WaPo - the state of macro is not good. Paul Romer's latest missive, unfortunately not titled "Hey Economists: Your Mom Is Fat", has caused a bit of a stir in the academy:
One could argue that the most high-profile contribution by macroeconomists to the post-2008 global economy has been an emphasis on fiscal austerity as a solution to stagnation. That prescription has been, well, pretty much disastrous.And it provides an opportunity for other people in economics to comment:
I bring all of this up because Paul Romer has a lulu of a paper entitled “The Trouble with Macroeconomics” that rocketed around the social media of the social sciences. If you think the title implies criticism, read the abstract:
For more than three decades, macroeconomics has gone backward. The treatment of identification now is no more credible than in the early 1970s but escapes challenge because it is so much more opaque. Macroeconomic theorists dismiss mere facts by feigning an obtuse ignorance about such simple assertions as “tight monetary policy can cause a recession.” Their models attribute fluctuations in aggregate variables to imaginary causal forces that are not influenced by the action that any person takes. A parallel with string theory from physics hints at a general failure mode of science that is triggered when respect for highly regarded leaders evolves into a deference to authority that displaces objective fact from its position as the ultimate determinant of scientific truth.It gets more brutal from there, as Romer mocks the logic of real business cycles (a core component behind much of modern macro) and relabels its key explanatory variable as “phlogiston.” In history of science circles, that is a sick burn.
Noah Smith - the new heavyweight macro critics.
Chris Dillow - an academic problem.
Mean Squared Errors - the microfoundations hoax.
And Romer himself had to put his paper up for download, since it was already being distributed without him. Read it!
Paul Romer - economists' moms are fat (pdf).