In this eighth lecture of Economics for Everyone, we begin our discussion of macroeconomics, the study of the overall level of economic activity.
The lecture offers some background and motivation by examining the sharp increase and sluggish fall of the unemployment rate during the 1930s, the Great Depression. This led to a crisis in economic thinking, and to the publication of John Maynard Keynes’s “General Theory”. Thus macro-economics was born.
Our first challenge involves a host of measurement issues, and in this lecture we examine the meaning, the measurement and the use of Gross Domestic Product. This statistic is nicely presented, reviewed, and evaluated in Diane Coyle’s book, GDP: A Brief but Affectionate History, and it is the major reading on your list for this lecture.
Download the presentation for Lecture 8, “The Meaning and Measurement of Macroeconomic Activity” as a pdf, and if you like listen to narrated version.
Arthur Cecil Pigou made lasting contributions to the science of economics, but for macro-economists of a certain generation he will always be considered a laughingstock.
Professor Pigou taught at Cambridge University during the first decades of the 1900s, and had the misfortune of making a cameo appearance in the opening chapters of what is arguably the most influential economics book of the 20th century, The General Theory of Employment, Interest, and Money, written with eloquence, and at times a very caustic pen, by his colleague at the same university, John Maynard Keynes (whose last name, by the way, sounds like “Canes”).
Pigou’s big mistake was to suggest that the unemployed themselves were to be blamed for their predicament. To Mr. Keynes, the notion that the persistently high unemployment rates of the Great Depression were in some sense voluntary was worthy of scorn and ridicule.
Continue reading “Mr. Keynes and the Austrians: a battle over a suggested interpretation of unemployment”