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The State of Macro 2012

Matt Yglesias points out it’s way too easy to bullshit in the field of macroeconomics:

 “The work that macroeconomic theorists and modelers do is genuinely difficult—certainly I can’t do it—but it’s far too easy for people with the relevant skills to demonstrate just about anything.”

This entire idea was started off by a post by Noah Smith, where he asks a simple question:

“But I feel like there’s a larger question: What has macro done for the human race in the last 40 years? How are we better off as a result of all this macro research effort?”

Those are good questions. Macro is difficult, but it’s not that difficult. We are very close to making gigantic breakthroughs in a variety of technological areas, like solar energy, faster than light travel, car engines, and robots, but we’re somehow having massive debates on the simplest topics in modern macroeconomics.

Noah’s post was part of a long string of posts started off by Paul Krugman and Steve Williamson. Paul says the state of macro is rotten because some people are bullshitters instead of honest participants:

“And many of the economists doing this stuff imagined that they were part of real discourse with the freshwater side, as witness Olivier Blanchard’s The State of Macro, written just before the crisis. Olivier’s abstract declares that

“largely because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged”

and concludes that “the state of macro is good”. Famous last words.

In fact, the freshwater side wasn’t listening at all, as evidenced by the way 80-year-old fallacies cropped up as soon as an actual policy response to crisis was on the table; and as for changing views in response to facts, well, we all know how that has gone.” [Italics mine]

One side in the debate on macroeconomics was not engaging at all. They were not trying to find the truth of the matter – rather, they were engaging in bullshit. It’s not what they were saying was always incorrect, or that it involved lying, but instead that they had an agenda which was not concerned with either the truth or falsity of what they were saying. They didn’t care as long as it advanced their agenda.

This type of engagement has a name: Bullshit. Bullshit has an essential quality that does not involve lying or even truth:

“This points to a similar and fundamental aspect of the essential nature of bullshit: although it is produced without concern with the truth, it need not be false.The bullshitter is faking things.But this does not mean that he necessarily gets them wrong.”

Harry Frankfurt elaborates on bullshit:

“It is impossible for someone to lie unless he thinks he knows the truth. Producing bullshit requires no such conviction. A person who lies is thereby responding to the truth, and he is to that extent respectful of it. When an honest man speaks, he says only what he believes to be true; and for the liar, it is correspondingly indispensable that he considers his statements to be false. For the bullshitter, however, all these bets are off: he is neither on the side of the true nor on the side of the false. His eye is not on the facts at all, as the eyes of the honest man and of the liar are, except insofar as they may be pertinent to his interest in getting away with what he says. He does not care whether the things he says describe reality correctly. He just picks them out, or makes them up, to suit his purpose.”

It seems to me like one of the major focuses of macro should be to create systems which weed out bullshit. Macro needs a way to falsify claims, because right now, it’s ” far too easy for people with the relevant skills to demonstrate just about anything.””

Over at Brad’s place, commenter Claudia points out the need for a common metrics in macro:

“I started working as a central-bank macroeconomist in the summer of 2007…and I still have a feeling of intellectual whiplash. In my short policy career, I have seen the value of all three types of macroeconomists, including academics, but it sure can be hard to get them all talking the same language and using the same metrics. But I am hopeful on that front…the bigger stumbling block, I fear, is getting people to let go (or even hypothetically consider letting go) of beliefs that did not serve them, the profession, or the public well. “

These metrics and language already exist. The only way to do macroeconomics is to start from the accounting and work with those accounts, and figure out how these accounts interact with each other. Here is Jan Hatzius on this very issue, from a recent interview with Joe Weisenthal:

“every dollar of government deficits has to be offset with private sector surpluses purely from an accounting standpoint, because one sector’s income is another sector’s spending, so it all has to add up to zero. That’s the starting point. It’s a truism, basically. Where it goes from being a truism and an accounting identity to an economic relationship is once you recognize that cyclical impulses to the economy depend on desired changes in these sector’s financial balances.”

