Sunday, February 15, 2015

Why do non-experts think they know about macroeconomics?

Scott Sumner asks one of the eternal questions of the econ blogosphere: Why do all these people who have never studied macroeconomics, much less done it as a job, have all these strong opinions and viewpoints, and seem to think they know more than the experts? His answer is that macro seems deceptively similar to things in people's daily lives:
Suppose we were talking about string theory instead of macro. Imagine I was debating a string theorist, and I told him the theory was a bunch of worthless nonsense, as it was not refutable. He might respond that I didn't know what I was talking about. And to be honest I would have to agree with him, I don't know what I'm talking about in the realm of string theory. And having once read someone who does, who also criticizes the theory for being unfalsifiable, doesn't change that fact... 
Perhaps because people can immediately recognize that fields like physics and biochemistry are way over their heads, but macro looks deceptively simple. Macro uses a lot of terms like money, saving, interest rates, investment, income, demand, unemployment, inflation, exchange rates, debt, deficits, etc., that seem to correspond to things in our everyday experience. And we obviously do have opinions on things in our everyday experience. And we are entitled to those opinions. But in fact almost none of these terms mean the same thing in macro as in everyday life.
I do think this is part of the story, but I think there are some other reasons too:

1. Macroeconomics is relevant to most laypeople. String theory, to use Scott's example, is not. String theory is something you hear Brian Greene or Michio Kaku talk about, and you think "Wow, neato, the Universe is mysterious and funky!", and then you never think about it again. Macroeconomics is something related to our jobs and our investments. It affects us every day. Notice that laypeople do not often hold forth on game theory or decision theory.

2. Macroeconomics has political implications. Many people have political agendas. The "heterodox" people you meet in the blogosphere are almost all just leftists who see mainstream econ as a tool of the neoliberal oppressor, and since macro is by far the most visible branch of econ, they equate "econ" with "macro" and bash it. Or take the "Austrians", whose goal is actually to make econ into a tool of the neoliberal oppressor, for real. Then you have a whole bunch of people who aren't pushing political agendas, but who feel that macroeconomists are pushing agendas, and don't like that. In fact, some macroeconomists are pushing political agendas, though I think it's a clear minority (no, I won't name names). This is also why a lot of laypeople get involved in climate science debates.

3. There is the perception that macroeconomists don't understand their own subject. The Great Recession convinced a lot of people that macroeconomics hasn't solved any of the problems it was created to solve. Contrast that with physics or bio or chem, which have very obviously given us a lot of the awesome stuff that makes our society rich. In addition, you have very public and acrimonious debates between macroeconomists like Krugman, Cochrane, and Sumner. That convinces a lot of people that there is no consensus within macro, which in turn makes them suspect that macroeconomists haven't gotten any answers out of the Universe. If the experts don't understand anything, why can't the amateurs weigh in?

I am not annoyed by normal people's penchant for butting into macro debates (though the "Austrian" and "heterodox" people do annoy me, since they approach things in a tendentious rather than an inquisitive manner). I think it's natural. Sure, a lot of stupid stuff gets said, but let he who is without sin cast the first stone!


Ryan Decker writes in response to my Reason #3 above:
When I fire up my web browser I'm not bombarded with confident non-expert opinions about earthquakes, despite seismology's apparent inability to predict them.
True, but seismologists are pretty up front about this, including any seismologist in the press. I think there's a public perception that while seismologists realize their shortcomings, and are therefore probably "on the job" in terms of trying new stuff, macroeconomists might have declared premature victory. A lot of macro people in the press express a lot of certitude about things. John Taylor expresses incredible confidence that the Taylor Rule (with coefficients of exactly 1.5 and 0.5!) is THE best monetary policy rule. Scott Sumner expresses incredible confidence that NGDP targeting is best. Paul Krugman expresses incredible confidence that fiscal stimulus is effective and that austerity is counterproductive. John Cochrane expresses incredible confidence that structural form - removing "sand in the gears" - is the best medicine for an economy in recession. Robert Lucas said that the "central problem of depression prevention has been solved." And so on, and so forth. 

I think normal people realize that that certitude is basically never warranted. Yes, those economists often (but not always) have some evidence to back up their claims. But not the kind of evidence that people have in disciplines where data is more abundant, controlled, and replicable. Which brings me to Ryan's second point:
Moreover, there are the usual talking points: how well would physics and chemistry be doing if they had the physics/chemistry equivalent of 5 or maybe 10 data-rich, non-experimental recession observations to study? We can interpret the massive success of physics and chemistry and relative lack of success in macroeconomics as meaning physicists and chemists are better at their jobs than are economists, or we can interpret it as meaning that getting reliable answers in economics is a lot harder than it is in physics. 
Yep. Exactly. If macroeconomists haven't gotten the kind of answers natural scientists have gotten, it's because macro is harder to get answers out of, not because macroeconomists are less intelligent or less honest. I think that's something that more laypeople should understand. That's why I think blog posts like this one by Mark Thoma, this one by Steve Williamson, and this one by David Andolfatto are the most important.

Ryan concludes:
A scenario in which economists know much more about economics than the typical lay person is not inconsistent with the latter interpretation. I also think it's a stretch to jump from the notion that there is much we don't know about recessions to "macroeconomists haven't gotten any answers out of the universe."
Also true. Macroeconomists know more than a lot of people think they do. That doesn't mean they know a lot. And macro discussions in the public sphere tend to focus more on the contentious stuff - the stuff where no one really knows all that much. That's where normal people feel justified jumping in. If you tell them that investment is the most volatile component of GDP, they're not going to argue. If you tell them that the central problem of depression prevention has been solved, they're going to argue, and in my opinion they're right to argue.

Meanwhile, Adam Ozimek thinks these reasons also explains why laypeople get involved in debates over nutrition science.

Robert Waldmann also chimes in. He thinks it's mostly about politics, and that macroeconomists don't really know any facts that an intelligent amateur couldn't quickly discover for herself.


  1. Has anyone ever questioned econ when (2) wasn't the primary factor? Any example I can think of has been someone arguing for a particular policy agenda that goes contrary to what they think economists think.

    1. I rudely question the standard mainstream macroeconomics used to defend policies which I support.

  2. There are few incentives to learn macroeconomics. Even students who learn in college only cram it so they can pass exams. Most of them will just get a small confidence boost and still subscribe to awful heterodox/austrian beliefs about the economy. Very few will use that knowledge in business or government.

  3. ", but let he who is without sin cast the first stone."

