John Quiggin on Macro
By Arnold Kling
The appealing idea that macroeconomics should develop naturally from standard microeconomic foundations must be recognised as a distraction. In its place, we must accept, in the language of systems theory that macroeconomic phenomena are emergent, arising from complex interactions of behaviors we do not fully understand, but must nevertheless respond to.
I am not sure what he means by “must nevertheless respond to,” but otherwise I agree. “Standard microeconomic foundations” means the restrictive “haiku” to which Olivier Blanchard refers.
I would add that it is also a distraction to insist on closed-form mathematical solutions. Macro problems occur because the economy faces recalculation problems that are too complex for markets to solve. They are too complex for us to solve, also.
Thanks to Mark Thoma for the pointer.
Update: Greg Mankiw points to a brief defense of contemporary macro by Narayana Kocherlakota (or is the essay here. It strikes me as anti-Quiggin, or at least anti-Kling. He seems content to the look under the mathematical lamppost for the macroeconomic watch, even if the watch won’t be found there.