Winner of the New Statesman SPERI Prize in Political Economy 2016

Saturday, 23 May 2015

Consensus in macroeconomics

Paul Romer has continued the discussion he started, broadening it out from ‘mathiness’ to a more general discussion of how the subject is done. He describes what he regards as appropriate norms of science. The first few are I think uncontentious, but Stephen Williamson has taken exception to these two:

e) In our discussions, claims that are recognized by a clear plurality of members of the community by as being better supported by logic and evidence are the ones that are provisionally accepted as being true.

f) In judging what constitutes a “clear plurality,” we put more weight on the views of people who have more status in the community and are recognized as having more expertise on the topic.

Stephen writes:

This is absurd of course. We don't take polls to decide scientific merit. Indeed, revolutionary ideas - the ones that take the biggest steps toward Romerian truth - would be the ones that would fail, by this criterion.

I can understand that for those who typically work outside the mainstream, and indeed may be known for proposing new and challenging ideas, find this kind of talk threatening. Take it the wrong way, and it sounds like a recipe for conformity and stagnation.

I’m sure that is not what Paul intended, and I also think he is making an important point here. I suspect a natural scientist would see (e) and (f) as simple statements of how things are. In my experience natural scientists have a clear idea of what the “clear plurality” is on any particular issue, and are happy to admit it, even if they disagree with that plurality. There is nothing here that says academics cannot challenge the ideas of the “clear plurality”.

But why is it important to have an idea of what that plurality is and acknowledge it? I can think of three reasons. First, it presents an honest picture to those learning the discipline. Second, it is very important that policy makers are told which ideas are widely agreed and which are the views of a small minority. That does not stop policy makers going with the minority, but they should know what they are doing (as should voters). The public’s trust in economics might also increase as a result. Third, it helps the unity of the subject, mutual understanding and progress. It becomes clear why those who do not accept the views of the “plurality” disagree, and what they need to do to convince the plurality that they are wrong.

Convincing the majority that they are wrong is a strong motivational force for progress. In contrast, working within a small school of outsiders all of whom just know that the plurality is misguided, and as a result never bother to engage or keep up with it, is a recipe for stagnation. Before heterodox economists start hitting the keyboard, that also means that the plurality is open to unconventional ideas and do not just reject them because they are unusual or defy certain generally accepted norms.

It is for reasons like this that I have argued that it is wrong to say that macroeconomics is ‘flourishing’ simply because there are lots of different ideas/models out there. If there is no clear way of establishing which of these command general support and which are the insurgents, and what the insurgents need to do to overturn any consensus, then it is not clear how the discipline can progress.

This is all a bit abstract, so let me give an example from business cycle theory. Here there is, at present, a clear consensus theory, which is the New Keynesian model. I have been challenged on this in the past, but I would want to insist on it because I would attach a good deal of weight to those who are actually involved in business cycle stabilisation i.e. economists in central banks. (I’m not sure how important ‘status’ should be in Paul’s (f), but expertise is important, and having to put ideas into practice and responding to data all the time should count strongly.)

So when fiscal stimulus was used in 2009, those economists who opposed it should have said something like: I understand that temporary increases in government spending will raise output for given nominal rates in the dominant New Keynesian model, but I think that analysis is wrong because …. They should not have said, as some did, that fiscal stimulus was old fashioned nonsense. Whether they did this out of ignorance or contempt for the mainstream, it suggested that at least some prominent economists were not following the norms of science.


34 comments:

  1. Interesting discussion overall and, I must say, I agree with this peculiar point on making things clear, explicit. Some people could read Romer's points and react as if he suggested unusual or original discourses should be marginalized... However, the intention here is clearly to clarify the situation.

    Imagine what biology would look like if its normal conduct of business was as politicized as that of economics and some people insisted on saying evolutionary biology is bs or, for climate, that global warming was nonsense or, for history, that the holocaust never happened without ever bothering to say their opinion is very marginal.

