Macroeconomics (4th Edition),   ISBN:9780131860261

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I purchased the Macroeconomics (5th Edition)by Olivier Blanchard a few weeks ago from here. The used book was 10% cheaper than the new ones and the ad was saying that it was marked minimally. But when I received the book I realized that every single page of the book is heavily marked, with tons of notes on the side. The book as absolutely unusable.

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Blanchard's Macroeconomics is a refreshingly readable textbook for undergraduate economics majors, organized around a tightly integrated core of basic macroeconomic models. The systematic pedagogy covers three primary time frames:

1) Short Run: The IS-LM model provides a graphical tool for viewing the short-run impact of fiscal and monetary policy on output, based on equilibrium between the goods market (higher output at lower interest rates due to more investment) and the financial market (higher output increases demand for money and raises interest rates);

2) Medium Run: The AS-AD model allows for a more dynamic view, indicating, for example, how a short-run increase in output at higher prices driven by higher aggregate demand can be followed by a gradual reversion to the original output level but at permanently higher prices as rising wages squeeze aggregate supply over the medium run;

3) Long Run: Technological progress is modeled as the Solow residual of output growth after subtracting growth due to labor and capital. Over the medium and long run, both higher capital accumulation and greater technological progress can produce higher output growth.

Following introduction of the core models, the discussion is extended to how expectations impact consumption, saving and investment decisions, and how trade and investment flows in the open economy impact output through exchange rate and interest rate effects. Two chapters are also devoted to pathologies: how economic depressions relate to price deflation (helpful in understanding Japan's prolonged economic slump), and how hyperinflation is linked to large budget deficits which can cause governments to print money excessively (any relation to the U.S.'s already sizable budget deficit, exacerbated by Obama's stimulus plan and near-term spending packages and the Fed's rate cuts and quantitative easing?).

The shortcoming of the work (though attributable more to the current state of economics as an academic discipline than to any deficiency of the textbook per se) is the tendency of economic models to "fit" retrospectively the phenomenology of our complex global economy rather than to provide truly useful tools for predicting the course of future economic events. In economic forecasting, even when predicting the impact of straightforward policy decisions in highly idealized economic situations, the most respected econometric models (see Fig. 24-2)--which essentially are more sophisticated versions of the basic models presented in the book--exhibit an uncomfortably high degree of variation in their predicted outcomes. This leads the author to conclude that "There is substantial uncertainty about the effects of macroeconomic policies," and consequently, that policymakers "should stop well short of fine-tuning"--which incidentally suggests, in my opinion, that we might benefit from emphasizing the more qualitative, long-term measures such as education, research, saving incentives and quality of government, instead of focusing on short-run fiscal and monetary policy.

The critical reader will also observe how the textbook itself, published in 2006 (I have the 4th edition), is deafeningly silent (please excuse my oxymoronic hyperbole) on the potential for our global economy to slip into the prolonged and deeply troubling financial, credit and economic crisis that began the following year (Nov. 2007) and continues to the present (Mar. 2009). If consensus opinion among academic economists had recognized the specific causes of the current crisis early on, understood the inherent mechanisms behind it, and urged regulators and policymakers to act, we presumably would be better off today, with less unemployment, higher output, higher consumer confidence and a smaller budget deficit.

Professor Blanchard, current chief economist at the IMF and former chair of MIT's economics department, deserves praise for his unified presentation of the basic models in macroeconomic theory, but unfortunately the real-world connection of all of the theoretical modeling remains tenuous: if prominent macroeconomists such as Blanchard and the celebrated parade of leading economic thinkers (including 10 Nobel prize winners and current Fed chairman Bernanke) featured in the epilogue cannot reliably predict the direction of our economy, how can their models ever rise above being mere mathematical manipulations?

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I t was an excellent purchase! I got it before what I expected and new!=)

Customer Rating: 

I got the item about 10days after placing its order. The book came in condition describled. Good purchasing experience, however if it came a little earlier then would be great

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As an undergraduate student, I found this text to give reasonable coverage in several areas- especially expectations based models and investment theory. The explanations are fairly clear, but not quite as intuitive as Mankiw which I often reviewed at the library before tests (had his principles text, perhaps this conditioned me in his parlance). Overall, the book is fairly comprehensive, but lacks clarity in certain respects. Teachers may want to offer some supplementary materials with more concrete explanations. Don't make us buy it though, this book costs enough as it is!