First Matt does us the favor of defining "freshwater macro."
freshwater" macroeconomics ... focuses heavily on the idea of a "real" business cycle and disparages the notion of either fiscal or monetary stimulus...Matt also mentions yours truly:
Stephen Williamson, a proponent of freshwater views...So, I don't know who Matt has been talking to, but in all of my published work, I don't think you can find a real business cycle model. Further, the models I work with are replete with various frictions - including private information and limited commitment - that make monetary and fiscal policy matter in important ways. I have even on occasion put sticky prices in models, studied credit rationing, and thought about multiple equilibria. So, I guess I couldn't be one of the those freshwaters. Indeed, there appear to be few currently active economic researchers who could actually be pigeonholed as real business cycle types who are sour on government intervention, or somehow don't want to think about it. So what am I, and what is it that most macroeconomists are actually up to?
I think Paul Krugman has the answer, and he makes it simple for us simple-minded folks. You just have to answer a question:
Can you live with that reality, and accept the notion that not everything you put in your model has microfoundations? If you can, you’re a saltwater economist, in some sense a Keynesian. If you can’t, you’re part of what has gone wrong with the field.Excellent. We're all saltwaters, including Bob Lucas. So, as far as I can tell, Krugman has no one to pick a fight with. Maybe he can go provoke some Austrians. I hear they are very feisty.