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    1. A disingenuous remark. It is working with assumptions such as rational expectations without giving a proper justification for using an empirically untenable proposition that people regard as 'science' falling within the realm of evolution and climate change denial etc.

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  2. Another example would be the influence of Sir Alan Walters as Thatcher's right hand man.

    You could also add that the historiography of economic historians looking at the 1930s and 1940s was being used in the 2008 crisis to help understand some of the contours of present day issues.

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    1. Having said that I think Walter's textbook is much better than say Romer's or any of the post-grad economics texts used today, which are basically applied mathematics problem sets which do not fundamentally question assumptions, variables and methodologies used. He is actually relatively historically informed. He even talks about things like hegemony. If you read his book you would be surprised that this guy was the intellectual force behind Thatcherism. Perhaps he did not have as much influence as is often believed.

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  3. The "status" argument is indeed difficult. In social sciences, a status of a prominent figure can keep whole faculties alive. How many marxist historians saw the collapse of communism and thought "I was wrong all the time!". In a status-dominated world, progress is made one grave at a time. Economics can try as much as it wants, it remains half a social science. And the argument by authority is very much alive in the science. Since a promiment figure, say, Milton Friedman, could shift the "balance of opinion" by a couple of percent, the emphasis in "clear plurality" must be on the word "clear". An idea shouldn't be rejected just because 50,1% are against it. Time, and the dying off of old opinions, could change the picture.

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    1. "Rejecting ideas" is the wrong way to look at it imho. Marginal ideas should just be funded less. But if you have a research proposal that can clearly vindicate or eradicate a marginal idea, that should be funded.

      An example: in the 1940's the dominant idea was that any CO2 emitted by humanity would promptly dissolve in the oceans, leaving atmospheric CO2-levels fixed. The idea that humanity was increasing atmospheric CO2 was very much in the fringe, back then. But there was a simple way to show that this idea was right or wrong: measure it (well, it actually wasn't _that_ simple)! Thus, the Keeling Curve was born, changing an idea that was fringe into the new mainstream.

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    2. Yes. SWL above: "It becomes clear why those who do not accept the views of the 'plurality' disagree, and what they need to do to convince the plurality that they are wrong." [my emphasis] The second part is critical; regardless of other differences, science requires that all parties agree on the nature and quantity of the evidence that would amount to disconfirmation. Then if the 'heterodox' faction can amass the empirical findings, all must accept it and modify their opinions accordingly.

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  4. Well this is unusual. I find myself more nearly agreeing with Stephen Williamson than with you, or, at least, ambivalent.

    I do agree with your perception the sociology of natural scientists. In particular, I have never heard one question that f) (status matters) describes the way things are and I have heard many assert that it is the way things are.

    I have two problems with Romer's proposed norms.

    a plurality is not a majority (in UK English I am saying that a relative majority is not an absolute majority).

    Romer proposes that all should provisionally accept a claim as true even if most believe it is false, because those who think it is false don't agree on an alternative. If there are 8 competing claims and one is accepted by 30% while each of the others is accepted by 10%, then there is a clear plurality. However, it is clear that the researchers are in no position to provisionally assert any is true.

    I notice that you shift from plurality to majority here "convince the plurality that they are wrong.

    Convincing the majority that they are wrong". "Plurality" and "majority" are different words with different meanings. Romer wrote "plurality" for a reason. I agree that when a clear majority agree on a claim, that it is best to accept it when discussing something other than whether it is true. I don't agree that this is reasonable in the case of a view held by a clear plurality which is not a majority.

    "provisionally" is a dangerous word. It asserts modesty, but, in economics, provisionally accepted claims are often very powerful. The provisional acceptance (explicitly described as such) can imply that manuscripts inconsistent with such claims are, therefore, rejected. Also, in practice, the claim that a set of assumptions is useful can be provisionally accepted even if the assumption has implications which are rejected by the data.

