Economics does not equal Macroeconomics
By Arnold Kling
Mr Krugman gives liberals the economics they want. Mr Barro gives conservatives the same service. They narrow or deny the common ground. Why does this matter? Because the views of readers inclined to one side or the other are further polarised; and in the middle, those of no decided allegiance conclude that economics is bunk.
My take on this is that the consensus of economists is likely to be more reliable on microeconomic issues than it is on macroeconomic issues. In my view, fundamental macroeconomic issues are unsettled. It makes sense to have what a Bayesian statistician would call “diffuse priors” and what an ordinary layman would call an open mind.
The probability that crude Keynesian economics is basically correct is greater than zero. The probability that crude Keynesian economics is all bunk is also greater than zero.
What is important to bear in mind is that just because economists cannot settle disputes about macro does not mean that all of economics is bunk or that nowhere is there a reliable consensus in economics. Macroeconomics is only one area of economics. In my view, it is the area with the highest ratio of unresolved issues to settled questions.