Today's weakness in the US economy results from lack of aggregate demand, due to high and growing inequality, underinvestment in public infrastructure and technology that is complementary to private capital, continuing mild austerity, difficulties encountered in making the structural transformation from manufacturing to a service-based economy, and a financial sector failing to provide adequate funds to SMEs. An agenda to restore growth includes a carbon price, inducing climate investments; increased public investments in infrastructure and technology; fighting inequality through redistribution and rewriting the rules structuring the economy; and reforming the financial sector and the global reserve system.

Integration of global financial markets was supposed to lead to greater financial stability, as risks were spread around the world. The finan cial crisis has thrown doubt on this conclusion. A failure in one part of the global economic system caused a global “meltdown.” The recent crisis has shown that in the absence of appro priate government intervention, privately profit able transactions may lead to systemic risk. This paper provides a general analytic framework within which we can analyze the optimal degree (and form) of financial integration. Within this general framework, full integration is not in general optimal. Indeed, faced with a choice between two polar regimes, full integration or autarky, in the simplified model autarky may be superior.

The research for which George Akerlof, Mike Spence, and I are being recognized is part of a larger research program which, today, embraces hundred, perhaps thousands, of researchers around the worl...

This article begins with the hypothesis that large economic fluctuations--the marked changes in the unemployment rate that characterize market economies--are a consequence of problems of adjustment to disturbances, especially adjustments of wages and prices. The article argues that because different prices (including prices of labor and capital) are determined in different ways, shocks lead to marked changes in relative prices, and those disturbances in relative prices greatly exacerbate economic fluctuations. The author looks closely at the price-setting process, providing further insights into why prices exhibit rigidities and why different prices may adjust at different rates. He then explores the consequences of asymmetric price responses.

The year 1996 marked the 50th anniversary of what has turned out to be an enormously successful institutional innovation: the Council of Economic Advisers (CEA). It was neither obvious nor inevitable that the CEA would enjoy the success it has had. Who would have thought that a group of academics, typically with little or no experience with politics or realpolitik, would not only survive in the rough-and-tumble of Washington, but also thrive and have some influence over policy? To be sure, the CEA's influence has fluctuated and has had to be established anew with each administration. But the durability of the institution, despite repeated reexaminations, is a testimony to the contribution that it has made in both Democratic and Republican administrations.

There is an old joke about economics which says that the questions stay the same, only the answers change. Though there is some truth in that idea, I would argue that over the past 50 years, there have been marked changes both in the questions and in the answers, but that many of these changes are still only imperfectly reflected in undergraduate textbooks.

A central question in development economics is, how can we account for differences in the levels of income and the rates of growth between the developed and less developed economies?