    What are the advantages of provisionally accepting claims which remain highly controversial ?

    I think that with his use of plurality and provisionally Romer wishes to place himself above both freshwater and (other ?) heterodox economists. He wants to profession to focus on models including value maximizing imperfectly competitive firms. So imperfect competition must not be ignored, but pricipal agent problems with managers who are not sole proprietors and don't act in shareholders interests should be ignored. Also rational expecttions should be assumed.

    I think this describes the preferred approach of a plurality of growth theorists. I don't think the guess that it will be the most fruitful approach has enough empirical support that it should be provisionally accepted as true by the community of researchers ( I personally usually assume this when modelling, but I don't say everyone should).

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    1. You, along with Stephen, seem to be giving these norms a power beyond what I think was meant (and certainly beyond what I meant). What has it got to do with manuscripts being accepted? What has it got to do with what the profession focuses on? (Who is directing research here?) What has it got to do with provisionally accepting something is true. Its just a recognition of what most macroeconomists currently think.

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    2. I don't want to waste your time with back and forth, and I didn't explain myself. I don't fear that you will abuse the word "provisionally" as you are an advocate of methodological pluralism.

      However, I do think that the word has been used to defend choices which are the basis for rejecting articles. I am thinking of the use of the word, or phrases to the same effect, by Lucas and Barro. One of the approximations provisionally accepted as useful was market clearing. I quote Krugman quoting Rogoff
      "Ken Rogoff wrote about the “scars of not being able to publish sticky-price papers during the years of new neoclassical repression.” "

      The relevant point is that the new classicals generally didn't argue that prices definitely are flexible (and still less that humans really have rational expectations). But it was provisionally agreed that nothing else would be published in journals they edited. I meant to refer to that period when I discussed how the concept of "provisionally accepted as true" has been used in the economics profession.

      I haven't presented evidence that the idea of provisionally accepting a claim as true was central to what Rogoff calls " new neoclassical repression." I don't think this should be controversial. The claims in question were that some assumption might be a useful approximation or that developing models including the assumption was the most promising research program. These are explicitly provisional statements. The power of the school of thought was partly based on the fact that they made very weak claims when challenged (and, according to Rogoff, enforced orthodoxy when they had the authority to do so).


      I do fear that Romer is proposing to repay them in kind. His proposals were all made in the context of whether to shun people. I don't like to read about the desireability of provisionally accepting the claims of a plurality as true in the context of a discussion of who should be shunned.

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  5. "Paul Romer has continued the discussion he started, broadening it out from ‘mathiness’ to a more general discussion of how the subject is done. He describes what he regards as appropriate norms of science."

    This is confused, although I don't know whether the confusion comes from SWL or Romer. The first sentence describes what is, how science is conducted. The second sentence is making a value statement; it is describing not what norms there are but what norms there should be (which ones are appropriate). "Appropriate" needs to be deleted, as Romer seems to be interested in the norms which are actually in place, and not the ones which should be in place.

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  6. http://mikenormaneconomics.blogspot.co.uk/2015/05/simon-wren-lewis-consensus-in.html?m=0
    We in the heterodoxy eagerly wait for your response...
    Economics is not a natural science.

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    1. Agree economics (in its present form) is not a natural science. It doesn't come close to meeting the criteria:

      "Philosophers of science have suggested a number of criteria, including the Karl Popper's controversial falsifiability criterion, to help them differentiate scientific endeavors from a non-scientific ones. Validity, accuracy, and social mechanisms ensuring quality control, such as peer review and repeatability of findings, are amongst the most respected criteria in present-day global scientific community." (Wikipedia)

      Notice how a social science like psychology started off with flaky Aristotelian hypothesizing via Freud and Jung, but over time developed into a real science.