Right on, Jan! It is so hard to do macro already. It’s really easy to make basic mistakes. It’s much wiser to begin from the accounting, and then do empirical research on how all these identities interact with their real world analogues. It is wiser to begin with this accounting based approach because bullshit becomes nearly impossible. It would be impossible for someone like Lucas to make this statement on March 30, 2009:

 “We had some lively sessions this morning about fiscal stimulus.  Now, would a fiscal stimulus somehow get us out of this bind, or add another weapon that would help in this problem?  I’ve already said I think what the Fed is now doing is going to be enough to get a reasonably quick recovery committed.  But, could we do even better with fiscal stimulus?

I just don’t see this at all.  If the government builds a bridge, and then the Fed prints up some money to pay the bridge builders, that’s just a monetary policy.  We don’t need the bridge to do that.  We can print up the same amount of money and buy anything with it.  So, the only part of the stimulus package that’s stimulating is the monetary part.”

“Reasonably quick recovery” is not really that funny 33 months later. Lucas was wrong on a monumental scale, and it should have been obvious to him we were not going to get a quick recovery with the fiscal and QE we were doing at the time.

But of course, it wasn’t obvious to him, or even to most economists. What he said wasn’t an uncommon statement at the time – many economists thought the fed was doing plenty to get the economy going. And many people were also thinking the U.S. was on the brink of massive inflation in February of 2011.

My point isn’t to show Robert Lucas was wrong. My point is to show mainstream macroeconomics does not have a feedback mechanism with which to point out statements like this are bullshit.

Here is how David Glasner responded to Lucas:

“I then suggested that if monetary policy is indeed effective in providing stimulus to an economy in recession, it is not that hard to construct an argument that fiscal policy can also be effective in providing stimulus, fiscal stimulus being a method of transferring cash from those indifferent between holding cash and holding bonds to those who would spend cash”

That’s great and all, but why did David Glasner have to make this counter-argument at all?

If macro economics was constructed around the principles of accounting, Lucas would have never been able to make his claim in the first place. Lucas would have already known his statement would be recognized as bullshit immediately by everyone with a basic knowledge of macroeconomics.

Yglesias is right. It’s way too easy for skilled people to construct nearly any argument in macro, and too hard to falsify wrong ideas. This is the state of macro in 2012. Perhaps in 2013, we can make some changes.


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40 Responses

  1. Robert Rice says

    What is this balderdash about putting the science back into economics, the truth value back into propositions, and the soundness back into arguments??? Falsifiable and falsifiably held worldviews, intellectual honesty, debate without hero-worship seeking egos, mutual respect, admiration, and work toward a common goal of identifying the truth through the refinement of each other’s set of beliefs, sifting the false from the true? The coherence and correspondence theories of truth synthesized? Gibberish, poppycock, insanity. Which one of you bozos was the first to suggest this cockamamy idea? And here I thought we were trying to start a cult. Messin up the master plan, man. World domination through mind control, hello? Where’s your priorities.

  2. AndyCFC says

    I hadnt seen the latest stuff on an alcubierre drive I thought that was dead, if this is serious that they have solved the energy issue its mind numbing.

    • beowulf says

      It does bring to mind an interesting analogy. Macroeconomics and the manned space program have both had a pretty bad 40 years. In both fields, Uncle Sam seem to be rather less capable than it was in 1973.

  3. jt26 says

    Cullen mentioned Sumner above, and it got me thinking about that debate on medium of account (mostly between SS, NRowe and BWoolsley). Maybe I misinterpreted the final result, but I got the impression that SS reluctantly conceded to NR/BW in the case when there was a disequilibrium between MOA and MOE. But, even that debate hasn’t change his mind (that base money is all that matters). But it makes you wonder why SS doesn’t keep an open mind about the problems of disequilibrium and especially Mike’s comments on moneyness (and its fragility)? This is a simple economics debate that doesn’t even require hating poor (or rich) people or requiring empirical studies!

    • Cullen Roche says

      They’ve all been compromised. Monetarism is not so much a school of economics as it is a religion. It is a religion that worships at the altar of the central bank. The irony here is that central banking is all about…wait for it….wait for it….BANKING. And yet Sumner has admitted that he doesn’t understand modern banking very well. So here’s the state of modern macro for you. The guy leading the charge in the highest flying school of econ at present is teaching something that relies largely on an in-depth understanding of banking yet that guy has admitted that he’s not a banking expert. You can’t make this stuff up.