    There is an Irish joke that repeats that line, but continues "Mother, will you put that stone down now!!"

    Not helpful, but it amused me.

  4. How do we separate the expert macroeconomists from the non-experts? If a non-expert is a non-economist, then I'd say that the premise of your post is false. There are non-expert lay people who write comments on economics blog sites, and some of them indeed seem to think they know as much as economists do, but obviously there's a severe selection bias problem - they're not representative of the population. My experience with lay people - drawn more or less at random from the population - is that they're eager to learn something. They think we possess some specialized knowledge, and they want to know what it is.

    If the non-experts are other economists - people who may even be highly successful economists, but non-macros - that's another story altogether. Among those, it's not hard at all to find people who think they know more than macroeconomists do - about macro - and are pleased to tell us about it. They're sometimes also pleased to tell the world about it. And that encourages a few lay people to think that they too know more about macro than macroeconomists do.

    1. Anonymous5:35 PM

      You can just say "Krugman." Makes it easier for everybody.

    2. Good. He's certainly among the "highly successful." But there are many many others.

    3. But Steve, I never claimed that the majority of the population thinks they know about macroeconomics.

      I just observe that many do. Obviously that is a self-selected set of people. And obviously they are a small percentage of the population, or else our blogs would get a lot more comments than they do! But there do seem to be quite a few of them, and seemingly more than in a lot of other fields.

    4. Also, the more you get into the public sphere, the more people want to argue with you.

    5. To be a bit mean, I think Stephen has demonstrated one reason why so many people are willing to confront macroeconomists and their views: they're often ridiculously arrogant.

      I'm sorry, but as much as I dislike and usually disagree with Krugman, face it dude, he's got it all over you in macro. He came out with the liquidity trap papers on Japan back in the day. Early in the US crisis, when almost everybody thought QE would cause some inflation, indeed that was why Bernanke did it, Kurgman came out strongly early explaining why there would be little inflation despite the monetary expansion. And he was dead on right. Meanwhile you fumbled around for a while until you came up with a cockamamie theory that low interest rates depress inflation. Which was good for some laughs. And now you're coming on here to vent that Krugman doesn't have the right to challenge you on macro because he didn't get his PhD in macro? Lordy lordy.

      Noah gave several good reasons but there's one minor one he missed: some people know that academia is nowhere near the frontier of contemporary macroeconomics. Hedge funds are where all the really serious macro people are these days. Academic macro guys are frankly escapist nerds who prefer dorking around with rational actor models and DSGE in an environment where nobody expects anything they do to ever be of any use.

      I know, most laypeople don't know much about hedge fund macro, because hedge fund guys don't publish much and when they do they're often as hard to read as string theory. But there are some exceptions, such as Soros.

    6. Actually, Krugman got his PhD in open economy macro, unless one wants to claim that understanding exchange rates is not macro. Ironically, one area where Krugman has probably been wrong quite a bit, although it must be granted that he has recognized this, has been in his many forecasts about how there never could be a euro and then how it was inevitable that it would fail. This does not mean that he has been wrong about how many of the problems with the euro have arisen, but in effect he has been wrong at times in the past about the political economy involved, which may not really be macro anyway, in particular in underpredicting the strength of the political will in the eurozone to make the euro happen and keep going, despite the many problems associated with it.

      This will can be seen even now with the Greece case, where many of the more heterodox supporters of the new government are advocating Grexit, while those in that government themselves are very loud about how that is not what they want at all.

      Barkley Rosser

    7. I understand of course that there are all sorts of crossovers, and I'm not the one arguing that it's any kind of handicap in his ability to understand macro, but no, Krugman did his PhD in international economics. Which for me is ironic because most of his analysis these days uses models that assume a closed economy.

      Since I've beaten up enough on Stephen I might as well pick on Noah a little too. He hates the Austrians, and I understand how annoying they can be, but what he doesn't mention is that lots of Austrians predicted the global financial crisis while precisely zero mainstream macro economists did. If some huckster selling investment management to octogenarian goldbugs can predict business cycles better than academic macroeconomists, who can't?

      You'll probably say broken clock right twice a day, but there was actually an important lesson there in just how far from reality academic macro had gone. It has been teaching since the 70s or earlier that business cycles are random and unpredictable. And that's exactly where Soros and Dalio and other macro hedge funds parted with academia. They took the position that the business cycle is a credit cycle and built teams to analyze in minute detail how credit cycles play out throughout the financial markets. They took a bet that the major conclusion of academic macro of the last fifty years was 100% wrong and it made them multi-billionaires. And you wonder why people without macro PhDs think people with macro PhDs don't actually understand macro?

    8. I might as well pick on Noah a little too. He hates the Austrians, and I understand how annoying they can be, but what he doesn't mention is that lots of Austrians predicted the global financial crisis while precisely zero mainstream macro economists did.

      The type of crisis the Austrians predicted - i.e., an inflationary crisis - never happened. If I predict an earthquake and we get a flood, do I get to say "Look, I successfully predicted a disaster"???

      Also, the most accurate prophet of the crisis I know of was Dean Baker, who is about as non-Austrian as they come - he considers himself a Keynesian, or something. I think.

      (And of course you already made the point about the stopped clock).

      But yes, you're right that academics didn't foresee even the *possibility* of a crisis. That was a huge failure on their part, and it's why they're racing now to catch up by building models where crises happen. But the crises in Japan and Sweden, not to mention the Great Depression, should have warned them.

    9. Do you think Dean Baker counts as mainstream? I'm not sure I can give you that point.

      My defense of Austrians extends only so far as I stated it, that many predicted the housing bubble, and that their position that the business cycle is a credit cycle not a series of random shocks is in fact correct. I'm not defending the details of Austrian theory, even less the slings and arrows of the Austrian troll horde. I admit they are to put it nicely extreme policy dissidents who are always predicting imminent disaster. As for their inflation prediction, as I wrote, Krugman was right on that and even the mainstream eg Bernanke who expected a moderate inflation impulse were wrong. Let alone the Austrians who predicted high or hyperinflation.

      But you might be surprised going back and looking at that 1912 book by von Mises. When he writes of inflation he's not writing about QE, he's very clearly writing about what we today would call "helicopter money" - not just printing money, but printing money to fund increased public spending, and lots of it. And that taken to extremes is exactly what caused the Weimar hyperinflation a decade later. I'm not saying it's impossible to do helicopter money in reasonable moderation. I'm just saying the original Austrian complaint about money printing was a sensible and timely one that you have to regret wasn't heeded in its day.

