The Capitalism and Freedom in the Twenty-First Century Podcast

Greg Mankiw (Harvard Econ Prof) on New Keynesian Macro, Growth and Econ Policy

Aug 15, 2024
Greg Mankiw, a Harvard economics professor and former White House economic advisor under President George W. Bush, shares insights into New Keynesian economics. He discusses the evolution of economic modeling, highlighting both its benefits and limitations. Mankiw delves into growth accounting and the challenges of existing growth theories. The conversation also touches on the changing role of economists in Washington and Mankiw's advocacy for effective climate policies like carbon taxes, emphasizing the need for greater economic literacy.
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ANECDOTE

Mankiw's Early Economics Spark

  • Greg Mankiw shifted from math to economics after realizing math at Princeton was highly abstract.
  • A friend's enthusiasm for economics and working with professor Harvey Rosen sparked his lasting interest.
INSIGHT

New Keynesian Model Origins

  • New Keynesian models incorporated sticky prices and wages to explain real effects of monetary policy.
  • This bridged the gap between real business cycle theory and Keynesian economics without discarding past insights.
INSIGHT

Sticky Information Improves Inflation Models

  • Sticky information model explains inflation inertia better than the Calvo model.
  • It posits that past expectations drive current inflation, creating natural inertia without ad hoc assumptions.
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