      • Greg says

        Well said Cullen

        Ive pointed this out in the past as well about Sumner. What I think makes it worse is that the essence of lending for a bank is lending to customers who can pay it back, so customers (in aggregate) must have an increasing income stream for bank lending to increase. Yet all polices being pushed by these geniuses involve driving down the income streams of the majority of people.
        Of course a CB is different in that it can run what would be an insolvent balance sheet, if it were BOA for example, because it cant run out of assets. So a CB can lend to anyone anywhere (within rules set by congress of course) and not worry about making a profit. It doesnt need to be paid back to survive.

      • Fed Up says

        From what I have seen from the market monetarists, here is what they believe.

        1) money = monetary base = currency plus central bank reserves. The central bank controls this so it is all powerful.

        2) For every borrower, there is a lender so banks are only financial intermediaries and there is a zero sum change.

        I believe both 1) and 2) are wrong.

  4. jt26 says

    Mike’s point is even scarier when one thinks of what has happened *even* in the hard sciences, where some of the same issues of ego and personal/political agenda have occurred (e.g. physics; helio-centric universe, aether, string theory); even educated humans suffer from the seven sins. Perhaps macro could be more honest and evolve into a soft science like psychology and neurosciences and fight against the exploitation from within and outside of their ranks (remember the days when psychologists used to have all sorts of opinions on race, unwed mothers etc.?)

    • Michael Sankowski says

      Oh yeah, Max Planck said science advances one funeral at a time.

      It’s just in the economics science, the funerals don’t cause any advance. We keep arguing about the same ideas, and we have since Keynes – heck even before Keynes. Barro has tons of students who think he is correct about the multiplier of government spending. When he passes (and sorry to be morbid), the science won’t advance.

      • Tom Hickey says

        It’s institutional. The key institutions teach a doctrine, or slightly competing doctrines like the freshwater and saltwater schools of economics, and it is very difficult to throw them off their perch because institutions perpetuate themselves through their output. By the time one completes one’s credentialing, that person is very heavily invested in the status quo.

  5. Fed Up says

    “The only way to do macroeconomics is to start from the accounting and work with those accounts, and figure out how these accounts interact with each other.”

    And, what if current account deficit = gov’t deficit plus private deficit is incomplete?

    • Michael Sankowski says

      Hey Fed Up,

      These three areas encompass all government activity, all national private activity, and all extra-national activity.

      There is some case to be made that currency pegs like those of China can have some impact, but that should be taken care of within the “extra-national activity” part of this equation.

      Feel free to riff on this however you like. We put up with half-baked ideas here, if they are presented in good faith. Sometimes you need to be wrong a bit before you can be really right.

      Also, if you haven’t read Monetary Economics by Godley/Lavioe yet, you really should take the time. I’ve made it through the first 4 chapters in good detail, and it is really worth the effort. Plus, Godley comes is one of the great economic writers – he writes in a very engaging and enjoyable manner.

      • Fed Up says

        Remember this:

        “current account deficit = gov’t deficit plus private deficit plus medium of exchange entity deficit”

        Imo, the central bank wants all new medium of exchange to come from the “hedge fund” model (including banks). That is actually the problem. Debt and the “hedge fund” model should not be allowed.

        I’ve never had this verified, but I am pretty sure medium of exchange (currency plus demand deposits) is what moves between the entities in current account deficit = gov’t deficit plus private deficit. I also believe all new medium of exchange is assumed to come from the “hedge fund” model (including banks) in current account deficit = gov’t deficit plus private deficit.

  6. Fed Up says

    “every dollar of government deficits has to be offset with private sector surpluses purely from an accounting standpoint, because one sector’s income is another sector’s spending, so it all has to add up to zero.”

    I’d say this is more accurate:

    savings of the rich = dissavings of the gov’t (preferably with debt) plus dissavings of the lower and middle class (preferably with debt)

    Deaggregate the private sector.

    • Michael Sankowski says

      Very much agree on this idea. The aggregates are only part of the picture.

  7. Cullen Roche says

    Good post Mike. I think the biggest problem with macro is that almost every single school starts with a policy agenda and builds an understanding of the system to confirm this view. Austrians start with small govt and design an understanding of the world that confirms this. Market monetarists start with NGDP targeting and explain the world so that this policy makes sense.