    10. "But there do seem to be quite a few of them, and seemingly more than in a lot of other fields."

      Note the use of "seem" and "seemingly," which reflects how pointless this conversation is. Who cares about what some people might think about what others might think, and why they might think it?

    11. For that matter, who cares about *anything*? We're floating in a vast, insensate, mostly lifeless void of hard radiation, and in a short time we will all die and lose consciousness for all infinity, and everyone who remembered us or was affected by us will also shortly die and lose consciousness for all infinity. So pretty clearly, nothing really matters.

    12. Regarding Dean Baker, who is generally viewed as probably having done better at predicting what went down in the crash, he is certainly not "mainstream." He openly admires Keynes and is pretty friendly with the Post Keynesians, but would seem to prefer not to be put into any particular box, and I think he disagrees with some of the more recent PK stuff such as "modern monetarism" (to be kept straight from "new monetarism").

    13. Anonymous9:08 PM

      that Noah Smith quote about radiation is my fav !

    14. In the long run...

    15. man this sub thread is long. Needless to say I am a Krugman fan and think he understands macroeconomics better than macreconomists do.

      But I don't think it is needless to point out the mainstream macrocoeconomists who predicted the crisis (few pixels will be wasted because it isn't a long list). Tom Warner you are asserting that the Bank of India has zero presidents. Raghuram Rajan is definitely mainstream and was definitely on the ball. Nouriel Roubini is also mainstream. So that's two and also ... well look two is more than one so I could type "macroeconomists" above.

  5. "macroeconomists might have declared premature victory."

    I think this answers your question, Noah.

  6. Anonymous5:32 PM

    I think it's odd and needlessly pejorative to say that citizens take sides in things like macroeconomics and climate science because they have "political agendas." I would say they get involved in these things because they have significant implications for policies that will determine the well-being of the nation, and therefore it behooves them to educate themselves enough about these fields to have opinions about basic issues, and to decide which particular schools of thought and sometimes individuals seem more persuasive than others. I get that it's a technical field and that non-professionals should not delude themselves into thinking they know enough to get involved in the technical issues that practicing economists spend their working hours on (ever hear laypeople decide they're qualified to discuss plate tectonics because they've read John McPhee?) But educated people with a basic understanding of methodology can educate themselves enough to choose whether they find Greg Mankiw's or Christina Romer's prescriptions for recovery more persuasive. The situation with climate science is not different (just easier now that the consensus has become so strong -- but it was not always thus and still is not with respect to many issues).

  7. Anonymous5:33 PM

    macroeconomics/microeconomics and politics are slaves to Banksters consequently they are unprovable sciences. Society should be served by Governance, Economics, Banking not the inverse as has been the case for the last few hundred years. Restore the correct hierarchy for a properly functioning society. End Banksterism now.

  8. Anonymous7:10 PM

    A physicist can calculate the trajectory of a batted ball with precision , but might well be a hapless clod as an outfielder. A world-class outfielder might be stumped when trying to add 2 plus 2.

    The economics profession brought us into the GFC with economic models that had no financial sector , no debt , no income distribution. I'm sorry , but that's just dumb , and any halfway-intelligent man on the street could have told them that beforehand , but we weren't paying attention beforehand. We've learned our lesson - you guys are dangerous when left to your own devices.

    We ain't going away , so you might just as well get used to hearing from us.

    1. Anonymous9:08 PM

      No debt? No income distribution? Did you wake up from the 1910s yesterday, discover the internet today, and write this post without reading a single paper in the past 100 years? There are plenty of models with these things. Most of them simply assume a no ponzi scheme type condition where you cannot use debt to pay for debt ad infinium.

      Maybe YOU might be stumped when trying to add 2+2, or k* = (s/(n+g+d))^(1/(1-a))???

    2. Anonymous11:33 PM

      I can prove my point about the blinders worn by mainstream econ pre-crisis by showing that those blinders are largely still on today. Tell me this - what does today's mainstream econ specify as the sustainable equilibrium debt/gdp (or income) level for households , for example? There is some safe limit/range for household debt/gdp(income) that will vary with interest rates and debt composition , as well as with the distribution of both income and debt. What is that number today for aggregate households? 50% , 100% , 200% , 5000% ?

      You can't answer that question because this is all new stuff to mainstream economists , the published studies on this are few and far between , and all are very recent , even though we've been running a highly financialized economy since 1980 or before , and even though there have been multiple financial crises globally over the last three decades , some of which revolved around household debt stress associated with housing bubbles , just like the GFC.

      Representative agent models , the workhorse of mainstream econ , can't see these stressors , because they ignore balance sheet or flow-of-funds effects and their distribution. One man's debt is another man's asset , blah-blah-blah.

      I don't think I need to remind you of the mainstream's widespread pre-crisis belief that financial innovation and globalization served to spread risk among those best able to bear it , thus their comfort level in essentially ignoring finance . Yeah , that worked out real well too.

      Shortly after the crisis onset Larry Summers demonstrated the egg-on-face moment for mainstream econ when he said that he had begun to re-read economists like Minsky and Kindleberger. He , at least , now gets that debt and finance matter , something many non-experts knew all along , and many experts still deny.

      It's simple , like 2+2 , but not simple enough , for some.

    3. Anonymous4:44 AM

      Boy , have I got a perfect example of a so-called "expert" who , in trying to score points for his "side" , makes a fool of himself by ignoring debt.

      John Taylor , just tonite , posted a comparison of the Obama recovery with the Reagan recovery , using the 2x rate of growth in the Reagan recovery to argue that gov't policy must have been superior under Reagan :

      Before this non-expert disembowels Taylor , let me point to a relevant inconsistency that is widespread among mainstream economists. Most will readily admit that deleveraging is bad for growth during the time it occurs. For example , everyone knows China has been running up debt at a furious pace in recent years , and most economists would agree that if they start working to delever from the current high levels , their growth rate will suffer. Many of those same economists will strongly object , however , if you point to one of their favorite growth spells and claim that it was "debt-fueled". Deleveraging is bad for growth , but leveraging has no positive impact ? Do you really think gdp would have grown at the same rate from 2002-2006 without the housing debt bubble ? Do you see why so many of us non-experts have no respect for the profession ?

