Describe the major divisions between the saltwater and freshwater school of macr

Question

Describe the major divisions between the saltwater and freshwater school of macroeconomic policy. Would you describe yourself as belonging more to the fresh or saltwater school? Why? Remember to use the language of economics here, not the language of politics. Answer for both sides?

Use this URL or other sources.
http://rooseveltinstitute.org/saltwater-economics-vs-freshwater-economics/

https://econproph.com/2011/11/08/brief-history-of-macreconomics-and-origins-of-freshwater-vs-saltwater-economics/

Explanation / Answer

When it comes to government intervention and policy in macroeconomics, two schools of thought are at the center of the debate. During the sub-prime crisis of 2008, for example, two schools quarreled about the government’s role in America’s recovery. Was there too little intervention? Too much? Or just enough? One school argued for more government intervention while the other side urged against it. These two competing schools are known as the Freshwater Schools and the Saltwater Schools. The Freshwater Schools include universities that sit near large bodies of fresh water like Carnegie Mellon, University of Chicago, and the University of Minnesota while the Saltwater Schools include universities near the ocean like Berkley, MIT, Columbia, and Harvard. These groups of universities form two different schools of thought about how a government should act toward its economy. They’ve been at odds since the 1970s.

When it comes to government intervention and policy in macroeconomics, two schools of thought are at the center of the debate. During the sub-prime crisis of 2008, for example, two schools quarreled about the government’s role in America’s recovery. Was there too little intervention? Too much? Or just enough? One school argued for more government intervention while the other side urged against it. These two competing schools are known as the Freshwater Schools and the Saltwater Schools. The Freshwater Schools include universities that sit near large bodies of fresh water like Carnegie Mellon, University of Chicago, and the University of Minnesota while the Saltwater Schools include universities near the ocean like Berkley, MIT, Columbia, and Harvard. These groups of universities form two different schools of thought about how a government should act toward its economy. They’ve been at odds since the 1970s.

Freshwater Schools believe in neoclassical economics. Laissez Faire is their motto. Their core belief, that the economy is rational and capable of running itself, is the light that guides their view. This free-market bravado insists that government intervention is unnecessary; even in the wake of an economic crisis. Freshwater Schools see each crisis as a necessary component of the business cycle that ultimately works to improve the economy in the long-run by weeding out prior inefficiencies and trimming old fat. Think of of this as something similar to the what an Ironborn Priest says in Game of Thrones, “What is dead may never die, but rises again, harder and stronger.” (Yes, I just related the downturn in the business cycle to a Game of Thrones quote.)

At odds with the Freshwater Schools are the Saltwater Schools who believe that government intervention is necessary for the economy. They follow the monetarist model set by economist John Maynard Keynes — the classic advocate of how to spend your way out of a downturn. Ideally, Saltwater Schools would like to guide the economy with the governmental tools at their disposal that include the control of interest rates, budgets, and money supply. Do you suffer from a down economy? Ah, well we have just the fix: lower interest rates to spur borrowing, and increase public spending to enhance the velocity of money and jobs created.

I would describe myself as a supporter of saltwater school of thoughts because as human we are privileged to decide how will be the condition of our economy. Saltwater school of thoughts motivates the great brains of economic world to come forward and take full control of economy. If we leave the fate of people of an economy on on market conditions then its shows somewhere inabilty of the economist of particular country.

Being a supporter of Freshwater School of thought I would place greater emphasis on the harnessing the benefits of free markets, rational expectations, real business cycle and monetarisms for an economy. Many times restrictions placed by governments do not let the economy to enjoy the market conditions.

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