NBER macroeconomics annual 1987

Recent Books He argues that we can and must obtain a policy which is both rational and efficient and socially compassionate. The major thesis “that the disuse and misuse of economics in policy making is not just a run of bad luck, bad judgment, or human errors. . . . Rather, the is proven in examples of good and bad problem is systemic. . . .” decisions at both micro and macro levels. Blinder challenges lawmakers to pursue new solutions to existing problems, and encourages policymakers to consider the positive impact economists can make on the political process. The Limits to Rational Expectations. M. Hashem Pesaran. New York: Basil Blackwell, 1987. 325 pp. NPA ISBN 0-631-14036-O. Pesaran’s primary aim is to provide a critical examination of the methodological and empirical basis of the rational expectations hypothesis (REH), which has been influential in the development of economic theory and the analysis and interpretation of economic time series data. The book is divided into three parts: the methodological issues, the econometric considerations, and the use of direct observations on expectations. Pesaran argues that the REH, like the adaptive expectations hypothesis that preceded it, is based on extreme assumptions, and in emphasizing the importance of formulating expectations formation models that explicitly take account of the learning process, he proposes an alternative method-the augmented adaptive learning expectations formation hypothesiswhich does not suffer from the shortcomings and is not based on the assumptions of the REH. NBER Macroeconomics Annual 1987. Stanley Fischer, ed. Cambridge, MA: The MIT Press, 1987. 321 pp. $25.95 ISBN 0-26206110-4 ($12.95 ISBN 0-262-56040-O paperback). Six articles that discuss major economic issues of the day are featured in this second issue of the NBER Macroeconomics Annual. The articles include “The Evolution of Unemployment in the United States: 1968-1985” by Murphy and Topel; “The New Keynesian Microfoundations” by Rotemberg; “Are Exchange Rates Excessively Variable?’ by Frankel and Meese; “Crazy Explanations for the Proof Successful ductivity Slowdown” by Romer; “The Macroeconomics Development: What are the Lessons?’ by Dervis and Petri; and “Ricardian Equivalence: An Evaluation of Theory and Evidence” by Bernheim. Each article is followed by a formal discussant and floor discussion that provides additional insight and evaluation. 318