Two From Mark Thoma
1. He points to Noah Smith’s description of learning Dark Age Macro.
I absolutely don’t blame Chris House for teaching what he taught. Our curriculum was considered to be the state of the art by everyone who mattered. Without a thorough understanding of DSGE models and the like, a macroeconomist is severely disadvantaged in today’s academic job market; if he had spent that semester teaching us Kindleberger and Bagehot and Minsky, Professor House might have given us better ways to think about history, but he would have been effectively driving us out of the macroeconomics profession.
(Read the whole thing. It’s spot on.)
If you want to talk that way, then I was driven out of the macroeconomics profession, because I listened to Robert Solow. Criticize his politics all you like, but Solow could smell the rotten fish that came to be modern macro. He was interested in what were at the time the more interesting alternatives–Barro-Grossman, Malinvaud, Clower, Leijonhufvud–and he presented those in the macro course he taught when I was there.
For my dissertation, I tried to develop a theory of sticky prices that would help a Malinvaud (Theory of Unemployment Reconsidered) model. I came up with something based on search costs leading to kinked demand curves. Although I published it, my article had zero impact, as evidenced by the fact that the concept has been rediscovered a number of times since.
I have come around to a different point of view on macro now. If you follow this blog, you know about PSST. I keep plugging away at it gradually. I think that if Solow and I were each 30 years younger it would make a good Ph.D thesis and he would make a good adviser for it.
Noah might not blame Chris House. But I blame Stan Fischer (nice gentleman that he is), and Thomas Sargent (outstanding theorist that he is). And Olivier Blanchard (he’s not really responsible, but he is emblematic, and, well, I just feel like blaming him). They created a monoculture, they had cleverness but lacked wisdom, and in my opinion, the profession suffered for it, and suffered gravely.
2. He points to Barkley Rosser, arguing with the latest Keynes-Hayek rap video. Rosser does not think that the accusation that Keynes favored central planning holds up.
I think there is something to Rosser’s point. The classic documentary The Commanding Heights made the same oversimplification, and I recall feeling uneasy about it.
Still, Keynes was clearly less obsessed with the knowledge problem than was Hayek. And among the followers of Keynes and Hayek, the polarization seems to have increased. Contemporary Keynesians are committed to treating government as if it were a knight in shining armor prepared to slay the many dragons of market failure. Contemporary Hayekians are probably even more convinced than Hayek that localized knowledge, imperfect science, and public choice considerations argue in favor of markets.
So, although I can see where Rosser is coming from, in the end, I don’t think that the new video gives Keynesians an undeservedly bad rap.