      Back to Taylor. Here's domestic nonfinancial ( i.e. public plus private nonfinancial ) debt/gdp over the entire period of coverage in FRED :

      Taylor brags that Reagan achieved a 4.8% rate of gdp growth during the '83Q1 - '88Q2 recovery , while Obama only obtained a 2.3% rate from '09Q3 - '14Q4. However , nonfinancial leverage increased from 140 to 173 % of gdp during the Reagan recovery , for an average growth of the debt ratio of ~6 percentage points per year. Only under Bush II did the ratio grow so rapidly for such an extended period. The Obama recovery was accomplised with debt growing at the same rate as gdp , yielding an unchanging ratio ( actually a small decline ).

      A second point that Taylor misses : Empirical studies ( as opposed to model-based self-stroking ) show that growth is generally slower at higher leverage levels - the "debt overhang" effect gets stronger as leverage goes higher. Reagan's recovery started after a period of ~ 3 decades of low and stable leverage , while Obama inherited the aftermath of a debt frenzy , with much higher leverage compared to what Reagan faced.

      All in all , a massive fail by Taylor , and one easily exposed by a non-expert.

    4. Anonymous12:54 AM

      Making up stuff and posting it to the Internet does not turn it into truth.

  9. Anonymous9:14 PM

    Just be thankful you're not in political science. I have to lie about my profession on a regular basis to avoid certain conversations.

  10. Is someone alleging Kruggers is not an expert?

    If he isn't then no-one is!

    1. Steve W. rarely, if ever, misses an opportunity to diss Krugmaster P.

    2. Anonymous12:08 PM

      Steve rarely misses an opportunity to make a fool of himself. But with a deadly mix of arrogance and bullheadedness never seems to figure that out.

    3. Anonymous1:42 PM

      Williamson's blog is good. They are substantial blogs and he gets a range of people who follow them, not all of them macro-economists (or trolls) with whom he makes a sincere attempt to engage. Ditto for Cochrane and Farmer.

    4. Yes, Williamson's blog is indeed good.

      He really, really, really hates Krugman, though.

    5. Anonymous9:05 PM

      dude, that's just a link bait strategy. A lot more people are going to click on a post explaining how and why Krugman is a douche

    6. Anonymous6:29 PM

      It helps the link bait strategy that Krugman actually is very much a douche.

  11. Here’s a different hypothesis. People form their worldviews from analogies. They have strong opinions, and sometimes even strong understanding, of certain problems or situations and then they extend what they know, or think they know, to everything else that can be analogized to them. So someone who is pretty sure she knows how to manage her income or run a small business thinks that macroeconomics is simply analogous to these things, and she has the answer to that too.

    What economists know, however, is that macroeconomics really begins where these simplistic analogies break down.

    Incidentally, it’s interesting that this discussion has broken out at the moment that a decision point is approaching in the eurozone. Quite a lot of the pontification about Greece et al. is based on unwarranted analogies. Heads of state are as capable of making bizarre claims about macroeconomics as your most uninformed, cocksure blog commentator.

  12. "It's because somebody knows something about it that we can't talk about physics. It's the things that nobody knows anything about that we can discuss. We can talk about the weather; we can talk about social problems; we can talk about psychology; we can talk about international finance--gold transfers we can't talk about, because those are understood--so it's the subject that nobody knows anything about that we can all talk about!"
    -- Richard Feynman

  13. Anonymous9:21 PM

    i have problems with a number of assertions in this blog.

    firstly, is the comparison of the certainty of, say, physics, with the uncertainty relating to economics.

    but the related issues are much more complex than certainty versus uncertainty.

    take, for example, two generally accepted axioms of science:

    - the planet is round, and
    - the earth revolves around the sun.

    now, almost everyone today accepts these two scientific facts.

    and yet, at the time, the new proposals were stridently challenged by those who disagreed. for example, the hierarchy of its day - the church - vehemently opposed the challenge to the previously commonly accepted "facts" that the earth was flat, and the sun revolved around the planet.

    in other words, what seems so "simple" now, was not nearly so simple when it was first proposed. so time makes a big difference in comparing issues today with issues of yesteryear.

    secondly, and this is not discussed at all, is the issue of "BIG MONEY".

    today, economics - like global warming science - represents a huge threat to the interesets of the 1%. and they aren't going to take the basic economic/scientific "facts" laying down.

    so what do they do. they go out and select scientists and economics who are willing to develop new/different rationales contradicting the ideas and the indiviiduals agaisst which the special interests were opposed.

    so, it's not so much the opposing assertions that are the problem, but that one side is attempting to explain what is occurring, and the other side is attempting to subvert the ideas proposed because they threaten the interests of the 1%.

    so, let's again look at the two old, established scientific facts: the planet is round, and the earth revolves around the sun.

    now, presume for a moment, that those two ideas had threatened the immediate financial interests of the 1%. then, of course, , there would have been a group of scientists who would have come forward to oppose these assertions. and, today, we'd still be arguing over these two basic scientific facts.

    the last issue is the introduction of the internet. this modern communication tool has permitted the wing nuts in our society to access the propaganda set forth by special interest groups. for example, climate change deniers have access to a wealth of misleading information that, however, supports their original, "intuitive" assessment.

    so, to conclude, to the issues included in noah's blog must be added the issues of:

    - comparing "old" science with "new" economics (apples and oranges),
    - the benefits to the 1% of "muddying the waters" of issues that are potentially threatening to their own interests, and
    - the introduction of the internet in the wide spread disemination of of propaganda to the
    the masses.

    and that's it. for now.

    p.s sorry, the edit function is a bit wonky, so my editing not as good as hoped.

    1. The Church never believed the earth was flat. They knew from the ancient Greeks it was round. It used to be taught that it was Columbus who showed it was round. Baloney.

      His critics argued with him about the size of the round earth. He said it was half the size it is, while his critics were right about its size, more or less. He got his funding because he said sailing west would be shorter to get to India than his critics did. They were right, as shown by his mistake in calling the native peoples he found in the New World "Indians." But, I remember being taught this nonsense about Columbus when I was in first grade, what a brave man he was sailing west in danger of a predicted falling off the earth that did not happen. Poppycock.

      Barkley Rosser

    2. Anonymous1:06 AM

      Barkley Rosser has already pointed out the error in asserting that the Church *ever* thought that the Earth was round.

      I think the other example, that it was accepted as fact that the Sun revolved around the Earth and not the other way around, is also not true. Galileo's great "crime" (apart from pissing off a pope for personal reasons) was not that he argued for an alternative model (indeed, Copernicus had already done that), but rather that he claimed it as fact, and not just another model that was consistent with the phenomena.

      For the Church, the idea that absolute truth could be arrived at via some means other than through God was the sacrilegious claim. The specifics of a heliocentric solar system was less of a worry.

