The General Theory of Employment, Interest, and Money. Keynes, John

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Intermediate Macroeconomic Analysis

ECON 302

SUMMER 2013

DREW UNIVERSITY

(Preliminary Syllabus)

Jamee K. Moudud [email protected]

Office: TBA

Office Hours: TBA

Course Description

This course is a study of the determinants of the level of income, employment, and prices as seen in competing theoretical frameworks. Topics include an analysis of inflation and unemployment, their causes, costs, and policy options; the sources of instability in a market economy; debates on policy activism; prospects for the control of aggregate demand.

The objective of the course is to enable students to learn the fundamental theoretical debates in economics and their real-world implications. At every step we will contrast the neoclassical approach with alternative approaches, including that of Keynes who is generally considered to be the founder of modern macroeconomics. We will therefore draw on both a macroeconomics textbook and Keynes’ famous book The General Theory of Employment, Interest, and Money.

Textbooks:

Peterson, Wallace C. and Estenson, Paul S. (1996). Income, Employment, Economic Growth, 8th edition. W.W. Norton & Company. (PE)

Keynes, John Maynard (1953). The General Theory of Employment, Interest, and Money. Harcourt Brace Jovanovich.

Course Requirements:

There will be two mid-terms and a final exam. Exams will consist of multiple choice and short-answer questions. There will also be occasional homework assignments.

1 Grades:

% of Grade

Exam #1 20%

Exam #2 25%

Exam #3 (Final Exam) 25%

Class Participation and Daily Reaction Papers 30%

Three in class exams will comprise 70% of your grade. If you know you will need to miss an exam for legitimate reasons (e.g. because of an illness), please notify me prior to the missed exam period and I will reschedule it for you. If you do not do so, your exam grade will be recorded as a U. You can optimize your performance on the exams by reading the text and the teacher’s manual, doing the exercises at the end of each chapter and checking your answers against the solutions manual, and attending and actively participating in class.

Class attendance and participation (answering/asking questions and participating in class discussions) and daily reaction papers will count for 30% of your grade. I expect that you will be prepared to discuss reading assignments on the dates they are due. The due dates for all reading assignments are listed in the first column of the schedule. You must submit a half-page, double-spaced, and typed reaction paper on the day’s readings and on/or the previous day’s lectures at the end of each class period. The papers should include one or two questions and/or comments on the course material (Your papers should not be a restatement of the textbook material). I will accept un-typed reaction papers for half credit if you attend class. I will not accept late reaction papers or papers submitted via e-mail. The papers should include their due date and chapter numbers/titles at the top. Unexcused absences and/or un-submitted work will have a negative, proportional impact on the participation grade. Regardless of reason, students are responsible for all material covered during their absence.

Syllabus:

1. Introduction to issues and methods

A. The state of the global and national economy

Steven Rattner, “America in 2012, as Told in Charts,” Opinionator, New York Times, Dec. 31, 2012; Joseph E. Stiglitz, “Inequality Is Holding Back The Recovery,” Opinionator, The New York Times, Jan. 19, 2013; Mark Weisbrot, “Economic Growth: the Great Slowdown (1980-2000) and Recovery (2000-2010), Political Economy Research Institute, Oct. 2012; Dean Baker, “Debt, Deficits, and Demographics: Why We Can Afford the Social Contract,” New American Foundation, Nov. 2012.

2 B. Theoretical Overview: Say’s Law, Keynes, and Contemporary Economics

PE, chapter 1, K, Preface and ch.1

2. Controversies in Macroeconomics

A. Say’s Law and the (Neo)Classical System PE, chapter 3 John Baptiste Say, A Treatise on Political Economy, Book 1, ch.15, especially sections 8-15 (econlib.org)

B. Keynes’ Theory of Effective Demand and Involuntary Unemployment PE, chapter 4 David Andolfatto and Marcela M. Williams (2012). “Many Moving Parts: The Latest Look Inside the U.S. Labor Market,” Federal Reserve Bank of St. Louis Review, March/April.

C. Consumption, Saving, and the Multiplier PE, chapter 7 Keynes, chapters 8, 9, 10.

D. Investment, Profitability, and Speculative Behavior PE, chapter 8 Keynes, chapters 5, 11, 12

E. Public Spending and Public Finanee PE, chapter 9 Keynes, chapter 24

F. Money , Output, and Interest Rates PE, chapters 5 and 11 Keynes, chapters 13, 15, and chapter 16 sections I and II.

E. The ISLM Model/Neoclassical Synthesis

PE, chapter 6

John Hicks (1980-81). “IS-LM: an explanation,” Journal of Post Keynesian Economics Vol. III, No.2, Winter.

3. Growth , Macrofluctuations, and the History of Policymaking PE, chapters 13, 14, and 16.

4. Rival Theoretical Perspectives in Contemporary Macroeconomics: New Classical, New Keynesian, and Post Keynesian Economics PE, chapters 16, 17, 18

5. Issues Regarding the Contemporary Economic Crisis James Galbraith’s Presidential lecture to the Association for Evolutionary Economics, “The Third Crisis in Economics,” Jan. 5, 2013 (http://utip.gov.utexas.edu) (note: recording)

3 Robert Pollin (1999). “Class Conflict and the ‘Natural Rate of Unemployment’,” Challenge, Nov/Dec.

Servaas Storm and C.W.M. Naastepad (2009) “The Costs of NAIRUvianism,” Challenge, Sept/Oct.

Robert Pollin (2011). “A Policy Framework for Advancing Productive Investments and Clean Energy throughout the U.S. Economy,” Political Economy Research Institute, Working Paper #265, September.