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How can losses on bond insurance concentrated at one firm, AIG, lead to the loss of tens of millions of jobs on a global basis?

In a micro world they can’t. Demand for a single farmer’s wheat may be highly elastic in price, but that’s not true for wheat as a whole, and wheat is but one grain, and grain but one (important!) component of food. Changes are attenuated, and so it makes sense to focus on individual markets, a world of partial equilibrium.

That’s not the case in the macro world. Everything is interconnected: income affects expenditure affects income. In micro jargon, this is an externality, and when everything has to add up to 100%, changes can be amplified. What is impossible in a purely micro world turns out to be all too real in a macro one.

This term we will grapple with the challenge of analyzing an economy as a whole. Some of that will involve learning how to disaggregate the whole into parts amenable to analysis, learning how to count each carefully, and then learning how to put them back together again. Unlike the typical microeconomics course, we will focus on a specific, real-world empirical case, the US economy, though in today’s world that requires situating it in the larger global economy.

In addition, policy concerns undergird our analysis, centered on three metrics: growth, employment and inflation. In the longer run of your fourscore (or more) years, long-run growth issues will dominate shorter run considerations. In the immediate future, however, you are most concerned with what your employment prospects will be in 2020, give or take a year. In the US at present, inflation is quiescent, but as we will see, it dominates thinking about monetary policy. Over the course of the fall, the news will likely bring aspects of fiscal policy.


By the end of the term you should:

  • know the core subsystems used to disaggregate the larger macroeconomy, eg, Consumption (C) and Investment (I)
  • understand the impact and tradeoffs of monetary policy (MP) and fiscal policy (FP)
  • be able to explain key linkages between the US economy and the rest of the world (ROW) through trade and financial markets
  • be able to trace key examples how a macroeconomy can amplify small changes, for better and for worse
  • understand the significance and limitations of key metrics such as unemployment and inflation
  • be able to explain the sources of long-run growth
  • be familiar with current policy issues, such as Federal taxes, expenditures, debts and deficits, including their magnitude relative to the overall economy

Texts – see the Texts tab.


At core the course will be chalk-and-talk, with readings, tests and homework aiming to shift the balance towards less chalk and more talk. Two midterms and a final will help you apply what you learn to narrower problems. Two short papers and 1-2 memos will let you analyze broader issues, while developing your skills at argumentation and succinct communication. Participating in the course blog will add the opportunity to focus on current topics, and to bounce ideas off the class as a whole.


I will provide a topic and a detailed guide for each paper. All will draw on Levinson’s An Extraordinary Time. Note that I require that you hand in all papers by the deadline as a hard copy.


You will need to take your final exam in Huntley during one of the standard exam slots. Midterms will be takehome. I hand out the questions in class, and collect them the next class. For convenience, I also post the questions on the course web site.


I expect it, absent illness and such. The Krugman and Wells text is quite clear, so as W&L students you ought to be able to learn the material on your own. But let’s be realistic: it helps to have a little bit due every Monday, Wednesday and Friday, so some review is in order. Furthermore, parts of macroeconomics are counterintuitive. Reiteration helps. We can’t cover all the details of a text designed for a 15-week term; I try to indicate why I direct our attention to the ones we do cover.

Of course all texts are out-of-date; class is a way to bring the most recent data to our discussions. In all of this, reading ahead of class helps. I reserve the right to impose pop quizzes to encourage preparation. Please, please don’t encourage me to do so. They take up your time in class, and you don’t have much. (I don’t expect you to shed tears about the implications for my time outside of class. That’s a microeconomic externality, which you should ignore, not a macroeconomic one, which you shouldn’t.)


The course web site is at – I do not use Sakai. I will sign you all up as contributors, which should permit you to post and comment. Given the total enrollment across two sections, I will pair you all up and ask for but 1 blog post per pair. That will produce about 24 total posts, a pace of 2-3 per week. I expect you to read and comment on most posts, including any I add to round out slow weeks. (See too my own blog, Autos & Economics on Google blogspot.) A useful resource for data-driven posts is FRED, including the blog at FRED. We will often discuss the latest post at the start of class. There are many, many other quality internet resources (and of course multiples more that are NOT concerned with quality).


All grades are letter grades. I round up/down your final grade on the basis of attendance and participation.

Midterms 15% each 30%
Final 25% 25%
Memos 5% 5%
Blogging 10% 10%
Paper 25% each 30%

Office Hours

I plan to be at Lexington Coffee Shop on Tuesday afternoon from 2:30-5:00 pm. Coffee is on me. I will also be available 4-7 pm Monday evenings, sometimes in my office, sometimes at the Palms –
check first. If neither time works, take the initiative and contact me - I am sometimes in my office very early morning or into the early evening. In addition, if you walk past my office and I'm there, invite yourself in.

My office is the first off the handicap rap on the lower level of Huntley (HU125B). Please contact me by email at Text my cell phone at 460 - 6288 only for last-minute schedule adjustments.

Honor Code

My midterms are takehome tests. Please pledge. Ditto the final, though you get reminders about that. Papers are likewise expected to be original, and to duly cite sources (as per paper guidelines). Due to class enrollments, I will likely pair you with another student for blog posts; make sure all names are on any and all joint work!


Please contact me in private, as per the university policy quoted below. Note that you will need to work in advance with the staff administering final exams if you need a separate room or extra time.

Washington and Lee University makes reasonable academic accommodations for qualified students with disabilities. All undergraduate accommodations must be approved by the Title IX Coordinator and Director of Disability Resources. Students requesting accommodations for this course should present an official accommodation letter within the first two weeks of the term and schedule a meeting outside of class time to discuss accommodations. It is the student’s responsibility to present this paperwork in a timely fashion and to follow up about accommodation arrangements. Accommodations for test-taking must be arranged at least a week before the date of the test or exam, including finals.