      This may not invalidate your point (there may be other examples that survive scrutiny), but I must admit I wasn't sure what the point was.

  14. Anonymous9:34 PM

    History of macroeconomics – part 1 (non-economist version)

    In the olden days Karl Marx told us that he could help us design new societies, so we tried that in the Soviet Union. It didn’t work out well!

    Other economists then told us that they could help micro-manage the economy using prices and incomes policies, and other grand plans, so we tried that. It didn’t work out well!

    Later, economists told us that they could help us set fiscal and monetary policy, so we tried that. However, economists themselves decided that fiscal policy didn’t work out well!

    We agreed that economists would help central banks set monetary policy and a few other things like regulating the banking system. Economists said that they could write models to forecast the future. We said that sounds difficult and asked why economists thought they could forecast the future when seismologists couldn’t forecast earthquakes. Economists told us not to worry and that we didn’t understand representative agents. We agreed that we didn’t understand representative agents.

    Then the banking system collapsed and we ended up in the worst economic recession for half a century. The forecasting models were oblivious to this!

    So we agreed that economists would just help set monetary policy. Unfortunately, interest rates were already at 0% and couldn’t be lowered further. Economists told us that what we needed was quantitative easing as that would generate inflation and stimulate the economy, so we tried that. Inflation didn’t change much but asset prices went up, so at least rich people were happy!

    So then we asked what else economists could do. Economists told us that they could write blogs, so we said ok. We read Paul Krugman’s blog. He told us that we needed to bring back fiscal policy as monetary policy doesn’t work at 0% interest rates. We read Scott Sumner’s blog. He told us that we needed monetary policy because fiscal policy doesn’t work at all. We pointed out that Paul and Scott were giving us completely opposite advice and that wasn’t useful!

    We then found out that there were other heterodox economists. What about them? Could they help? No, no, no, said the economists. Heterodox economists are not very good, and they are very rude. We said that a few heterodox economists claimed to have forecast the recession. Economists told us that heterodox economists are conmen as no-one can forecast the future of the economy. We said that’s not what economists had said when we were sceptical about their forecasting abilities three paragraphs ago.

    Then economists wrote blogs saying that non-economists are annoying and don’t realise that economists are experts. We pointed out that economics is based on the division of labour. This divides us into suppliers who are experts and customers who are not experts. We then let the dumb customers decide the fate of the expert suppliers. This applies to everything. Samsung can spend several years and millions of dollars designing a new tablet computer. We then say that we prefer Apple’s table computer because it has a shinier screen and a picture of an Apple on the back. We force politicians to spend millions of dollars to help us decide which of them is best suited to being the most powerful man in the world. We then elect George W Bush.

    We asked why economists thought their services should not be subjected to the same level of scrutiny by non-experts as other services like law or medicine, but no-one was listening. The economists had gone to a lecture by Scott Sumner. Scott told the economists that monetary policy is all that is required because, if required, the central bank can always print lots of money and buy all of the assets in the economy. That is bound to stimulate the economy he said. We listened at the door and thought that this sounded like he was suggesting that, in some circumstances, an arm of the state might buy the means of production. We were sure that we had heard this idea somewhere before but couldn’t remember where.

    To be continued ...

    1. Oh dear, you bring up the alleged "rudeness" of heterodox economists claiming to have predicted the crash better than mainstreamers. I suspect that when Noah hints at that he has Steve Keen in mind, whom he has dumped on in the past on such grounds.

      Of course, the old "who predicted the crash better" meme has been bashed around a lot here. I think it is a matter of record that probably as a group the Minsky-oriented heterodox Post Keynesians probably did better than anybody else, despite theiri occasional rudeness and sloppiness. But since then they seem to have been sent back into their box as the DSGEers have dashed around introducing fin frictions and half-baked het agents into their models, with results that continue to seem somewhat half baked.


    2. Anonymous12:30 PM


    3. Anonymous12:34 AM

      Rosser -- no matter how many times you say lies, they don't become true.

  15. Anonymous10:59 PM

    I think the comparison to the field of nutrition is a very apt one -- though not exactly in the way that __ intends. In nutrition, you have journalists like Gary Taubes who are not themselves doctors or research scientists, but have the basic educational foundation and work ethic to enable them to take the necessary deep dives into the underlying literature -- and also to interview the people who ARE doctors and research scientists -- that allow them to call bullshit on entire lines of research that people have built careers around -- for example, the idea that obesity is caused by eating fat, or that salt causes hypertension, or that dietary cholesterol causes heart disease.

    Economics is no different. There, you have journalists like Matthew Yglesias or Neil Irwin who are not themselves macroeconomists, and do not have the credentials or the inclination to do original research in the field, but certainly are conversant enough with the concepts to call bullshit on things like expansionary austerity or the notion that raising interest rates causes inflation.

    Really, in this regard economics is no different than any number of technical fields with highly interested and sophisticated lay audiences. Think climate science, or physics, or ecology. The idea that nobody can have an opinion who does not have a degree smacks of high-priesthood defensiveness.

    1. Anonymous11:02 PM

      The ___ is Adam Ozimek.

    2. Anonymous12:35 AM

      The idea that Matt Yglesias is conversant in macroeconomics is laughably absurd.

  16. Anonymous11:45 PM

    I know that economists -not all- routinely lie, including about what other economists say or have said. And that does not matter to their professional reputation. (I do not confine myself to macro.)

    1. Anonymous6:35 PM

      Did I mention that other economists unanimously agree that I am the greatest mind in the history of the topic?

      Well, they do.

  17. If you read Krugman and Cochrane you cannot but conclude that one of them must be a charlatan or a fool. You may not know which one, but at least one must be. Each of them says it is the other.

    If bridges collapsed as often as economies, we would be burning down the engineering schools.

    If economists want to be treated with respect and listened to, first they are going to have to earn it. As a group the macro economics people have not earned the public's respect or trust.

    1. Anonymous1:08 AM

      Exactly. Its also amusing to see Sumner post his whine, considering how often he wades into discussions that are outside of his pure area of expertise. He has no problem celebrating Chinese accomplishments without anything but a surface knowledge of the subject -- did you guys know that Hong Kong spends less of its GDP on government than statist parasites in Ameirca?! THAT PROVES THAT GOVERNMENT IS EVIL.
      So hacks being mad that other people but into their hacking business is silly, its especially silly when Sumner quit his job of being a professor to be a full time hack at the Koch Center for Excellence.

