This paper provides a critique of standard theories of money, in particular those based on money as a medium of exchange. Money is important because of the relationship between money and credit. The process of judging credit worthiness, in which banks play a central role, involves the collection...

This paper provides an explanation for situations in which the state variables describing the economy do not change, but aggregate consumption experiences significant changes. We present a theory of pseudo-wealth—individuals' perceived wealth that is derived from heterogeneous beliefs and...

This paper, an extension of the Presidential Address to the International Economic Association, evaluates alternative strands of macro-economics in terms of the three basic questions posed by deep downturns: What is the source of large perturbations? How can we explain the magnitude of...

When government expenditures exceed current tax revenues, the resulting deficit must be financed either by issuing bonds, which imply obligations to levy future taxes, or by creating high-powered money. The choice between money and bonds is often thought to be of great moment for both real and...

Schumpeter argued that economic downturns had positive effects, in the incentives that it provided for firms to increase their efficiency. Part 1. provides a simple model confirming Schwnpeter's insight At thesame time, the model shows that there are real costs to economic fluctuations which...

This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behavior, e.g. incorporating insights from...