    Who actually starts with just an explanation of how the system works?

    • beowulf says

      Keynes, John Maynard.
      “Keynes despised the American Keynesians. His whole idea was to have an impotent government that would do nothing but, through tax and spending policies, maintain the equilibrium of the free market.”

      • Tom Hickey says

        Yes, quite right, that Keynes was an upper class English snob, which about as close to aristocracy as one can get without the title. Oh wait, Lord Keynes?

        But this equilibrium at full employment was not the neoclassical version of equilibrium achieved through the operation of the market, which is the basis of neoliberalism as a social, political and economic agenda.

    • dilletaunted says

      “I think the biggest problem with macro is that almost every single school starts with a policy agenda and builds an understanding of the system to confirm this view.”

      This is manifestly untrue. You have no evidence to support such an assertion

      • Oilfield Trash says


        ‘This is manifestly untrue. You have no evidence to support such an assertion”


        Ideology innately lurks within economics in the form of the core belief in equilibrium. Most mainstream economic theory has contorted itself to ensure that it reaches the conclusion that a market economy will achieve equilibrium. The defense of this core belief is what has made economics so resistant to change, since virtually every challenge to economic theory has called upon it to abandon the concept of equilibrium. It has refused to do so, and thus each challenge – Sraffa’s critique, the calamity of the Great Depression, Keynes’s challenge, the modern science of complexity – has been repulsed, ignored, or belittled.

        This core belief explains why economists tend to be extreme conservatives on major policy debates, while simultaneously believing that they are non-ideological, and motivated by knowledge rather than bias. If you believe that a free market system will naturally tend towards equilibrium – and also that equilibrium embodies the highest possible welfare for the highest number – then any system other than a complete free market will produce disequilibrium and reduce welfare.

        You will therefore oppose minimum wage legislation and social security payments – because they will lead to disequilibrium in the labor market. You will oppose price controls – because they will cause disequilibrium in product markets. You will argue for private provision of services – such as education, health, welfare, perhaps even police – because governments, untrammeled by the discipline of supply and demand, will either under- or oversupply the market (and charge too much or too little for the service). You may also argue a system of government was not needed to ensure order: instead, social order would arise naturally in a market system in which each individual followed his own self-interest.

        In fact, the only policies you will support are ones that make the real world conform more closely to your economic model. Thus you may support anti-monopoly laws – because your theory tells you that monopolies are bad. You may support anti-union laws, because your theory asserts that collective bargaining will distort labor market outcomes.

        I think there is strong evidence that when it comes to safeguarding the channels of academic advancement, little else matters apart from preserving the ideology that defines economic orthodoxy.

      • Cullen Roche says

        Manifestly untrue? Where’s your evidence of that? Let’s just take MMT for instance. They have literally designed an entire theory around the idea of the money monopolist which is the rationale for the Job Guarantee. Wray and Mitchell have built their entire careers around this policy idea.

        Sumner has built his whole career around one policy idea, NGDP Targeting. He doesn’t care how the system works. He’ll make his policy work in the system we have.

        Austrians generally want the gold standard or some form of smaller govt. They’ll argue in favor of this approach regardless of what the empirical evidence says about how the system works.

        Krugman has built an entire idea of a liquidity trap around the idea that govt spending won’t hurt the economy. Of course he does that. It’s not based on any rational understanding of the system, but it confirms his biases.

        My comment might be a bit general in nature, but there are similarities in all of these schools. They all confirm some preconceived policy bias no matter the operational realities say….

      • Michael Sankowski says

        Oh come on! Bias is everywhere in econ, and they built a system which makes it really hard to decide anything.