      Anyway, its a shame that Noah was so badly battered by his job hunting experience out of graduate school that the only people he still gets up to call out on their bullshit are the crazy -- like the Austrians -- or the irrelevant -- like the Ferguson.

    2. Anonymous8:06 AM

      Whoa, Zing!

    3. Physicists have heated arguments like the ones Cochrane and Krugman have.

      Have you read some of the stuff Peter Woit and Lee Smoling have written about their colleagues?

      So if the point you are trying to make is that public disagreement implies that economists are not to be trusted, you will be very disappointed when you find out how almost every field of science operates.

  18. I understand that you are anything but a defender of macro as it is, but your example of things that macroeconomists know is pathetic (and I think not polemically so). That investment is the most volatile part of GDP is a simple calculation made many decades ago.

    Someone (not you) might argue that macroeconomists understand why consumption is smoother than GDP and mention the PIH. That takes us straight to an anomaly which can't be explained away -- the excess sensitivity of consumption. The smoothness is roughly completely explained by the assumption that consumers ignore their shafe of the national debt and of profits retained by firms -- consumption is roughly as smooth as personal disposable income (note this is the old Keynesian explanatory variable abandoned in spite of striking empirical success). Real interest rates have almost nor relation with consumption growth (this is also true of long term averages and not just habit formation). Exactly at the point you note, macroeconomics has failed totally.

    Data analysis here

    I don't think all mainstream macroeconomists are apologists for neo-liberalism. I know some of them and they are left of center. But their models don't fit the data.

    On seismologists: First it is correct to value predictions much more than ex post explanations. However, seismologists have amazingly successful explanations. Here one must distinguish (contra Friedman) between predictions we care about for practical reasons (when will the earth quake) and those useful to test hypotheses (the practically important ones and predictions about observations which are only interesting because the hypothesis implies the predictions).

    I have two challenges for Ryan Decker:

    1) Do you doubt that the standard model of earthquakes is fundamentally accurate ? I mean really doubt it more than you doubt the existence of, say, Australia ?

    2) do you really hope that DSGE models have roughly the same sort of relationship with the economy that tectonic models have with the earth that sometimes quakes ? Do you think they will be seen in roughly the same light in 100 years ? Assume we could check (hey it's fun to assume we will live 100 years). Would you bet on it ? How much and at what odds ?

    OK now a general challenge. How much do you trust the macroeconomic judgment of Nobel Laureate Ed Prescott ? Do you consider his forecasts when making inter-temporal choices ? Do you know what he said about the US economy in early Spring 2009 ?

  19. I wouldn't say that macroeconomists don't know their own field, but I would say that macroeconomists can often be caught making errors that are visible to a reasonably well-informed lay person.

    I could see Sumner makes a good case for market monetarism in general, but was way off-base, for example, when he claimed the appropriate fiscal multiplier is zero. I can also see that Keynesians are missing something if they fail to consider the monetary offset in assessing multipliers. It was clear (even before the spreadsheet errors were revealed) that there were methodological problems in Reinhardt-Rogoff in their (sort of) claim that their paper supported a 90% debt/GDP threshold.

    It is also clear that Fed economists have been overly optimistic for years about growth, and they are overlooking the importance of market indicators of inflation expectations. For Austrians and Austerians, it seems obvious they are ... completely out to lunch.

    I know about these things because, although I don't have expertise or training in macro, I know enough about it to be able to evaluate these questions, and evaluate the arguments (largely made by professional economists) on either side of the issue.

    So while a trained professional economist may know their field well, in a general sense, it seems all too common for professional economists to make visible errors in analysis, usually for obvious ideological reasons. Krugman also seems to note this, when he describes this as "the dark age of macro."

    These errors are highly prevalent. I don't know what exactly it is about macro that make its practitioners so error prone (not just in *prediction*, which is understandable, but in more fundamental aspects of their analyses), but when such errors are so prevalent, you are going to get pushback from the hoi polloi.

    1. Anonymous2:58 PM

      Well put!

    2. "I can also see that Keynesians are missing something if they fail to consider the monetary offset in assessing multipliers. "

      Which Keynesians when ? Krugman is a Keynesian. Back when the federal funds rate was well over zero, he confidently asserted that the monetary offset was complete.

      New Keynesian policy analysis focused almost 100% on monetary policy. Old Keynesian policy analysis considered multipliers for accomodating and non accomodating monetary policy. I don't think you can name a Keynesian who didn't consider monetary offset in a paper written after 1960.

      In any case, if you accuse a group of people of an error, you should name names and provide links. I think you didn't in your accusation against Keynesians because your accusation is totally false.

    3. No, economists aren't often caught making mistakes that are visible to a "reasonably well-informed layperson".

      What actually happens is that laypersons see assumptions and theoretical shortcuts made for complex but valid reasons and believe these things are "errors" because they aren't educated and experienced enough in the field to realize that it's not error but design.

      In other words, you suffer from the same disease that every layperson is infected with: thinking that because something SEEMS like an error it couldn't have been done on purpose for reasons that you can't possibly imagine precisely because you lack expertise.

      Economists, like all other scientists, work incrementally, building their work up, within a certain framework. That requires them to make certain assumptions, take certain shortucts, make certain leaps, and leave certain holes that will be corrected, bridged, and filled over time.

      You, the layperson, aren't patient or involved enough to understand why those things are done, so you just assume you are done in error.

      They rarely are.

  20. Rocket scientists make rockets
    Economists don't make economies.

    Without rocket scientists we wouldn't have rockets.
    We had economies before we had Economists.

    If we didn't train more rocket scientists we wouldn't have more rockets.
    If we didn't train more Economists We'd still have economies.

    What exactly do Economists do? Seriously, isn't the whole point of what you do to get nonexperts to make policy or modify their choices and behavior variously? How does that happen if we aren't part of the conversation. If Sumner presents a paper and only Economists here it, did he really present it?

    What is the point of this question? Look everyone knows Economists have left a lot for new Economists to discover, AND that they have discovered something already.
    It's also clear that everyone has confidence intervals that are far too narrow. So maybe yours can narrower than mine.

    Inquisitive - what else is there?

    It's the answer....

    1. What?

      Before we had economists we certainly didn't have MODERN economies.

      Modern economics has played a big role in things like Central Banking, regulation of monopolies, modern tax systems, the opening up of trade, etc.

      Modern economics helped teach governments that mass price controls are really bad, that mercantilist policies are disastrous, that .

      Who do you think developed measures like GDP and inflation and actually started tracking them so policy makers could make smart decisions?

