Saltwater economists are associated with economists from the Universities on the east and West coast of the US.
In particular universities such as Berkeley, Harvard, MIT and Yale.
Economic thought from these universities tends to be more suspicious of free markets and advocate a greater role for government regulation and discretionary fiscal policy.
Saltwater economists are more critical of rational expectations and point to examples of irrational behaviour.
Freshwater economists are associated with the Chicago school of Economics and other universities around the Great Lakes such as Rochester and Minneapolis. The Chicago school of Economics is such a dominant force in Economics, it is probably a more common term than ‘freshwater Economists’
Freshwater economists typically place greater emphasis on the benefits of free markets, rational expecations, real business cycle, monetaristm and are more critical of government intervention in the economy. It is also termed ‘laissez faire’ economics and is closely allied to the neo – classical school of economics.