I knew when I wrote this post some economists would not like it. These are economists who locate themselves outside the mainstream: heterodox economists. They often claim that mainstream economics is this narrow discipline wedded to particular assumptions that are both implausible and ideological. So when I argue that in principle and practice it is not, they will not like it. Simply saying (as I do) that economists are often too reluctant (sometimes for good reason in terms of the sociology of economists) to explore this freedom is not enough for them. Some of them require mainstream economics to be beyond redemption.
Sure enough, Lars Syll attacks my post. He writes
“And just as his colleagues, when it really counts, Wren-Lewis shows what he is — a mainstream neoclassical economist fanatically defending the insistence of using an axiomatic-deductive economic modeling strategy.”
I can only think that reading my post got him so angry he temporarily lost his critical faculties. Because what he writes is completely false. I wrote a comment on his blog but it has not appeared, although fortunately Bruce Wilder makes my point in very gentle terms. As I have been here before with Syll (see the footnote to this post), I will be less gentle.
My post ended with the following sentence:
“Mainstream academic macro is very eclectic in the range of policy questions it can address, and conclusions it can arrive at, but in terms of methodology it is quite the opposite.”
I argue in the post that “this non-eclecticism in terms of excluding non-microfounded work is deeply problematic.” I then link to my many earlier posts where I have expanded on this theme. So how I can be a fanatic defender of insisting that this modelling strategy be used escapes me. Unless I have misunderstood what an ‘axiomatic-deductive’ strategy is. Perhaps for Syll not following this strategy means being able to completely (180 degrees completely) misrepresent what someone else says.
That out of the way, I wanted to say something more substantive. In macro, the insistence on using microfounded models also works as an exclusion device. (I am suggesting this as a fact, not a deliberate strategy.) You cannot just write down an aggregate macro model, based on other people’s work or empirical findings or whatever. You have to microfound it, and that requires a lot of skill and practice, as many a PhD student has found out.
If it also turns out when doing this that the issue you want to address or the innovation you want to make is ‘difficult’ in terms of finding an acceptable microfoundation, there are many wise supervisors who will suggest that the student tries something else. It is hardly surprising that this might put some people off mainstream macro.
I think some knowledge of these things is essential - the kind of knowledge to be able to read and understand a journal article. But the depth of knowledge required to be able to create your own microfounded model, if your own interests are more empirical but you nevertheless want to explore the implications of your empirical work for the economy as a whole? Here I think what Lars Syll says has validity. But his wish to tar even the critics of this aspect of mainstream macro with this brush is just bizarre. More generally heterodox economists misdirect their fire when they accuse mainstream macro of being inescapably narrow in its subject matter or assumptions, when their criticism should be directed at the limitations implied by microfoundations formalism.