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on History and Philosophy of Economics |
| By: | James Horton (Methodist University, Charles M. Reeves School of Business and Economics) |
| Abstract: | Rochon and Rossi (2026) argue that neoclassical economics should no longer be taught to undergraduates. Their argument is based on the premise that neoclassical foundations are flawed and the empirical record is weak. I grant several of their empirical criticisms and reject the pedagogical conclusion they draw from them. A macroeconomic framework offers immense value to students when economists still disagree about it and when it offers explanations of important economic episodes that students can evaluate against historical evidence. It does not have to have been judged correct. Where those disagreements remain open, removing one side from the curriculum transfers adjudication from the student to the instructor. That same argument applies to heterodox frameworks when economists are still arguing over them. Rochon and Rossi's proposal also sits in tension with their call for a more empirical economics education, since empirical reasoning requires competing explanations against which evidence can be interpreted. |
| Keywords: | Economics education, Curricular pluralism, Macroeconomics teaching, Economic methodology, Neoclassical economics, Heterodox economics |
| JEL: | A22 B41 B50 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:mtd:wpaper:004 |
| By: | Tomasz Kopczewski (University of Warsaw, Faculty of Economic Sciences); Jan Lisicki (University of Warsaw, Faculty of Economic Sciences); Tomasz Potocki (University of Rzeszów, Faculty of Economics and Finance) |
| Abstract: | Physicists have spent a century chasing a Theory of Everything and have not caught it. Economists got there first. Starting from one stylized atom, the optimizing individual, they built a full cosmology of a competitive economy with a single tool: one constrained-optimization template, applied to consumers, then to firms, then lifted whole into an Arrow–Debreu equilibrium. This paper reconstructs that move as a spell: one optimization problem to model them all. We trace what mathematical and conceptual engineering each step demands, from the axioms of homo oeconomicus to the existence theorems that hold the edifice up. Rather than prove that the equilibrium exists, the paper computes it, and a companion dashboard puts every lever of the model in the students’ hands. The aim is to show students who already have the mathematics what the monument cost to build, so they can use it, and later drill holes in it. |
| Keywords: | general equilibrium, constrained optimization, homo oeconomicus, teaching microeconomics, methodology of economics |
| JEL: | A23 B21 B41 D50 D58 |
| Date: | 2026–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:war:wpaper:2026-41 |
| By: | Armando Álvarez (Department of Economics, Trinity College, USA) |
| Abstract: | This paper develops a simple and teachable shifting equilibrium model of Minsky's Financial Instability Hypothesis by integrating a benchmark post-Keynesian model of endogenous money with Minsky's own ideas of the introduction of money through credit, the profit-seeking behavior of the banking sector, and his classification of financial postures. The paper highlights how financial crises are intrinsically connected to economic decisions made under fundamental uncertainty that Minsky, following Keynes, considered inherent in capitalism. The model focuses on credit-financed investment decisions by non-financial firms and the corresponding lending by profit-seeking banks. The paper introduces a ratio of Ponzi-speculative to hedge units, which connects the macroeconomic outcome with the micro classification of individual firms according to Minsky's financial postures. |
| Keywords: | Endogenous money, financial instability, financial postures |
| JEL: | E12 E44 G01 G21 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2611 |
| By: | Tomasz Kopczewski (University of Warsaw, Faculty of Economic Sciences); Iana Okhrimenko (Lazarski University in Warsaw, Department of Econometrics); Jan Lisicki (University of Warsaw, Faculty of Economic Sciences) |
| Abstract: | Economics rewards precision, but precision within a model does not establish what a result means, whether the represented object is economically admissible, or whether the conclusion travels to the world. This methodological essay builds a classroom prank on the Indian parable of the blind men and the elephant. Students solve slightly different calibrations of a two-sector Leontief model, reduce the answers to policy signs and vote; every system is solvable, yet thirty of the hundred coefficient pairs fail the Hawkins–Simon productivity condition. Six blind men extend the lesson to calculation, point equilibrium, binary inference, identification, aggregation and computational dynamics. In each case the well-behaved statistic is not the one that answers the economic question, and its good behaviour is what makes it persuasive. Artificial intelligence lowers the cost of building alternative models towards zero; the scarce input is the disposition to ask what a successful result is not showing. |
| Keywords: | economic methodology, model instability, Hawkins–Simon condition, statistical significance, classroom demonstration |
| JEL: | A22 B41 C12 C63 C67 D51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:war:wpaper:2026-39 |
| By: | Ferreira, Francisco H. G.; Mitchell, Ann E. |