      Economics never went beyond that stage because corrupt political agendas interfered in its development. Not only that, economists always preferred excuses to making and testing falsifiable hypotheses. They attempt to weasel the authority of science without earning it. As Uncle Milty said, there is no such thing as a free lunch. But it's the people who end up getting stuck with the bill (i.e. myriad policy failures that have caused: skyrocketing debt and inequality; deteriorating economic growth and living standards; meltdowns, crises, boom-to-bust business cycles; market manipulation and other forms of corruption and fraud; dismantling of democratic government; etc.)

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  7. Theologians divide schools of thought between "Orthodox" and "Heterodox". Scientists do not.

    "But why is it important to have an idea of what that plurality is and acknowledge it? ... Third, it helps the unity of the subject, mutual understanding and progress. It becomes clear why those who do not accept the views of the 'plurality' disagree, and what they need to do to convince the plurality that they are wrong."

    This assumes that economists can be convinced they are wrong. But this assumption is false because it's easy enough for any economist to rationalize away evidence that shows one of their articles of faith is wrong. (Anyone who follows economics has seen economists resorting to rhetoric and cherry picking of evidence countless times.)

    Take the minimum wage debate. Conservative economists (and partisans) always take the position that a minimum wage hike will kill jobs. Left-leaning economists (and partisans) will always take the position that a minimum wage hike will work because it will put more money in the hands of low-wage workers, which will boost aggregate demand and economic growth.

    Although this is an issue that could be determined scientifically, it is clearly not one where a plurality among economists would have any meaning. For instance, a plurality of economists polled in the 1960s would yield different results than the 1980s or today. (Obviously science is not like fashion.)

    All this demonstrates that economics is simply politics with math thrown in to lend authority to political agendas. Real economic science would not be corrupted by political biases.

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    1. “Theologians divide schools of thought between "Orthodox" and "Heterodox". Scientists do not.”

      Not so. There's orthodoxy and heterodoxy in [foundational] quantum theory and in a number of other areas in physics, e.g. particle (orthodox) versus modified gravity (heterodox) approaches to explaining certain well known astronomical and cosmological data. And every field is affected by the (just) war against orthodox statistics.

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    2. Pretty slim pickings when googling heterodoxy and physics. The Wikipedia article on modified gravity makes no mention of heterodoxy. It would seem heterodox physicists are self-described.

      In any case, I would say that heterodox economists are wasting their time. They are omegas in a dominance hierarchy in an insane asylum run by the inmates. Even if one came up with a hypothesis that rang true, it wouldn't matter. Trying to convince an economist one of their dearly-held tenets is wrong is like trying to convince the Pope to become Protestant.

      People develop deeply-ingrained left-right political biases based on how they believe society should be structured. Left-leaning are egalitarian. Right-leaning are oligarchical. Although there exists an optimal economy on some location along the left-right economic spectrum, economists have no desire of discovering it. They spend their time using rhetoric and rationalizations to reinforce their belief systems, not unlike Christian fundamentalists who deny the theory of evolution because their biblical mythology says otherwise.

      If economists really want to be heterodox, they will: a) make falsifiable hypotheses; b) prove or disprove them with economic research from over a century of historical data; c) build models based on established facts. (Orthodox economists put the cart before the horse, developing models based on ideology. So it's not surprising that when their policies are put in practice they produce colossal and unmitigated disasters. Like a hillbilly rocket made of scrap metal and fastened together with duct tape, it doesn't take a rocket scientist to figure out what will happen upon ignition.)

      Time to relegate the medieval barbers to the dustbin of history. Either them or our corrupt, makeshift, dying civilization.