      It takes someone really divorced from history and reality to think that the modern economy arose spontaneously without the input of people like Keynes, Tobin, Solow, Samuelson, Kuznets, etc.

      Saying we had an economy before economists is like saying we had computers before modern computer scientists.

      Well yea, we did.

      It was called an abacus and you couldn't exactly use it to post blog post comments on the internet.

  21. My concern is that all economists may be wrong ( the opposite has not been quantitatively proved yet) and thus give harmful recommendations. ( You remember Trichet's view on the usefulness of economic theories in monetary policy.) They do not take into account the risk of own misunderstanding and ignorance and consequences for people and economy. This is unacceptable. It is like not tested medicine or not certified aircraft. To some extent, economists have no responsibility for what they say and lay public consider their statements as "truth" because of general belief in scientific knowledge, which was built up by hard sciences.

    1. Economic decisions have to be made and economic policies have to be implemented.

      Even if economists can only improve those decisions by 10% or even 1%, that's still better than 0%. Yes- making those decisions WITH modern economics is absolutely better than making decisions blind, without any kind of guidance from rigorous economic theory.

      Before modern economics, you had Spanish kings triggering horrendous depressions and hyperinflations with ridiculously stupid economic policies.

      Believe it or not, economies were way more volatile, way more insecure, and way less capable of even, stable growth prior to the 20th century and the advent of modern economic theory and their resulting institutions (i.e. central banking, fiscal stabilizers, freer labor markets, etc.).

  22. Of all the issues to worry about, the fact that non-experts like me get on blogs and voice opinions hardly seems worth considering. Maybe we simply enjoy discussing subjects we're not experts in. I lived in Berkeley for 33 years and had innumerable discussions with experts, none of whom told me I couldn't discuss their subject with them because I'm not an expert. Rather, most enjoyed the interest shown by me and at least tolerated explaining aspects of their subjects to me. To the extent that I voiced opinions about these subjects, it usually had to do with more general issues arising from them. Of course, they did the same thing about issues they weren't experts in. I comment on blogs just to show that I support them and that other average buffoons like me can do the same. Pardon me for not asking your professional permission.

    1. Rather than a call for prohibition of discussion, I read the subtext of the complaint as being about how so many people get all Dunning-Kruger about econ, and fail to realize how little they know. This would result in a lot of people failing to understand the salient issues and generally being annoying.

    2. If something's annoying, best to ignore it. Life's too short.

    3. Your opinions and the opinions of people like you affect the way the rest of us live because they influence the way politicians act and get elected, the kinds of policies that are enacted, and the general direction of the country.

      We live in a democracy where people influence the direction of the country directly (i.e. by voting) and indirectly (i.e. by influencing people who DO vote, etc.). So we can't just ignore other people's opinions on things that affect us all.

  23. I read this yesterday.

    Then later I was reading Schiller's new version of :Irrational Exuberance".

    It made me realize that it wasn't just the general public that encroached on Economists, but that the public may see that Economists may step on the domain of other social scientists. On page 170 he started talking about "psychologists think...."

    And I realized that Economists do that to all social scientists. So there's perhaps an arrogance there in terms of the economists. There's also a weirdly low barrier to entry of understanding because there are some easy concepts in Macro 101 that don't exist in quantum physics.

    1. Not buckethead1:13 PM


  24. As an investor, macro is important to me, as I desire more wealth opportunities rather than fewer, yet current policy seems to be creating fewer.

    So let me offer an example. It seems to be a settled question among macro guys that if the economy is at full employment, government borrowing to invest in public projects will crowd out private borrowing/investment, and this is by definition a bad thing.

    Yet, it is obvious many public projects have generated far more NPV than potential private projects. If a higher return public project exists, and the macro guy says we must not make the investment to avoid crowding out, this seems insane.

    1. It would be insane to say that, but macroeconomists don't. The very prominent and very conservative Robert Barro has written more papers than I care to read about productive public investment and its optimal level.

      There are economists (and non-economists) who are pretty much pure libertarians and want private toll roads and, for all I know, private toll sewage treatment plants. But they are a minority

  25. Phil Koop8:18 AM

    these reasons also explains why laypeople get involved in debates over nutrition science

    "Debates over vaccine science" would have been more to the point. Yeah, I get that there is an acute shortage of data in macro. But I am not persuaded that more data would silence debate. We actually have quite a lot of data about nutrition, medicine, and vaccines, and yet the end of debate is not in sight. I think that whenever causes are neither necessary nor sufficient, they will be disputed. Because, whatever can be disputed, will be disputed.

  26. Yeah, these 3 arguments cover it almost completely. I think the matter can be demonstrated most clearly by the mantra that "the government needs to be run like a business/household". Politicians say that to explain economics in laypeople's terms, yet it's very wrong and very harmful in a depressed economy. But many conservative economists support this statement in principal and ricardian equivalence is still very important in economic theory. Politics, ideology, internal disagreement within the science and the fact, that the economy matters to everyone, these are the factors.

    By the way, do you know
    It's a blog about retractions of scientific papers and related science scandals.
    Economics papers get retracted suprisingly little:
    Your Update offers a good explanation. Results in macroeconomics are harder to come by, and thus, harder to refute.

  27. Anonymous9:16 AM

    This is not quite to the point of my pretending to have expertise in macro but .....I've been waiting for the $3 trillion the Fed has pumped into the economy to wreak havoc with inflation and interest rates. Hasn't happened yet. Macro theory at it's finest? Oil is down $50 - an $80 billion dollar /yr tax break for people who should spend the money - another interesting test.
    Many of the economics professors I meet are people with an agenda in a field where a statistic is available to explain anything. It's not that I think I know more, it's that their science has little predictive ability. The most I hope for is access to data that seems useful not their conclusions.

    1. Fortunately, the Fed didn't pump the money into the economy. It pumped the money into private banks' reserve accounts at the Fed.

  28. Scott Sumner, in the referenced post, writes "Often the comments go beyond 'wrong' into the realm of meaninglessness (i.e. 'banks don't lend out reserves.') "

    This example of a meaningless phrase is, of course, put forth by expert economists, but apparently economists that Sumner is too arrogant to acknowledge to be experts who he disagrees with.

    1. Anonymous12:39 AM

      If anyone knows how to be meaningless, it is you.

  29. I think it's because a reasonably intelligent lay person can follow the logic of an argument even when the recognize that they do not know the math. Econ can be turned into a narrative that helps non-experts understand. Is this really different than other fields? I understand how internal combustion makes my car go, but I still can fix it. I can't do economic models, but I do know enough to understand that Rand Paul is an idiot.