        • Tom Hickey says

          All discourse is conducted in a universe of discourse that is based on a POV and the norms that determine the boundaries of the framework reveal what the key values and criteria are. It is not possible to conduct expression outside of such constructs, which is a key point in the objection of Feuerabend to “scientific objectivity” and the deconstructive analysis of post structuralism and post modernism. There is no human thinking possible without norms, since they are the criteria for inclusion and exclusion, prioritization, etc. Human beings are stuck within the logic constraints imposed on them by the “hardware” and “operating system.” A hardware constraint is the inseparability of thought and feeling at the level of brain functioning. A software constraint is the principle of non-contradiction. Humans also impose more specific constructs on themselves through the “apps” they use, some of which are consciously chosen and some not, such a cultural, subcultural biases, institutional arrangement, and group and personal preferences. It is ver difficult if not impossible for humans to be completely aware of the logical of the conceptual frameworks they use, largely unconsciously, learned along with language-use and cultural socialization. Volumes have been written on this, and it is central to the contemporary intellectual debate.

        • Oilfield Trash says


          Have you heard the joke about the chemist, the physicist and the economist who get wrecked on a desert isle, with a huge supply of canned baked beans as their only food? The chemist says that he can start a fire using the neighboring palm trees, and calculate the temperature at which a can will explode. The physicist says that she can work out the trajectory of each of the baked beans, so that they can be collected and eaten. The economist says, ‘Hang on, guys, you’re doing it the hard way. Let’s assume we have a can opener.’

          While there may be no absolute POV I doubt there is very little disagreement universally among human beings that assuming a can opener exist does not constitutes “reality”. But I know a lot of economist who are smart enough to create a school of thought on economics how the people on this island would be much better off if they only had a can opener and would promote policy to insure in the future everyone had one.

        • Tom Hickey says

          That’s a joke that economist’s like to tell about themselves. They know the game they are playing. Basically, if you admit complexity, you can’t do economics as they would like to conceive it. Like the weather, outcomes become indeterminate.

          Of course, the world we inhabit is a complex system, but they pretend it is not for simplification. As Noah Smith (trained as a physicist before getting his PhD in econ) observed, economists choose their assumptions for methodological convenience rather than representational accuracy.

          But the irony is that almost all of us are in this boat to some degree but don’t know it because we are trapped within POV the outline of which is only barely visible to us.

          Where we run into its limits is when others disagree with us. Even it so-called factual disputes, the facts themselves are often in dispute because we structure reality iaw our POV.

          Even where there is basic agreement in science, there may be dispute over epistemology and ontology. The Einstein-Bohr disagreement is an example, and quantum physicists still don’t agree wrt an interpretation of QM.

          This is not a disagreement over physics but rather a difference over how to understand knowledge and reality given the non-classical nature of QM and the presumption that we inhabit a classical world.

        • Oilfield Trash says


          I think you are one of the good guys in the inner sanctum of academia. IMO you are more interested in getting it right and less interested in being right. So my criticisms below are not directed to you personally but to the institutions you work within.

          I understand your point about “The Einstein-Bohr disagreement is an example, and quantum physicists still don’t agree wrt an interpretation of QM.”, but you are describing the sociological theories of how scientists behave, which hardly fits the stereotype of scientists as dispassionate seekers of truth.

          What makes economics different from other sciences is the irrational tenacity with which it holds to its core beliefs in the face of either contrary factual evidence or theoretical critiques that establish fundamental inconsistencies in its intellectual apparatus.

          Physical sciences hold on to their core beliefs with some tenacity, but nowhere near this much – even serious students of the foundations of quantum mechanics rarely defend the standard formulation anymore. As a result, revolutions in physical sciences – where one dominant paradigm is replaced by another (creative destruction) – occur much more frequently than they do in economics.

          Unless economics develops a means to undertake experiments to test rival theories, it may be unable to break from the grip of ideology. Not that this is a problem that can be solved, but hiding behind F-twist and instrumentalism when others interject that the assumptions of the model being discussed are unrealistic is a cop out. If this is the best the discipline has to offer it should adapt the useful ideology and “do no harm” by staying out of policy debate.

        • Cullen Roche says

          Thanks for the laugh! :-)

        • Cullen Roche says


          No offense, but the only reason MR even exists is because Mike is dead right on this point. We disliked the policy bias in MMT and this false description of a “money monopolist” in a system that very clearly is dominated by an oligopoly of private banks. But MMT confirms a preconceived policy bias by distorting the reality of the monetary system. You can disagree, but you can’t claim that Mike is wrong. It’s plain as day for those who are willing to be unbiased and open their eyes to our operational realities. Of course, I expect you to disagree. Just like I would expect Krugman and Sumner and everyone else to disagree. These people all live and die by their policy biases. They have no choice but to defend what they’ve upheld all along. Krugman is at least showing some signs of flexibility, but don’t expect him to change his stance on policy any time soon (or ever).

