Do Macroeconomics Need a Revolution?

The environmental crisis has lead to stark criticism of economics from environmentalists; here is my latest post on the voodoo debate. The financial, or rather, economic, crisis now leads economists to attack macroeconomists. Freakonomics discusses a recent research paper that goes far to suggest that time’s up for macroeconomics as we know it and that a regime shift is needed. As far as I can tell, the situation has all the signs of a scientific revolution, but those things usually takes a generation or so.

Justin Wolfers writes, under the charming title ‘More Navel-Gazing from Academic Economists’ (which I don’t get, by the way, first of all, Who aren’t navel-gazing? and second, Do he suggest that the discussion is irrelevant outside academic economics? third, Aren’t academic economists supposed to be occupied with academic economics, and thus be, to a certain extent, navel-gazing?), that macroeconomists write to each other, pursuing formal elegance (I wanted to write eloquence, but became uncertain; I’ve now decided it would fit as a metaphor; anyway) instead of empirical knowledge.

The claim is that academic macroeconomists have become mired in a particularly fruitless equilibrium, in which each is engaged in the search for ever-greater levels of formal elegance, at the expense of empirical relevance. There’s definitely something to this.

Mr. Wolfers is optimistic though:

Despite this observation, I don’t share the gloom of the naysayers, but my optimism comes from looking beyond macro. As a whole, the economics profession has become more empirically grounded.

The post on Freakonomics links to further discussions for those interested.

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