Issues in Contemporary Economics, vol. 2, Macroeconomics and Econometrics.

• Author: Smyth, David J.

This is the second volume of the proceedings of the International Economic Association Congress in Athens, 1989. The twelve papers are grouped into three parts: Part I, six papers on the macroeconomic aspects of unemployment; Part II, two papers on the economics of integration; Part III, four papers on econometrics. The papers are preceded by a preface by Amartya Sen and an introduction by Marc Nerlove. There is absolutely no connection at all between the topics covered in the three parts. The quality of the papers is variable. A number of the papers appear to have been written speedily and casually; some repeat discussion in the authors' earlier papers; some are reprints, in whole or part, of journal papers; some have broad perspectives while others report detailed theoretical or empirical results.

The first two papers in Part I represent attempts to provide alternatives to Keynesian models. Lawrence Summers argues that models based on the expectations augmented Phillips' curve are fatally flawed and recommends the use of an hysteresis approach instead. Summers believes that the premise that "a downward sloping aggregate demand schedule and an upwards sloping aggregate supply schedule intersect to determine uniquely and sharply the level and of output and prices is untenable." Edmund Phelps attempts to persuade the reader that there is "structural alternative" to the Keynesian model, based on real wage rigidity. Phelps argues that there is tentative support for the structural hypothesis relative to the Keynesian theory. I was not convinced by Summers' or Phelps' arguments. Convincing analyses would have to be much more rigorous than those presented in the papers.

Steve Alpern and Dennis Snower present a simple model that suggests that workers' use of wage claims as a learning instrument may contribute to unemployment. Assar Lindbeck concentrates on market imperfections in his theoretical analysis of why unemployment persists. His major policy conclusion is that it is important to avoid long periods of unemployment developing in the first place.

Olivier Blanchard demonstrates that thinking about labor markets as markets with large flows give a simple way of thinking about the Beveridge and Phillips curves. Using this strategy Blanchard concludes that reallocation factors dominated natural rate of unemployment increases in the United States and the United Kingdom whereas bargaining factors dominated in Germany.

Using microdata for the United...