| Abstract: | This paper examines differences and similarities betweenfour prominent concepts in the literature on social justice:equality of opportunity, social mobility, Sen’s capabilities, and meritocracy. We review the canonical economic modelof equality of opportunity and discuss how the dominantapproach to measuring inequality of opportunity (IOp)relates to the measurement of intergenerational mobility, and that both concepts can be considered versions of acommon framework, namely that of inherited inequality.Eliminating systematic disparities among groups of peoplewith different inherited characteristics is closely related toensuring that opportunities are equalised between them:people may still make different choices, but they face the same choice sets. We argue that this interpretation is close in spirit to Sen’s view that people, being vastly diverse, will make different choices, but societies ought to strive to provide them with equal capabilities, from which to choose functionings they have reason to value. There are important differences between the two approaches, but IOp and inherited inequality may be seen as a coarse operationalisation of Sen’s concern with inequality incapabilities. All three of these concepts differ rather fundamentally from meritocracy, even though it too may have a (subsidiary) role to play in a good society. |
| Keywords: | inequality of opportunity;mobility;capabilities;meritocracy |
| JEL: | J1 |
| Date: | 2026–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141043 |
| By: | Christophe Cahn; Patrick Fève; Julien Matheron |
| Abstract: | This paper traces how dynamic stochastic general equilibrium (DSGE) models became a central tool for quantitative policy analysis in Central Banks. Their appeal grew out of the shortcomings of large-scale macroeconometric models, the Lucas and Sims critiques, and the gradual shift from real-business-cycle theory to the New Keynesian framework. The paper reviews the medium-scale DSGE model that became standard in policy institutions, as well as extensions dealing with unemployment, open-economy transmission, financial frictions, and fiscal policy. It also discusses the practical machinery (solution, estimation, forecasting, and counterfactual analysis) through which these models are brought to the data and used in policy work. The final part turns to heterogeneous-agent New Keynesian models (HANK), where incomplete markets and distributional heterogeneity reshape the transmission of monetary and fiscal policy. The central claim is that DSGE models remain valuable less as definitive descriptions of the economy than as a disciplined way to connect theory, data, and policy experiments, while identifying where richer mechanisms are needed. |
| Keywords: | DSGE Models; Central Banks; New Neoclassical Synthesis Models; HANK; Monetary Policy; Policy Analysis |
| JEL: | E32 E52 E58 C11 D14 D31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1066 |
| By: | Thomas Drechsel; Dali Tsakadze |
| Abstract: | How leaders allocate their limited time and attention is an important question in economics. This paper constructs and analyzes a novel data set covering the daily calendars of three Federal Reserve Chairs, Ben Bernanke, Janet Yellen, and Jerome Powell, containing more than 20, 000 calendar entries. We document several patterns. First, all Fed Chairs spend more than 30% of their documented meetings with Fed staff, highlighting the crucial role of economists in the Fed's decision process. Second, interactions with the media became more frequent during Bernanke's tenure and remained important until the end of Powell's tenure. Third, Powell held significantly more meetings with lawmakers than both Yellen and Bernanke, reflecting an increasing need for the Fed to engage with political actors. Beyond these trend patterns, we examine the time allocation of Fed Chairs at business cycle frequencies and show how different activities respond to shifts in the macroeconomic environment. Finally, we place our findings in historical context using the available calendars of earlier Fed Chairs, including Alan Greenspan. |
| JEL: | D71 D72 E58 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35913 |
| By: | Iorgulescu, Elissa-Ana-Maria; Kuntara Pukthuanthong; Quinn, William |
| Abstract: | We develop two long-run monthly proxies for inflation expectations in the United States: a market-based measure derived from commodity prices from 1877-2020, and a narrative intensity measure based on the text of all New York Times articles from 1870-2020. The market-based measure, despite having been influential in extant literature, is found to be largely unrelated to subsequent inflation. However, the narrative intensity measure is a strong and consistent predictor of future inflation. For the period of overlap with the Michigan Survey of Consumers, its correlation with survey-based inflation expectations is 0.74. We then use this measure to provide new evidence on debates surrounding historical inflations and deflations. Our most notable result is that, contrary to the current consensus, the deflation of 1930-33 became anticipated relatively early. An unsupervised article-level topic analysis over the 150-year sample documents a shift from inflation narratives based on commodities, currency, and market quotations to narratives based on energy, central banks, and monetary policy. Finally, we find that unexpectedly hawkish monetary policy predicts an increase in inflationary narrative intensity, but that this relationship is driven entirely by the element of monetary surprises that is a linear function of macroeconomic conditions. |
| Keywords: | Inflation Expectations, Inflation, Deflation, Economic Narratives, Economic History |
| JEL: | E31 E32 E52 N11 N12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qucehw:344109 |
| By: | Stern, Nicholas |
| JEL: | J1 N0 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141392 |