There’s been no shortage of pontificating about the state of macro (and Mark Thoma has put together a useful reading list, here). But there are two important things to note about the debate. First, it has been dominated by folks in their 50′s and beyond. And second, these rhetorical broadsides haven’t involved any actual research into the state of macro.
This is why I thought it worth highlighting Narayana Kocherlakota‘s contribution, which begins with facts and draws some useful conclusions. He starts by delineating a list of the folks who might collectively comprise the cutting edge of mainstream macro — those macroeconomists in top-15 economics departments (no business schools), tenured since 1990. Here’s his list:
- MIT: Acemoglu, Angeletos, Werning
- Harvard: Laibson
- Chicago: Alvarez, Mulligan, Shimer, Uhlig
- Princeton: Rossi-Hansberg
- Stanford: Bloom, Klenow, Piazzesi, Schneider
- Berkeley: Gourinchas
- Yale: Engel, Golosov, Moscarini, Smith, Tsyvinski
- Northwestern: Doepke
- Penn: Fernandez-Villaverde, Krueger, Schorfheide
- Columbia: Ng, Reis, Sala-i-Martin, Schmitt-Grohe, Uribe
- Minnesota: Perri, Phelan, Rios-Rull
- NYU: Lagos, Leahy, Ludvigson, Violante
- Michigan: House, Killian, Stolyarov, Tesar
- UCLA: Burstein, Hellwig, Ohanian
- Wisconsin: Seshadri, Williams
- UCSD: None
- CalTech: None
Surveying the work of these folks leads Narayana to a cautiously optimistic set of conclusions about the state of the (mainstream) cutting edge, noting that:
- Macroeconomists don’t ignore heterogeneity.
- Macroeconomists don’t ignore frictions.
- Macroeconomic modeling doesn’t ignore bounded rationality.
- Macroeconomic models do incorporate a role for government interventions.
- Macroeconomists use both calibration and econometrics.
- There is no freshwater/saltwater divide — now.
- These researchers have been much more interested in the consequences of shocks than in their sources.
- The modeling of financial markets and banks in macroeconomic models is stark.
- Macroeconomics is mostly math and little talk.
- The macro-principles textbooks don’t represent our field well.
This is an interesting perspective. Like Narayana, I know and like most of these folks. And his summary of the facts seems right. These economists are too young to be responsible for the state of modern macro, and this generation is notably absent from the current macro wars. (The headline-grabbing names, such as Krugman, Cochrane, Stiglitz, DeLong, Prescott, or Lucas, are all of an earlier vintage.) If Narayana is right, then perhaps the future is brighter than the recent past. I hope so.
But there’s one more theme missing from this summary. This is a list of economists much more interested in economic theorizing than economic policy. It’s hard to find the intellectual successors to folks like Marty Feldstein or Larry Summers — economists who consider policy advice an important role of academic economists. Notably, none of these folks have ever served on the Council of Economic Advisers. As far as I’m aware, none were advisers to either the Obama or McCain campaigns. There are a few who consult to the Fed. I’m not aware of any significant engagement of these folks with the IMF or World Bank. Perhaps, with time, this generation (my generation!) will become directly involved in the policy debate. But until this happens, Narayana’s optimism about the state of academic macro won’t translate into equal optimism about the state of macro policy debates.
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I should have said and to be really precise- “relatively timeless.”
Macroeconomics was personally one of my favorite subjects while I was working on my Bachelor’s.
Macroeconomics is just another tool that is helpful in attempting to predict economic phenomena. The study has come a long way, and it still has much farther to go. But it really is a subject that should be embraced and researched by more economists in order to evolve it into a more efficient and useful tool to be used in analyzing economic phenomena and predicting the outcomes of new (and sometimes ridiculous) policies. I am glad to see that Narayana Kocherlakota produced such a piece of literature.
For some food for thought, allow me to paraphrase economist Charles Wheelan: “a friend of mine said ‘if we know so much about public policy, then how come there are so many problems?’……That’s like saying if we know so much about medical science, then how come people keep dying?” To relay my point, with the micro foundations in macro theory and the econometric work that goes into developing macro theory, there is certainly no reason to dismiss it.
To science minded: The answer to your question (09/21/09–3:41 pm) is yes. Try setting up a Mundell-Fleming model to predict the effects of the fed lowering interest rates to battle deflation and increase the U.S.’ net exports, in any time period.
Trying to draw parallels between economics and sociology is an interesting approach, seeing as they are both social sciences and seek to explain phenomena within society, but I think comparing the two misses the point.
Engel from Yale has been involved in policy (and politics) in his native Chile.
I’m not surprised to hear that there are younger stars in the macroeconomic sky.
But isn’t the key question what these younger stars were able to say about the financial crisis both before it occurred and after?
Maybe they all just agree with “Krugman, Cochrane, Stiglitz, DeLong, Prescott, or Lucas” and “Marty Feldstein or Larry Summers.”
In which case it’s still a useless discipline.
Saying macro is useless implies the same kind of school boy bias employed by a group of 5’11″ white boys colluding to keep the 6’5″ single black kid off the basketball team because they’re scared the black kid will steal their girlfriends.
Those that are quick to dismiss macro seem to forget that macroeconomists also learn the same economics education that every other micro school economist touts. It doesn’t really matter if any economist from either discipline predicted the recession or the financial “crisis,” because no one outside of the study would have listened anyway. A lot of people thought things were so good before the crash that if any economist advocated thrift to help hedge the economy from the ensuing crash, he/she would have been dealt a deaf ear. That’s called irrational exuberance. The financial “crisis” was a problem of moral hazard, irrational exuberance and overbuilding, not whether or not some young macro or micro economist was able to call it. There was so much asymmetric information in the financial market it was (still is) ridiculous. As economists, its not necessarily our job to protect people from themselves. Let it happen. People need to learn.
One might as well claim that the whole study of economics is useless, like some kind uneducated fool who only gets his information from Ron Paul supporters, fox news and cnn, and truly believes the study of economics is the reason why the economy hit a telephone pole (and I’ve met several of these types, especially at the bars).
Don’t think of either study as useless, but as something reserved for the esoteric. AND also realize that neither study predicts everything.
cool blog
I might be a bit behind the times in finding this blog post, but I’m rather disappointed that all top 15 departments are in the US – is it really true that the rest of the world is so bad at Macro?