Getting Ready for Graduate School: Macro Summer Reading

At GMU, for the past decade students have been steered to the Snowdon and Vane, Modern Macroeconomics to prepare for their first year courses and PhD core examine.  It is a very readable presentation of the material, and it is still highly recommended.

But from Greg Mankiw I learned that my former colleague at NYU, Jordi Gali is working on a survey book of the state of the art in monetary and macro theory.  Gali is an outstanding economic thinker and also a genuinely good guy.  My office was two doors down from his and we spoke often in the hallways and on the elevator.  He treated the Austrian contingent (faculty and students) with an intellectual respect that I must say was not as prevalent in the department as one might have hoped.

During the 1990s one of the big "puzzles" in macroeconomics was the persistence of double-digit unemployment in Europe.  Jordi had a graph on his door which plotted the real wages of European workers and their marginal productivity.  The real wage was far above the marginal productivity.  So he asked, "what puzzle?"

I haven't read the manuscript yet, but I have very good reasons to believe it will be thoughtful and insightful.  So I will look it over and I recommend that those students entering graduate school in economics this fall do the same.

Comments

[Kaem]

How do you measure marginal productivity??

[matthew]

The real trick is getting your instructors to incorporate capital theory into their macroeconimc classes.

[matthew]

and this is to kaem.

If a hire a worker who contributes $100 to my output, then his marginal productivity is $100. To get back to Professor Boettke's point, now what if the worker's real wage exceeds his marginal productivity? Then only a fool or an altruist would hire him, and suffer losses in the process.

[Pearl]

Ok, Kaem's point is not as ridiculous as it appears. The measurement is more complicated when several stages of production and a great diversity of factors of production are involved. In addition, this can only be measured ex post, so in reality an entrepreneur has to anticipate the marginal productivity and pay wages in accordance with that, but where humans are involved error is not excluded. By any means, the disconformity between marginal productivity and real wages is strengthened by the imposition of wage controls as it was the case during the 1990s.

[Roberto]

Dear pro.f Boettke,

is there any good book on the market that explains, with the required degree of formality, the austrian theory? Something like what Galì is writing for the new-keynesian view on monetary policy...