Saltwater and Freshwater
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buritobr
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« on: June 05, 2015, 07:47:49 PM »

Why are the new-keynesians located in the coasts (Harvard, MIT, Princeton, Yale, Columbia, Berkley) and the new-classicals located in the countryside (Minnesota, Chicago)? Is there a special explanation? Or just a coincidence?

Red states and blue states are not an explanation. The average ideology of the academics don't follow necessarily the ideology of the average population of the place where the university is located. Minnesota was the only state where Reagan lost in 1984. However, the new classical counter-revolution was happening there at this time.
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RFayette
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« Reply #1 on: June 05, 2015, 08:22:09 PM »

Part of it is intellectual tradition.  At UChicago, the conservative legacy can be traced back a ways, including to Richard Weaver's "Ideas Have Consequences."  So these schools have had a more conservative bent for awhile. 
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Foucaulf
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« Reply #2 on: June 06, 2015, 12:43:37 AM »

With Chicago, new classical macro is a product of a Chicago econ tradition that goes back several decades. In its early days, Chicago econ had been a bit kooky (see Frank Knight or Jacob Viner) relative to the rest of the profession, and during the Great Depression the two aforementioned economists argued against the effectiveness of Keynesian policy.

By the fifties and sixties, Chicago econ had strong leadership with Friedman and George Stigler. Both cared intensely about rigorous modelling of individuals and firms, arguing the "real economy" of interaction between those two explain behavior in the long run, which often contradicted the aggregate modelling of Keynesian policy. They left strong impressions on their students, who would graduate and prosper in the field.

This does not imply Chicago was the only place where people were rethinking macro theory. Minnesota is a prominent example of such; it was a gathering ground for those who were thinking of rational expectations modelling, e.g. Tom Sargent, Christopher Sims, Neil Wallace and Ed Prescott. Carnegie Mellon also had John Muth, Robert Lucas at his most productive, and Finn Kydland.

What I claim is that the new classicals and rational expectations modelling came out of a small group of people, who were very productive and argued for an entire methodology out of their ideas. Chicago's was more predictable, but Minnesota and CMU less so. They gained attention and had great influence on their students, possibly due to how much they dismissed their opponents' arguments. Their students then placed very well across all departments, and so it goes.
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