A Theory of Pseudo-Wealth

Abstract

Recent events in the US and Europe have witnessed the limitations of conventional macroeconomic models to predict and explain large economic recessions and crises, and to provide guidance for policies that attempt to resolve them.

We are indebted to Bruce Greenwald, Daniel Heymann, Peter Howitt, Ivan Werning, participants of the 2014 IEA World Congress in Jordan, INET-YSI Workshop on Macroeconomic Fluctuations at the 2014 Annual Meeting in Warsaw, the 2014 Montevideo RIDGE Forum, the 2015 AEA Annual Meeting in Boston, as well as participants of seminars at INET, University of Trento, Javeri-ana University of Bogota, University of Tokyo, GRIPS, Hitotsubashi University, University of Buenos Aires, Northeastern University, Catholic University of Louvain, and especially to our discussant John Geanakoplos on one of the papers that form the basis of this article for useful comments and discussions. We are thankful to the Institute of New Economic Thinking (INET) for financial support.