      "Heterodox: not in accordance with established or accepted doctrines or opinions, especially in theology; unorthodox." (Dictionary.com)

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    3. Agreed. It should be very obvious to people that unless we look for other methodologies (perhaps inspired by some of the very old ones) we are not going to make progress in this discipline. Sticking with the New-Keynesian model IS the recipe for stagnation (or further stagnation). There needs to be a very strong ontological defence of this framework for it to be let allowed to continue, let alone maintain its monopoly position. And there obviously isn't one. Even the general public can see that which adds to its lack of credibility and ultimately we get bad political decisions as a result. All the current hierarchy of figures have a vested interest in its maintenance. It is heavily connected with their identity. Even Krugman. He does not want his Prize devalued by people saying "hang on this has not been awarded to virtually any real science over the last half century."

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    4. I think it's more than vanity that unites this particular clique of pretend technocrats. As Stiglitz points out in "Freefall," monetary policy has a conflict of interest between bondholders and workers.

      A low 2% inflation target means the wealth of the wealthy will be protected from erosion. But it comes at the expense of employment. If one looks at the US employment rate of male workers aged 25-54 (which has no demographic change over time,) inflation fighting efforts, beginning in 1973, beat down the employment rate down from an average of 94% in the full-employment post-war Keynesian era to 84% today. (An actual unemployment rate of 6% vs 16%.) In 1989 it had a ceiling of 90% before 2% inflation targeting was put in place. By 1999 the ceiling was 89%. After that the economy collapsed in a 14 year slump (and counting.) (The bubble economy of the 2000s can hardly be considered an actual recovery from the "dot com" bust of 2001.)

      So monetary policy designed to protect the wealth of the rich ended up threatening the wealth of the rich. Today they get very poor returns on their investments. Policy corrupted by self-interest ended up being self-defeating. (But New Keynesian and Market Monetarist New Classical economists simply ignore the results and claim the "Great Moderation" was an economic miracle.)

      These economic high priests should enjoy their time in the sun, now. It won't last forever. Unlike the theocrats of old, their power is ultimately performance-based. They can't keep bungling the economy indefinitely.

      The economic stagnation of the past 14 years is worsening over time. The meltdowns get bigger. Just look at the amount of private and public debt this stagnation and economic chaos has created. When the next bubble bursts, no amount of supply-side helicopter money dropped on rich bankers will stop the hemorrhaging.

      There will be change. Unfortunately, some countries will look to fascism and communism as alternatives (like they did during the economic turmoil of the 1930s.)

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  8. http://www.3spoken.co.uk/2014/03/uk-whole-of-government-accounts-some.html?m=0
    The consensus - as in government documents that actually describe how our economy works - is the MMT view.
    And still textbooks contain the 'money multiplier' and 'government budget constraint' which are blatant lies.

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  9. Macro statistics - i.e. the national accounts - are based upon well defined and operationalized variables and great care is given to the estimation of these accounts. Neoclassical models are based upon *assumed* intertemporal optimization of vague, ill defined variables like social welfare and utility and rely on haphazard, unsystematic 'callibration' to give the models at least some emprical content while (using VAR only aggravates this problem...). Mind that a social scientist like Diederik Stapel was fired for using comparable methods in psychological research! Even concepts like consumption, capital or investment are totally vague and fuzzy in the neoclassical models. The national accounts have the SNA, the System of National Accounts, which spells out the concept and definition of such variables in detail - neoclassical models have nothing of the kind (divisia money might be at least an endeavour to do this). Which leads to the weird situation that while the national accounts show developments in *all* sectors and sub-sectors of the economy in great detail and *based upon the interlinkages of these sectors* neoclassical models leave out entire sectors at will and disregard such interlinkages - most notorious is of course the disregard of the financial sector (non included in the ECB Eagle model!), which enables them to disregard the private money creation which crippled the economy of iceland, Ireland, Spain and so many other countries. This private money creation is however spelled out in the 'broad' national account statistics, i.e. the stock and flow consistent quadruple accounting based estimates of MFI credit and money creation which are the basis of M-3 estimates of money (and which use the same sectors as the national accounts, for one thing). In the neoclassical models - nothing of the kind.

