Thursday, 23 October 2008

The State of Macro (updated)

Over at the visible hand in economics we are referred to a posting at EconLog in which Arnold Kling rips into economists. Kling is unhappy with the state of current macro but not everyone argees. Olivier J. Blanchard in a recent NBER working paper looks at The State of Macro.

Blanchard argues that for a long while after the explosion of macroeconomics in the 1970s, the field looked like a battlefield (still does to me!). He goes on to say that over time however, largely because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged. But he adds not everything is fine. Like all revolutions, this one has come with the destruction of some knowledge, and suffers from extremism and herding. In his view, however, none of this deadly. The general state of macro is good.

The first section of his paper sets the stage with a brief review of the past. The second section argues that there has been broad convergence in vision, and the third reviews the specifics. The fourth focuses on convergence in methodology. The last looks at current challenges.

Update: Arnold Kling responds to Blanchard here. He opens by saying
I'll excerpt more below, and try not to get personal about an economist who for thirty years has embodied everything I despise about macro. Back then, he was insufferably smug and I was childishly rebellious. Not much has changed.

1 comment:

Matt Nolan said...

Very interesting.

I get the feeling that we are coming up to a point where the idea of "micro-foundations" - or at least the way we provide microfoundations in macroeconomics is going to come under scrutiny.

Given this I thought I would try to look at the justification for doing this beyond waving the term "reductionism" around - and I've found myself severely lacking. I suspect a period of methodological critique may be in order for macroeconomics over the coming years :P