The New Paradigm Papers of the Month of April

Convergence? Thoughts about the Evolution of Macroeconomics Over the Last 40 Years

Olivier Blanchard

On the occasion of the 40th anniversary of the NBER Macro Annual Conference, Olivier Blanchard reflects on the evolution of macroeconomics over the past four decades. He draws on the insights of 27 renowned macroeconomists. His conclusion: the discipline has developed significantly in methodological terms, particularly through the widespread use of dynamic stochastic general equilibrium (DSGE) models. The advantage of these models lies in their ability to provide a unified framework for conducting research and structuring debates. Moreover, a wide range of extensions can be incorporated into this basic model structure—such as short-sighted preferences, cognitive biases, heterogeneity, or economic frictions like credit constraints.

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Paths to the Periphery

James A. Robinson

In a recently published article based on his Nobel lecture from December 2024, James Robinson summarizes his research on the importance of institutions for economic growth. While inclusive institutions (e.g., the rule of law) promote growth through broad-based incentives and opportunities, extractive institutions (e.g., colonialism) hinder it by providing benefits only to a few. Countries develop extractive institutions for two reasons: power relations (e.g., elites seeking to secure their position) and normative goals that deviate from general prosperity—that is, cultural or religious beliefs that justify certain practices even if they do not foster economic growth. This heterogeneity shows that institutional change requires not only political reform, but often a renegotiation of deeply rooted beliefs.

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Fairness Across the World

Ingvild Almås, Alexander Cappelen, Erik Sørensen, Bertil Tungodden

When is inequality perceived as unfair, and do these views depend on cultural context? A new paper provides global evidence on inequality acceptance, based on a large-scale experimental study involving over 65,000 individuals across 60 countries. It finds that people’s tolerance of inequality is significantly higher when it is merit-based rather than luck-based. However, there is striking cross-country variation: for example, 70% of Chinese respondents accept luck-based inequality, while only 10% of Norwegians do. In general, fairness preferences (meritocratic, libertarian, or egalitarian) and beliefs about the causes of inequality are strongly linked to a country’s economic, cultural, and political traits. While Western countries tend to favor meritocracy, they also believe less in merit as a driver of inequality.

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The Political Power of Firms

Matilde Bombardini, Francesco Trebbi

How can we quantify the political influence of businesses and corporations? The literature generally distinguishes between instrumental power (direct, intentional influence) and structural power (indirect and systemic). Focusing on the former, a recent paper presents a holistic view of the channels through which large corporations exert political influence in modern democracies—not only through well-studied tools like campaign contributions and lobbying, but also via more opaque means such as charitable giving, political connections, dark money, public advocacy, and employee mobilization. Concentrating on the U.S., the authors quantify corporate influence through congressional voting, special interest politics, political connections, grassroots efforts, and philanthropy. Their analysis shows that the political footprint of S&P 500 firms in 2015–16 rivals their total CEO compensation.

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