    Neoclassical macro models are, though influential, the odd man out when it comes to the scientific community. Some recent in your eyes heterodox results from the BIS alone look here http://rwer.wordpress.com/2013/11/15/the-case-for-a-land-tax-bis-edition/ and http://www.imf.org/external/np/sta/wgsd/pdf/hss.pdf

    Surely, your students should study this!

    The point - from a neoclassical point of view the *entire* set of macro statistics should be classified as 'heterodox', as it (unlike the neoclassical models) shows a complete, stock and flow consistent, quadruple accounting, explicit estimate of the monetary economy. Unlike the situation with neoclassical models this system is 'Kantian' in the sense that it is not based upon a 'consensus' of academic economists but upon well defined variables and estimation methods. Examples: Godley, of course, was an economist who incorporated this system in his models. Koo, too. Which, for instance, enabled Koo to state that the increase in the amount of money in the thirties in the USA which accompanied the post Roosevelt election economic upswing was caused by the government borrowing from the MFI's - and not (like Friedman suggested) a private sector event. As the financial sector is left out of the neoclassical macro models, such insghts can however not be incorporated into the neoclassical models.

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    1. Great comment. One of the best I have seen on here. The national accounts, which predate New-Keynesianism, and even neo-classical economics, have more empirical, ontological and epistemological grounding than modern macro-economic theory. It is a scandal really.

      And your remark:

      "Unlike the situation with neoclassical models this system is 'Kantian' in the sense that it is not based upon a 'consensus' of academic economists but upon well defined variables and estimation methods."

      That remark would get a blank stare from the modern macro-economists who have had philosophy and history stripped out of the mainstream of the subject.

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    2. Interesting stuff. The national accounts serve as the basis of economics as a positive science. The neoclassical models have served as the basis of economics as a normative science. It's not that philosophy has been stripped from the science, it's just that the neoclassical models translate the normative philosophy of classical economics (which comes down to the rules of price and demand, and the concept of the "invisible hand") into math. Over time, it has been assumed more and more that normative and positive economics go hand in hand.

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  10. SWL

    I realize that this is a pain, but could you extend to Disqus. I would prefer to be quasi anonymous, but not entirely. I use that on Delong and a few others. I would rather not be entirely anonymous, but ...

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  11. I wouldn't get too carried away with the argument that central banks use new-Keynesian models. First they might not even have such a model. The FRB model is an expanded ISLM model (which has, or used to have, a quite richly modelled financial sector - unusual for something from the Great Moderation). Secondly, if they do, how often do they use them? Some central banks may have New Keynesian models, but Carney has pointed out the limitations of the theory that lies behind them and the extent they can be used and relied on. Kocherlakota has made it clear a lot of central bank decision making simply lies outside the realm of any quantitative model.

    A good historical knowledge and an ability to deal with complex and contradictory normative information are some of the skills most needed by a central banker.

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  12. Interesting parallels between this, and a different debate on what science is in the particle physics community regarding string theory. A recent book by Richard Dawid, a physicist turned philosopher, (see review here http://backreaction.blogspot.co.uk/2015/05/book-review-string-theory-and.html?showComment=1432388489495 ) suggests that since string theory doesn't fit conventional ideas of the scientific method, the scientific method needs amending. Needless to say, not everyone agrees.

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  13. I think the free trade debate is a good example of the dangerous of consensus in a discipline like economics. Economists say people who oppose free trade don't understand economics. But anthropologists, historians, country specialists and others know about the effects that free trade, particularly if trade liberalisation is rapidly introduced, have had on societies in the third world and low income groups. We had a strong consensus in the 1990s too, the Washington Consensus which was behind such policies, free capital flows and misguided policies after the Asian Financial Crisis. A lot of these types of policies were also behind problems leading up to 2008.

    I have spent a lot of time in the economics profession and out of it, and seen it from inside and outside. I would not worry so much about a consensus in the profession if it was open to knowledge from outside and was historically well-informed. But in my experience it has been far from that description. I am also not optimistic about change.

