This year marks the 40th anniversary of the NBER Macro Annual Conference, founded in 1986. This paper reviews the evolution of mainstream macroeconomics since then. It presents my views, informed by a survey of a number of researchers who have made important contributions to the field. I develop two main arguments. The first is that, starting from strikingly different positions, there has been substantial convergence, in terms of methodology, architecture, and main mechanisms. Methodology: Explicit micro foundations, explicit treatment of distortions, with, at the same time, an increased willingness to deviate from rational expectations, neoclassical utility and profit maximization. Architecture: The wide acceptance of nominal rigidities as an essential distortion, although with mixed feelings. Mechanisms: The wide nature of the shocks to both the demand and the supply side. The second is that this convergence has been, for the most part, good convergence, i.e., the creation of a generally accepted conceptual and analytical structure, a core to which additional distortions can be added, allowing for discussions and integration of new ideas and evidence, rather than fights about basic methodology. Not everything is right however, with too much emphasis on general equilibrium implications from the start, rather than, first, on partial equilibrium analysis of the phenomenon at hand. The appendix to the paper gives a sample of the views of the members of the survey on each of these arguments. Author's Note: I thank the economists (too many of them to be able to thank individually) who answered my survey and made comments. In many cases, it led to further interactions and fascinating discussions, which, hopefully, are reflected in this paper.
Geoeconomics is the use of a country's economic strength to exert influence on foreign entities to achieve geopolitical or economic goals. We discuss how concepts of power in the political science and economics literature can be used to guide research on geoeconomics. Economic threats as a form of coercion have seen a recent resurgence. We show how different types of threats can be modeled using simple tools and discuss what channels their potential effectiveness is based on. We discuss important open questions for the future literature to pursue.
