Comment on M. Bruno, "Theoretical Developments in the Light of Macroeconomic Policy and Empirical Research"

Abstract

The paper by Michael Bruno is a very interesting and thought-provoking survey of the key new/likely/desirable developments in macroeconomics as seen by a distinguished economist and policymaker. I like and agree with most of Bruno's arguments and assessments, so all I will do is add three further reflections on points in his paper. This is a comment in a volume dealing with no less than the development of macroeconomics. Therefore I have chosen to discuss grand subjects, where all I can do is outline the problems, and leave the answers to the reader. Let me begin with Bruno's comments on the re-emergence of the pricewage spiral in economic theory, the importance of the COLA, the importance of external price rises, etc. Broadly speaking, these remarks deal with the importance of institutions for the dynamics of prices and wages. I think these remarks are part of a complex - something we all should have faced long ago. Maybe we (academic economists) have been led astray, by analytical convenience, into almost universal acceptance of a belief that we should never have accepted without solid empirical support, even if it