Over at Econlog, Arnold King is telling us how he lost his macro religion. It is an interesting post, and it gives me the impression that he believes any type of technical macroeconomics (either empirical or theoretical) to be somewhat of a fraud – a fair description given the difficulty of stringing out cause and effect in macroeconomic data.
In the post he discusses a essay by Greg Mankiw called the Macroeconomist as scientist and engineer. Far from presuming that macroeconomists do the same thing as scientists and engineers, the point of the essay is to describe the difference between macroeconomists that thrive in the abstract and those that work in the face of policy and data. Although there is not a clear split between the two – the distinction allows him to discuss how many of the recent (last 20 years) conclusions in macroeconomics do not appear to be useful for forming policy.
The essay by Mankiw is very good, and it provides a much better description of the evolution of macroeconomics ideas then my earlier retort to Chris Trotters claim about Keynesianism. However, I would also beware the partisan element of what he states.
He admits that he is strongly involved with the New Keynesian school, but the bias does not lie there. Fundamentally, he does not seem to realise that he also seems to play down the importance of the scientist in his piece. This is interesting, given that he is an eminent professor, and is more than capable when playing the “scientist” role in macro-economics.
I think the “scientist” does have a substantial role to play. Sure, part of the reason that the macro-economic policy recommendations have not evolved inline with theory is because the discipline has had trouble translating them over to policy. However, there is an important difference between now and Keynes time, when his policies were so quickly implemented – macroeconomics exists, and the old ways of doing things are entrenched in the policy making institutions. The higher technical requirements of the new found science in economics, combined with a relative reluctance by many people in policy to move over must also take some of the blame.
Ultimately, it may take a substantial economic shock to shake applied economists into updating their models – could the current credit and energy shocks be sufficient? I am sure that they will at least force central banks to pay more credence to the supply side than they currently do.
Earlier links to the paper are found: