The Failure of Macroeconomics

TheFailure of Macroeconomics: Summary


TheFailure of Macroeconomics: Summary

John Cochrane in the article The Failure of Macroeconomicsoffer a discourse on the way macroeconomists disagree on the policiesthat governments should take to spur economic growth considerably inthe post-recession times. Here, Cochrane (2014) asserts thatfollowing the 2008 financial crisis, per capita has risen slowlyusually below 1.5%, which has resulted to cumulative losses forAmerica. In this regards, t

he slow economic growth means that in future people will experiencelower living of standards and decreased quality of health among otherimportant issues thus, America’s influence abroad will fadeslowly.

Leading macroeconomists understand the challenges that the countrywill face in future if the growth continues to grow gradually. Infact, Robert Hall sees the post-recession years as economic tragediesfor America of scales unparalleled since the Great Depression.However, most economists differ intensely on the causes of theseslumps and the policies that the government must cultivate tocounterbalance. In this regards, questions arise whether demand orstructural contexts causes the slump and whether fiscal or monetaryinducements will fix the slump. Here, Cochrane (2014) argues thatthe current interest rate as proposed by Keynesian models allowspeople to spend less and save more. In this regards, the policiesdeveloped by Keynesian models such as government spending becomeinsubstantial. On the other hand, asset bubbles and reach for yieldare the new problems rather than lack of demand and with increasedinflation and house prices stimulus cannot counterbalance the slumps.Here, discourse revolves around intrusive regulations, unintendeddistinctiveness, and huge distorting taxes, which may impede growthor recovery hence, the identification of structural reforms as thesolution. However, the government needs to consider continuously thatslowed economic growth is the burning challenge.


Cochrane, J. H. (2014, July 2). Whenmodels don`t yield the spending policies they want, some Keynesiansabandon models—but not the spending.&nbspThe Wall StreetJournal. Retrieved October 7, 2014, from