        • Tom Hickey says

          Anyone who thinks that they have the ocean in their bucket is talking nonsense. Not saying that Mike is claiming this byway. He just said that approaches to economics are based on different POV’s, which is manifestly the case on inspection.

          What I am saying is that there is no absolute POV. There are many different POV and there is no absolute or overarching criterion that making one superior to all others. That’s either naivete, taking one’s position as “right” those not in agreement wrong, or else “religious” dogmatism. All such criteria are arbitrary and based on agreement. There is very little agreement universally among human beings.

          In ethics, for instance this is the distinction among deontological systems based on codes such as religious injunction or constructs of “duty,” consequentialist system based on preference for outcomes, and virtue systems based on transcendentals that are posited as criteria.

          In ontology, there are many POV’s on what constitutes “reality.” The most common POV is naive or commonsense POV, which the POV of one’s own culture or subculture. Naive, commonsense POV’s don’t stand up to logical scrutiny. All sophisticated POV’s are ultimately based on assumptions, usually taken to be “self-evident,” but their is dispute over what is self-evident.

        • Cullen Roche says

          There are empirical truths in economics. Things like banks don’t lend reserves. It is not merely a POV. POV is what one falls back on when they reject reality in favor of ideology. Like claiming that banks are partners of the govt so you can claim some mythical money monopoly. That’s a POV based on a preferred view of an alternate reality….

        • Tom Hickey says

          I was responding to Mike’s “Bias is everywhere in econ, and they built a system which makes it really hard to decide anything.” The point is that all economic approaches are based on assumptions, including methodological assumptions. The assumptions are indicative of a POV. Mainstream economics is set up the way it is based on methodological decisions that the people in power have signaled are non-negotiable. Robert Vienneau recently summed it up here.

          “If you want to argue against mainstream economics, a mainstream economist can dismiss you as ignorant of some model variation and as attacking a strawperson. Furthermore, this dismissal could be “justified” by just checking whether you have a degree from a small number of schools, and, if you do, just mocking you as not having fully learned what they are teaching. Thus, your time can be taken up with argument about whether you know what you are talking about. The mainstream economist never need get to the point of engaging a critique.”

          There is really no way to argue with these people. The only way is to replace them, and that is the challenge they have laid down. They feel secure enough to say that if one is not working within their frame, then one is simply irrelevant. The rule out opposition.

        • Cullen Roche says

          It’s funny you cite that because you do this to us all the time:

          “Furthermore, this dismissal could be “justified” by just checking whether you have a degree from a small number of schools, and, if you do, just mocking you as not having fully learned what they are teaching.”

          You protect the institution of economics at every twist and turn. I can’t even recall how many times you’ve brushed me off like a gnat on your windshield because I don’t have three letters behind my name. As if I am some know nothing wind bag just bloviating over things I couldn’t possibly know about because I didn’t waste 8 years of my life learning about how the world works through the eyes of some 80 year old gas bag who didn’t understand how the world works to begin with. Yet we rely on these people to tell us how the world works today. That makes zero sense. I don’t know why you protect economists at every turn. You’re doing exactly what you claim to despise. I have a sneaking suspicion why you do it though. By claiming that someone doesn’t have a PhD you can claim that their position is inferior. It’s a nice way of building your case up by tearing someone else down. So when 4 non-economists come along and say MMT is wrong it’s easy to say the economists are right just because they got a degree….

          I say it’s time for the institution of economics to be turned on its head. It’s time for practitioners to start telling the world how the world works. It’s time for the economists to go line up for jobs in fields that might actually serve a meaningful purpose. Take that PhD and put it to good use actually exploring the real world as opposed to theorizing about things you have no actual experience in to begin with….That’s how change will happen. Someone needs to totally disrupt the institution. And it needs to come from people outside the institution.

        • Tom Hickey says

          Cullen, IIRC, you wrote that after I advised you that writing and documenting a paper was crucial.

