Although I don’t teach or practice macroeconomics, if I did I’d certainly be thinking of using the new textbook from Wendy Carlin and David Soskice, Macroeconomics: Institutions, Instability and the Financial System. As the subtitle so clearly indicates, this book does absolutely engage with the messiness of the post-crisis real world. Its aim is to stay simple enough for undergraduate use while also realistic enough to empower its readers to understand the why and how of the financial crisis and to evaluate macroeconomic policy. For graduate students or practising economists wanting a reference book, this offers a tractable, intuitive model that combines the standard 3-equation approach with the insights of Hyman Minsky (mentioned in the Preface) and institutional realism.
Macroeconomics: Institutions, Instability, and the Financial System
The first chapters set out the standard 3-equation model, and chapters on expectations and money & banking follow. The latter includes a description of how a modern banking system works (no whiff of a money multiplier!). Two chapters on the financial sector and the crisis follow – including topics like balance sheet recessions, QE, and a discussion of austerity policies. There is a chapter on innovation, growth and fluctuations – Solow, endogenous growth and Schumpeterian growth. Next comes a section on the open economy, with separate chapters on oil shocks/commodity prices and the Eurozone.
The final chapters cover monetary and fiscal policies, supply side policies and the labour market, and a final chapter on real business cycles and the New Keynesian approach.
This is certainly the first textbook I’ve spotted to have incorporated the lessons of the crisis, and it does so very elegantly, keeping the modelling framework reasonably simple. The book also weaves in the events of recent economic history, and applies the models it develops to actual events, so students do not have the dispiriting experience of being taught an economics in the classroom divorced from the kind of economics they hear about in the news.
I’m a big fan of Wendy’s already, having had the pleasure of working with her on the CORE curriculum and e-book; and this new textbook confirms my opinion. I’ve dipped in to specific chapters that I can evaluate properly, such as the one on growth and the supply side and labour market sections – perhaps if I read the whole book properly it will cure me of my ingrained macro-scepticism……