Macroeconomics for a Modern Economy

This article is a revised version of the lecture Edmund S. Phelps delivered in Stockholm, Sweden, on December 10, 2006, when he received the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. The modern economy, where fully adopted, has been transformative for nations — but much less so for economics. In neoclassical economics, the object of the theory is often not human endeavor as we know it — only « prices and quantities ». Trying to put people into economic models became my project, from the analysis of the determination of the unemployment rate to the study of the business of growth. In modern economies, marked by the feasibility of endogenous change, innovation mechanism and discovery largely shape the experience and the rewards of participating in the economy. Thus emerges the question of the good economy, i.e. an economy that produces the stimulation, challenge, engagement, mastery, discovery, and development that constitute the good life.