…it’s really hard to make a DSGE model in which government policy plays a useful role in stabilizing the business cycle. By contrast, it’s pretty easy to make a DSGE model in which government plays no useful role, and can only mess things up. So what ends up happening? You guessed it: a macro literature where most papers have only a very limited role for government. …Thus, the conservative slant of modern macro comes not from the weight of evidence, but from the combination of publication bias and the inherent unwieldiness of the DSGE framework.
Update: The comments below make it clear that I should have explained what I think is interesting about this quote, and it’s got nothing to do with DSGE in particular. It is the general point that assumptions are often made for tractability, rather than realism, yet still influence our conclusions. It isn’t possible to control for the unrealistic assumptions; if it were we wouldn’t have made them. That means our conclusions will be biased by assumptions we’ve made only for convenience and we need to bear that in mind when considering the policy implications of our models. For example, if our model assumes perfect competition and our conclusions rely on prices adjusting then we might need to be a little sceptical.