        • Cullen Roche says

          Well, I should have cited you on the paper then! 😉

          And you should CERTAINLY remember that it’s been the core piece of work on these matters!

        • Tom Hickey says

          Cullen if I implied that it was not what I intended. As I remember it, when MR was launched I suggested that to be successful in being recognized as an alternative it would be necessary to write up some professional papers in addition to blogging, which is sort of shooting from the hip. (I implied this to Mike, too, when he said that MR was just a hobby for him. I believe I said those things before JKH has joined you and produced the kind of work I was suggesting would be needed for MR to be regarded as being a serious player on the scene.

          I don’t have a horse in this game personally. I am advocating MMT as the best practical solution I have seen proposed, in my estimation at least, not in the least in that it doesn’t require changing the system in ways that would be “challenging” politically and institutionally, although the challenges are still great. However, I am personally convinced that without radical change only minor fixes around the edges are possible. My thinking is much closer to Peter Cooper at, for instance.

          As far as academic economics goes, I would put it in the same category as academic philosophy — terminal case. The profession itself is broken, e.g, resistant to change, and severely compromised, e.g., by cronyism and complicity. At the top it’s become part of the revolving door.

        • Cullen Roche says

          Tom, you and I both know that my monetary system paper is very widely read. Last I checked, it’s the #3 paper on SSRN and has been for a very long time. In fact, that one paper is almost as widely read as every single MMT paper by Kelton, Fullwiler and Wray on SSRN COMBINED. If we’re measuring stature of work by dissemination of papers then you’re overlooking a rather glaring piece of work. Not to toot my own horn, but that’s been a living document and something I’ve poured my heart and soul into over the years through thousands of hours of research.

          But whatever, I totally agree that it’s JKH’s and Brett’s work that needs to be more broadly disseminated. My stuff is just the very basics. I never claimed it was anything fancy, but come on. It’s not like I’ve published NOTHING on this over the years….

          And yes, the field is broken. That’s why I think we can’t rely only on academics to fix it. It needs to be disrupted from the outside. We need more practitioners to come along and tell people how things work. The whole field is ripe for someone like JKH to come along and just blow the doors off the whole place because no one from inside the institution is going to do it. They’ve all been compromised. Werner MIGHT be able to do it because of his background, but I am not sure. The change needs to be imposed on the institution from outside of it.

  8. Greg says

    …….if you cant get the accounting right, you cant get the economics right!

    This post makes me think of Silvers book again. One of my takeaways from his book is that we need a lot more people making predictions but they also must have a way to be “accountable” for their predictions, and rewarded or punished based on the accuracy of their predictions. Accountability for your predictions makes one a little less prone to trying to get away with bullshitting.

    Some sort of market where economists who wish to be part of public policy making must put their predictions and models up against others and be rewarded if very specific predictions come true? They will lose something if they are wrong too. Too many wrongs and they are reduced to posting on the blogosphere, not getting to talk on MTP.

    • Michael Sankowski says

      Read this and weep further:

      “Thus, these models supported the ideological convictions of many on the right — government intervention can make things worse, but not better.

      “At first, the evidence seemed to support these models (e.g. Barro’s empirical work), but as the evidence accumulated it eventually became clear that this prediction was wrong. Mishkin provided key evidence against these models through his academic work (see, for example, his book A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient-Markets Models), so I am not as convinced as Simon Wren-Lewis that the difference between monetary and fiscal policy is due solely to the existence of technocratic, mostly non-ideological central bank economists letting the evidence take them where it may. That certainly mattered, but is seems there was more to it than this.

      The evidence that Mishkin and others provided was a key reason these models were rejected (it was also difficult to simultaneously explain the magnitude and duration of business cycles with unexpected monetary shocks as the sole driving force), but when it comes to fiscal policy, as noted above, evidence has not trumped ideology to the same degree. One of the reasons for this, I think, is that it’s difficult to find clear fiscal policy experiments in the data to evaluate. And when we do (e.g. wars), it’s difficult to know if the results will hold at other times. But I can’t really disagree with the hypothesis that if an institution like the Fed existed for fiscal policy, there would be a much bigger demand for this information, and that demand would have produced a much larger supply of evidence.”