It appears that economics is on the verge of war … ok maybe I’m being melodramatic – but the change in tone of economists recently (well, actually mainly macroeconomists) has been startling!
During the credit crisis, more and more economists have moved towards a panicked position. However, the first true indication that this might be different than a few little methodological spats came to me from these posts (Econlog and VoxEU).
These posts indicated that the very structure of economics was preventing research into valuable fields – we had failed to achieve knowledge by focusing on “equilibrium”, “mean reversion”, and/or the constant obsession by ignoring the depression when we analyse data.
There are two primary areas where I think the main set of criticism will fall – and the size and scope of this criticism will determine whether it is war, or merely an evolution of ideas. These areas are 1) aggregation and stability conditions (so macroeconomics and its current foundations) and 2) behavioural assumptions (a more widely shared issue). Tyler Cowen links on both issues to some degree 1,2.
Hopefully there is a realisation that economic methods and models are useful – even if the value judgments economists make aren’t always up to scratch. My concern is that disputes about value judgments will lead to a situation where the entire framework is thrown to the side. However, if this occurs it will be partially the result of some economists inability and unwillingness to describe their assumptions openly – something we should all keep in mind.