Arnold Kling  

New Thinking in Macroeconomics

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The latest essay in my "million mutinies" series says,


For mainstream economists, the financial crisis has produced a new intuitive model of the economy which has yet to be articulated in any formal theory.

Of course, I do not believe either the older textbook macro or the newer just-so stories. Read the entire essay. It is a sequel to the first essay and to the second.


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CATEGORIES: Macroeconomics



COMMENTS (2 to date)
Daniel Kuehn writes:

Aren't all the stories people don't like "just so stories"? The people who see value in what you call a just so story as something that just needs to be worked out in more detail probably see PSST as a "just so story".

I think what macro needs to recognize is that there are a lot of mechanisms at work in a complex system, and what we really need is an appreciation of all of the "just so stories" that seem to be accurately describing a piece of the elephant. We need to investigate each of these rigorously, put them all together, say "this is our best shot at describing all the different things that are going on", and once we do that we'll probably have a decent sense of this particular elephant...

...until the next big one comes along, and it will likely have a somewhat different set of characteristics.

Mark Little writes:

Excellent article. Thank you.

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