . 14-31.

February 12: Taking Technology-Shock Theories Seriously

• Susanto Basu and John Fernald (2000), "Why Is Productivity Procyclical? Why Do We Care?'' (Cambridge: NBER Working Paper W7940, October).

• Andrei Shleifer (1986), "Implementation Cycles," Journal of Political Economy 94-6 (December), pp. 1163-1190.

• Dale Jorgenson and Kevin Stiroh (2000), "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity 2000-1 (Spring), pp. 125-235.

PART II: THE GROWING STRENGTH OF BEHAVIORALIST APPROACHES

February 19: The Rationale for Behavioralist Approaches

• George Akerlof and Janet Yellen (1985), "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?" American Economic Review 75-4 (September), pp. 708-20.

• J. Bradford DeLong, Andrei. Shleifer, Lawrence Summers, and Robert Waldmann (1990), "Noise Trader Risk in Financial Markets," Journal of Political Economy 98-4 (August), pp. 703-38.

• Richard Thaler (1986), "The Psychology and Economics Conference Handbook," Journal of Business 59-4 part 2 (October), pp. S279 - 284.

February 26: Unemployment and Behavioral Economics

• George Akerlof (1982), "Labor Contracts as Partial Gift Exchange", Quarterly Journal of Economics pp. 543-69.

• Truman Bewley (1998), "Why Not Cut Pay?" European Economic Review pp. 459-490.

• Matt Rabin (1998), "Economics and Psychology," Journal of Economic Literature 36-1 (March)pp. 11-46.

March 5: Money Illusion and Aggregate Output

• George Akerlof and Janet Yellen (1985), "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," Quarterly Journal of Economics pp. 823-838.

• Robert Shiller (1997) "Public Resistance to Indexation: A Puzzle", Brookings Papers on Economic Activity 1997-1 (Spring), pp. 159-228.

• E. Shafir, P. Diamond, and A. Tversky (1997), "Money Illusion", Quarterly Journal of Economics 112-2 (May), pp. 341-374.

• George Akerlof, William Dickens, and George Perry, "The Macroeconomics of Low Inflation", Brookings Papers on Economic Activity, 1996-1 (Spring), pp. 1-76

March 12: Savings and Economic Psychology

• David Laibson (1997), "Golden Eggs and Hyperbolic Discounting," Quarterly Journal of Economics, 112-2 (May), pp. 443-77.

• D Laibson, A. Repetto, and J. Tobacman (1998), "Self-Control and Saving for Retirement", Brookings Papers on Economic Activity, 1998-1 (Spring), pp. 91-196.

• D Laibson, A. Repetto, and J. Tobacman (1998), "A Debt Puzzle" http://www.economics.harvard.edu/faculty/laibson/papers.html.

• E. Duflo and E. Saez (2001), "Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices" (Cambridge: NBER Working Paper W7735).

March 19: What Should Investors Do?

• Hal Varian (1987), "The Arbitrage Principle in Financial Economics," Journal of Economic Perspectives, 1-2 (Fall), pp. 55-72.

• Stephen LeRoy (1989), "Efficient Capital Markets and Martingales," Journal of Economic Literature 27, pp. 1583-1621.

• Narayana R Kocherlakota (1995), "The Equity Premium: It’s Still a Puzzle," Journal of Economic Literature, 1996-1, pp. 42-72.

• John H. Cochrane (1991), "Volatility Tests and Efficient Markets: A Review Essay, Journal of Monetary Economics 27, pp. 463-485.

FIRST FIVE-PAGE THESIS PAPER IDEA DUE

April 2: What Do Investors Do?

• Terence Odean (1998), "Are Investors Reluctant to Realize Their Losses?" Journal of Finance, pp. 1775-1798

• Terence Odean (1999), "Do investors trade too much?" American Economic Review (December).

• Andrei Shleifer and Robert Vishny (), "The Limits of Arbitrage", Journal of Finance 52, 25-55.

April 9: Whither Behavioral Macro?

• Matt Rabin (2001), "Risk Aversion and Expected-Utility Theory: A Calibration Theorem", Econometrica http://emlab.Berkeley.EDU/users/rabin/wpapers2.html

• John Gruber and Botond Koszegi (2001), "Is Addiction 'Rational'?: Theory and Evidence," Quarterly Journal of Economics 116-4 (Fall), pp. 1261-1305.

• Xavier Gabaix and David Laibson (2001) "Bounded rationality and directed cognition" http://web.mit.edu/xgabaix/www/papers.html.

• E. Fehr, E. S. and Gachter (1998), "Reciprocity and Economics: The Economic Implications of Homo Reciprocans", European Economic Review pp.845-59 http://www.iew.unizh.ch/home/fehr/.

• Matt Rabin (1993), "Incorporating Fairness into Game Theory and Economics", American Economic Review 103, pp.1058-82.

PART III: GROWTH ONE LAST TIME

April 16: Corruption and Political Blockages to Growth

• Andrei Shleifer and Robert Vishny (1992), "Corruption," Quarterly Journal of Economics 108, pp. 599-618.

• Paulo Mauro (1995), "Corruption and Growth," Quarterly Journal of Economics 110-3, pp. 681-713.

• Jonathan Temple and Paul Johnson (1998), "Social Capability and Economic Growth," Quarterly Journal of Economics 113, pp. 965-990.

• William Easterly and Ross Levine (1997), "Africa's Growth Tragedy: Policies and Ethnic Divisions," Quarterly Journal of Economics 112, pp. 1203-1250.

SECOND FIVE-PAGE THESIS IDEA PAPER DUE

April 23: Trade and Growth

• Paul Krugman and Anthony Venables (1995), "Globalization and the Inequality of Nations," Quarterly Journal of Economics 110, pp. 857-880.

• Paul Krugman (1991), "Increasing Returns and Economic Geography," Journal of Political Economy 99-3 (June), pp. 483-499.

• Gene Grossman and Elhanen Helpman (1990), "Comparative Advantage and Long-Run Growth," American Economic Review 80-4 (September), pp. 796-815

• Jaume Ventura (1997), "Growth and Interdependence," Quarterly Journal of Economics 112-1 (February), pp. 57-84.

• Daron Acemoglu and Jaume Ventura (2001), "The World Income Distribution" (Cambridge: NBER Working Paper W8083, January).

April 30: Institutional Roots of Growth

• Lant Pritchett (1997), "Divergence, Bigtime," Journal of Economic Perspectives 11-3 (Summer), pp. 3-18.

*Daron Acemoglu, Simon Johnson, and James Robinson (2002), "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," Quarterly Journal of Economics 117 (November).

• Daron Acemoglu, Simon Johnson, and James Robinson (2001), "The Colonial Origins of Comparative Development," American Economic Review 91-5 (December), pp. 1369-1401.

• Stanley Engerman and Kenneth Sokoloff (1997), "Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economies," in Steven Haber, ed., How Latin America Fell Behind (Palo Alto: Stanford University Press).

THIRD FIVE-PAGE THESIS PAPER IDEA DUE