Lars P. Syll

Good advice to aspiring economists Submission to observed or experimental data is the golden rule which dominates any scientific discipline. Any theory whatever, if it is not verified by empirical evidence, has no scientific value and should be rejected. Maurice Allais     Formalistic deductive “Glasperlenspiel” can be very impressive and seductive. But in the realm of science it ought to be considered of little or no value to simply make claims about the...

DSGE macroeconomics — overconfident story-telling We economists trudge relentlessly toward Asymptopia, where data are unlimited and estimates are consistent, where the laws of large numbers apply perfectly and where the full intricacies of the economy are completely revealed … Worst of all, when we feel pumped up with our progress, a tectonic shift can occur, like the Panic of 2008, making it seem as though our long journey has left us disappointingly close...

Solow on post-real Chicago economics As yours truly wrote last week, there has been much discussion going on in the economics academia on Paul Romer’s recent critique of ‘modern’ macroeconomics. But the rhetorical swindle that New Classical and ‘New Keynesian’ macroeconomics have tried to impose upon us with their microfounded calibrations and DSGE models, has not gone unnoticed until Paul Romer came along: I think that Professors Lucas and Sargent really...

Several mainstream economists still believe that ‘any interesting model must be a dynamic stochastic general equilibrium model. From this perspective, there is no other game in town. If you have an interesting and coherent story to tell, you can tell it in a DSGE model. If you cannot, your story is incoherent’ (V.V. Chair). Similarly, not very long ago, Blanchard (2014, p. 31) was affirming that the solution to previous mistakes was that ‘DSGE models should be expanded to...

Post-real macroeconomics — science as fraud There are many kinds of useless economics held in high regard within mainstream economics establishment today . Few — as Paul Romer recently has been arguing — are less deserved than the post-real macroeconomic theory – mostly connected with Nobel laureates Finn Kydland, Robert Lucas,  Edward Prescott and Thomas Sargent – called calibration. In an interview by Seppo Honkapohja and Lee Evans (Macroeconomic...

Paul Romer on macroeconomics as a religious dogma  [embedded content]

The dividing line between bad and good macroeconomics If I am right that in recent decades the equilibrium in post-real macro has discouraged good science … there is some risk that a rear-guard of post-real macroeconomists will continue to defend their notion of methodological purity. At this point it is hard to know whether this group will fracture or dig in for a fight to death. If they dig in, I suspect that it will be in a few departments and that the...

James Tobin on post-real macroeconomics James Tobin explained why real business cycle theory and microfounded DSGE models are such a total waste of time. Thirty years before Paul Romer. Maybe one should start teaching some history of economic thought at economics departments again? Just a thought … They try to explain business cycles solely as problems of information, such as asymmetries and imperfections in the information agents have. Those assumptions...

– The models are rubbish. – Don’t be silly. There’s a paper from the 1980s on learning effects. Jo Michell

‘Modern’ macroeconomics — a costly waste of time Commenting on the state of standard modern macroeconomics, Willem Buiter argues that neither New Classical nor New Keynesian microfounded DSGE macro models have helped us foresee, understand or craft solutions to the problems of today’s economies: The Monetary Policy Committee of the Bank of England I was privileged to be a ‘founder’ external member of during the years 1997-2000 contained, like its successor...