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  14. Maybe not quite 100% on-topic, a reconstruction of economics as a science with normative intentions should be to conclude what is economically desirable. In contrast to physics, where the search for truth and finding out the laws of nature is the only goal, economics doesn't even know how what is good economics and what isn't. Free trade is generally believed ot welfare enhancing, yet it usually only benefits a minority (though that minority is not all that small). More laissez-faire has been correlated with a higher inequality. The Gilded Age saw strong economic growth, but also high inequality, deflation, frequent economic crashes, mass poverty, the first national strikes, the birth of unions and the socialist movement and so on... Was that a "good" era or a "bad" one? Of course, welfare functions are supposed to measure what is good, but there's no consensus on a single one, nor a consensus on what is actually good. Bentham or Rawls, or something more communist? Should money alone be used to measure welfare (while there have been a couple attempts to replace GDP by other wellness indicators), and what about the post-meterialistic world? Maybe access to information, or leisure is more importnat than money? Environmental factors, maybe absolute economic growth shouldn't be a priority with limited resources? Is the future more important than today? And so on...
    Even within the neo-classical/Keynesian camps there will be no consensus on answers to these questions. The axioms that might be the basis of economics as a mostly positive science aren't there.

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  15. I can't speak for the overall quality of http://bit.ly/1cWWzVr , but the Sidelski side is good, again pointing out that while Ferguson continues in denial, the figures that SWL and other produce are supported by Osborne’s own OBR.

    There are crackpots who invent their own inconsistencies in Keynesian theory. It’s best left to economists and others who are not paid political hacks. Ferguson and his ilk are not the people who’d know.

    It’s much like his painting a false picture of rapidly escalating inflation based on a guy he’s finally repudiated, sort of, because he had to. He can’t even make an admission without smearing those who expose him.

    As for the Gilded age, that can’t be a serious question?

    That gave us the Long Depression which dominated the industrial world from the early 1870s through the turn of the century. The only people who got rich were robber barons who were called that with good reason.

    Destructive banking panics recurred, finally forcing the Bank of England to accept the role of central banker, eventually resulting in the establishment of the FED.

    Some people always profit from the misery of others. A lot of people got rich from the Napoleonic Wars. Same for the Civil War.

    In the United States, between April of 1865 and December of 1900 the United States spent 229 months in recession. months in recession. http://nber.org/cycles/ That's not strong economic growth.

    Social unrest gave rise to the Populist Party, the Labour Party, European Socialism and much more. People voted with their feet, beginning the great emigration from Europe and the exodus of black people from the American south.

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    1. That example was a bit provocative. And the answer is probably more negative in the UK than in the USA, but in sheer terms of growth the time wasn't all that bad. There were also significant productivity gains in that period which, because there were no attempts to keep aggregate demand at full potential, probably cost jobs, so that real wage growth lagged behind productivity growth and the majority of gains went to capital holders. However you sometimes see claims, that the GIlded Age should be cheered, for example by Tyler Cowen.

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  16. A lot of discussion in blogs and newspapers gives the illusion that the profession has taken aboard lessons from the recent crisis and public concerns on board. This is very misleading to prospective people contemplating studying economics. If you think economics and macro is more historically informed and is asking serious questions about why it does things the way it does, you are very wrong. The RBC models is still the foundation of macro. There IS a consensus. And that is, irrespective of what you are looking at you must look at this this way. Since 2008 it looks at more things - from the same methodology. Prescott and Sargent still reign supreme in macro-economics and this is not likely to change. You must look at the world that way. If you really are interested in empirically and historically well-founded investigation with a view to dealing with the problems of entrenched poverty in developing countries or unemployment among certain groups in advanced ones, you are best advised to pursue this elsewhere. In macro-economic theory the real causes of these things are relegated to vacuous anomalies (so called frictions) - most of your study will be about RBC.

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