The Trouble With Macroeconomics
Research seminar with professor Paul M. Romer, NUY Stern School of Business
Discussant: Anders Gustafsson, The Ratio Institute
Forthcoming in The American Economist. The full paper can be read at paulromer.net
Abstract:For more than three decades, macroeconomics has gone backwards. 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.
