Because although the crisis has added material, nothing has really been thrown away as a consequence of what has happened. We have not, either individually or collectively, decided that the Great Recession implies that some chunk of what we used to teach is clearly wrong and should be jettisoned as a result.He goes on to say that this is a good thing, because undergrad macro is all Keynesian, and the crisis has proved Keynesianism right. But - setting aside the debate over whether Keynesianism is right or not - undergrad macro is really beside the point when it comes to the state of economics as a science. The frontier of economic research and thought is the academic journals.
And I'm pretty sure that Wren-Lewis' statement that "nothing has really been thrown away" applies to the journals too. Four years after a huge deflationary shock with no apparent shock to technology, asset-pricing papers and labor search papers and international finance papers and even some business-cycle papers continue to use models in which business cycles are driven by technology shocks. No theory seems to have been thrown out. And these are young economists writing these papers, so it's not a generational effect.
The rest of the profession seems to be aware of this fact. Diane Coyle writes:
[M]acroeconomists simply do not realise how low their stock has sunk in the eyes of their microeconomist colleagues. When popular critics attack ‘economics’, they mean macro. It’s bringing us into disrepute, we fear. Although macroeconomists will insist that there are known scientific facts, they do not appear to agree on what these are.If smart people don't agree, it may because they are waiting for new evidence or because they don't understand each other's math. But if enough time passes and people are still having the same arguments they had a hundred years ago - as is exactly the case in macro today - then we have to conclude that very little is being accomplished in the field. The creation of new theories does not represent scientific progress until it is matched by the rejection of failed alternative theories.
The root problem here is that macroeconomics seems to have no commonly agreed-upon criteria for falsification of hypotheses. Time-series data - in other words, watching history go by and trying to pick out recurring patterns - does not seem to be persuasive enough to kill any existing theory. Nobody seems to believe in cross-country regressions. And there are basically no macro experiments.
I can think of two exceptions to this. Both involve central bank policy. The first is Paul Samuelson's claim that a Phillips Curve represents a static menu of policy options for the Fed. The second is Milton Friedman's claim that the Fed could control the growth rate of M1. Most or all macroeconomists seem to regard these two claims as having been proven false. What happened in both cases was that a famous economist recommended a policy and gave specific predictions for the outcome, the policy was then explicitly tried by the Fed, and the outcome wasn't what was predicted. In other words, the Fed helped the field by carrying out an experiment on the whole economy. Obviously we can't do that sort of thing for every macro paper that comes out in the AER.
So as things stand, macro is mostly a "science" without falsification. In other words, it is barely a science at all. Microeconomists know this. The educated public knows this. And that is why the prestige of the macro field is falling. The solution is for macroeconomists to A) admit their ignorance more often (see this Mankiw article and this Cochrane article for good examples of how to do this), and B) search for better ways to falsify macro theories in a convincing way.