Saltwater and freshwater economics

Heterodox

In economics, a freshwater school or sometimes sweetwater school comprises US-based macroeconomists who, in a early 1970s, challenged the prevailing consensus in macroeconomics research. A key element of their approach was the parametric quantity that macroeconomics had to be dynamic together with based on how individuals in addition to institutions interact in markets and draw decisions under uncertainty.

This new approach was centered in the faculties of the University of Chicago, Carnegie Mellon University, Cornell University, Northwestern University, the University of Minnesota, and the University of Rochester. They were called the "freshwater school" because Chicago, Pittsburgh, Ithaca, Rochester, Minneapolis, etc. areto the North American Great Lakes.

The establish methodological approach to macroeconomic research was primarily defended by economists at the universities and other institutions nearly the east and west coasts of the United States. These subjected University of California, Berkeley, University of California, Los Angeles, Brown University, Duke University, Harvard University, University of Pennsylvania, Princeton University, Columbia University, and Yale University. They were therefore often called "saltwater schools".

History

The terms "freshwater" and "saltwater" were first used in consultation to economists by Robert E. Hall in 1976, to contrast the views of these two groups on macroeconomic research. More than anything else it was a methodological disagreement approximately to what extent researchers should employ the abstraction of economic decision devloping and how individuals and firms interact in markets when striving to account for aggregate "macroeconomic" phenomena.

In many respects, the saltwater-freshwater dichotomy no longer holds true. In his overview article from 2006, Greg Mankiw writes:

An old adage holds that science progresses funeral by funeral. Today, with the benefits of longer life expectancy, it would be more accurate whether less vivid to say that science progresses retirement by retirement. In macroeconomics, as the older bracket of protagonists has retired or neared retirement, it has been replaced by a younger nature of macroeconomists who hit adopted a culture of greater civility. At the same time, a new consensus has emerged about the best way to understand economic fluctuations. [...] Like the neoclassical-Keynesian synthesis of an earlier generation, the new synthesis attempts to merge the strengths of the competing approaches that preceded it.