Macroeconomists: Scientists or Engineers?

Some comments on my earlier posts discussing microfoundations have mentioned Mankiw’s well known paper on the macroeconomist as scientist or engineer? This is something I’ve also wondered about, so I went back to reread the paper. Mankiw writes:

“My premise is that the field has evolved through the efforts of two types of macroeconomist—those who understand the field as a type of engineering and those who would like it to be more of a science. Engineers are, first and foremost, problem-solvers. By contrast, the goal of scientists is to understand how the world works. The research emphasis of macroeconomists has varied over time between these two motives.”

Mankiw tries to relate this distinction to the debate between Keynesian and New Classical economists. When I first read the paper, and even more so now, I find this link ultimately unconvincing. The attempt to cast Keynesians as engineers and New Classicals as scientists requires too many qualifications: there is probably something there, but it does not seem to be the critical distinction. His argument that New Keynesian theory has had little influence on policy turned out to be premature, as he himself anticipated in his conclusions.

But suppose we use the engineer/scientist dichotomy and apply it to microfoundations, rather than particular schools of thought – will that work? Microfoundations macro is the science, while those pursuing different approaches are the engineers. Is the problem with academic macro at the moment that we have too many who think they have to be scientists, and too few who try to be engineers?

I really have not made my mind up about this. One of the motivations I give in my earlier post listing reasons for departing from microfoundations focuses on policy. We have some empirical finding that at present has no clear microfoundation, but policy cannot wait for theory to develop that microfoundation. We need to explore its macroeconomic implications now. I give price rigidity as a retrospective example – it took at least a decade to develop New Keynesian theories. So we can imagine those involved with policy as the engineers, busy looking at the implications of some empirical finding, while those exploring its microfoundations are the scientists.

Certainly I have found the distinction between scientist and engineer often has resonance with macroeconomists in policy making institutions. They feel the urgency of the problem, and probably have less concern about some of the seemingly more esoteric issues that might be raised in an academic seminar. My post suggesting that the core models used by central banks should not be DSGE models ties in with this. In that context I like the scientist/engineer dichotomy, because I don’t think central banks have the resources to develop alternative modelling frameworks alone. Although we find plenty of engineers outside academic departments, we also need engineers who are academics.

But then, would it make sense to have distinct departments, of pure and applied macroeconomics? Obviously not because there are not enough of us to go round, but isn’t there something more fundamental in that observation? I write papers that build and simulate DSGE models, but I have in the past built models that are not fully microfounded, and the only thing stopping me doing both at the same time is time itself and that a major part of my job is to publish in academic journals. More importantly, in which department would you put Michael Woodford (at least when he writes Jackson Hole papers)?

This isn’t really about people as about ideas. I certainly think that anyone building non-microfounded models needs to have a thorough knowledge of microfounded models to do it well. (That would go for heterodox economists as well.) But equally, I think it is difficult to build good microfounded models without having a good knowledge of the empirical evidence. This is not just a matter of selecting an appropriate puzzle: I think a good deal of the microfoundations game is about selecting particular ‘tricks’ that allow these models to get closer to the real world, as I suggested here. While I can think of some macroeconomists whose productivity is largely unrelated to what is happening in the real world, and others – particularly in policy institutions - who do good stuff without ever seriously thinking about microfoundations, I think the majority of academic macroeconomists need to do both. In other words, to be good scientists we need to be engineers, and to be good engineers we also need to be scientists.