  30. Anonymous11:28 AM

    I'm some kind of environmental scientist, not an economist. but I've been following Mark Toma's blog for some time to try to get a better understanding of economics. I still don't claim to understand it, but I am persuaded that most economists and most other scientists have differing attitudes about data. To overstate the point, for most economists the models seem primary, and for most other scientists the data are primary. One of the things I like about Piketty is that he starts with the data.

    1. Anonymous12:40 AM

      You truly know nothing.

  31. I'm going to add something that, speaking as someone with only a little economics training (i.e., no degrees) may annoy the economists: economics is not all that far removed from its basic thought experiments, in which a lay person may engage.

    Sure, they're a ton of math in the background that I would not understand (although I have certainly seen people who pose as knowledgeable criticize Sumner for perhaps not being so math-y), but we're still telling stories about how people behave.

    1. Anonymous12:46 PM

      You should read GT by Keynes. Explains all his theory in plain language, and then ending the chapter with telling you that this may be summed up in the following one line equation.

    2. Anonymous12:51 AM

      Plain, self-contradictory language inconsistent with actual data.

  32. Anonymous2:40 PM

    Economics is much harder than Physics because man is so unpredictable and irrational, almost impossible to model.

    Therefore, in order to increase the accuracy of economic forecasts, economists should engage the help of neuroscientists.

  33. Anonymous4:39 PM

    Layman's question: what are the reasons to believe, that economist are more than highly intelligent specialists in a certain class of mathematical models which can be technically tweaked to show a wide range of behaviour but are not in any deeper sense a description of real world economies?

  34. As Galbraith said, "The only function of economic forecasting is to make astrology look respectable."

    The simple answer is that macroeconomic experts just aren't that good. They seem to understand all the parts very well, but how those parts come together is always a mystery it seems. Unless, of course, they are looking at things retrospectively, and then it's obvious. But ask for a forecast in real time, and prepare to be let down.

    If my weather man could only ever tell me why it snowed yesterday, but never offer up anything more than, "The sky looks troubling today," I'm guessing I might be a bit more inclined to challenge his expertise as well.

  35. Anonymous6:11 PM

    Point 2: you seem to be asserting that economists have no political agendas, that only their critics do. Fresh-water vs. salt-water economists seem to line up quite directly with conservative vs. liberal political policies. This is just a coincidence?

    Point 3: "perception that macroeconomists don't understand their own subject"

    70 years after the Great Depression, not only is there still debate about its causes, but also about whether FDR's actions were needed or useful. I can plot the disagreement along those political alignments the existence/influence of which you seem to deny. I understand why the Germans fear hyper-inflation, but looking at Greece, it's hard to understand economists who still favor austerity.

    In addition, some economic assumptions (and I apologize if I am confusing macro and micro) fly in the face of common sense. Classical economists seem to have been surprised by the results of studies in behavioral economics that show people are risk averse. Apparently they never learned"a bird in hand is worth two in the bush", "don't count your chickens before they are hatched", or ever had to stretch a paycheck to put food on the table at month end. Or take the conceit that the "economic" individual behaves rationally. Economists have never read "Extraordinary Popular Delusions and the Madness of Crowds"?

    Trickle-down economics? It doesn't take an economics degree to conclude that a billion dollars sitting in one person's off-shore account won't affect the economy as much as spreading it around 300 million people. Or to deny that using capital gains from selling stock to buy a yacht is more economically productive than using one's salary for the same.

    "If macroeconomists haven't gotten the kind of answers natural scientists have gotten, it's because macro is harder to get answers out of, not because macroeconomists are less intelligent or less honest."

    I don't see anything remotely resembling humility in the public pronouncements of the economists who shape the political economies of countries around the world. The Conservative ones "know" austerity works, that government deficits are always bad, that lower taxes on the richest 1% are good for the economy. They "know" that higher marginal tax rates cause people to work less. (Is there any empirical evidence anywhere that people turn down raises because their taxes would be higher? Maybe a worker would turn down overtime if every penny of that income went to the government, but those who are subject to overtime pay generally have no choice about working overtime.)

    Morover, since there are at least two schools of economists, at least two economic positions on every public policy economic decision, one side must be wrong. Why (dishonesty or ignorance) is a question I can't answer. But it is hard for me not to conclude that data is being manipulated to support one's ideology, right or left.

    Lastly, the assumption by Scott Sumner that non-economists have no right to enter into economic discussions is akin to the assumption by politicians that, as non-scientists, it is not part of their job description to opine on matters such as evolution or climate change. As you correctly point out, economic decisions by politicians (informed by, justified by prescriptions from economists) affect everybody. As such, we Ć«verybodies have an obligation to understand as much as we can from what we read and hear - and to demand that economists explain why there are liberal and conservative schools and why we should not, therefore, treat anything they say with the same skepticism we apply to a politician who promises to serve the voters rather than the donors?

  36. Anonymous7:24 PM

    How is it that economists keep getting away with comparing what they do with actual science?

    The analogy should be to philosophy, not string theory, and then the answer to your question becomes quite clear. Economics is the epitome of mathematical rationalization, not mathematical rationality.

    1. Well said. Noah was debating several economists only a few posts ago about what has happened to median wages over the last 30 years.

      Really? is there no standard way of measuring and evaluating something as fundamentaly as median wage growth?

      Sadly there are way too many examples of this. Just google "what happens when the minimum wage is increased"? to see what I mean.

      Of course people don't view it with the same critical eye as physics.

  37. Nick L8:02 PM

    In reference to number 1, I don't think the problem is that other sciences don't "affect us every day". I don't need to know how an internal combustion engine works to get to work in the morning, but the fact that the engine does work is certainly what gets me there. Similarly, I don't need to know the relationship between GDP, inflation and unemployment, or that I'm making decisions at the margin, etc., to have a successful career or to make good choices.

  38. In a democracy, monetary policy is far too important to leave to the "experts."

    1. Yeah, we should turn it over to a bunch of drooling gold bugs.


    2. There is nothing stopping the drooling gold buggers from taking over monetary policy now.

      Remember: Congress has the exclusive power to regulate the monetary system (including the value of money), which it has *delegated* to the Federal Reserve. For an interesting project, why don't you research differential inflation rates amongst states under the Articles of Confederation.

      The short and sweet is that Congress brought the FOMC into existence, they can take it out too. The Federal Reserve is never but two mistakes away from getting it's authority revoked. We elect Congressional representatives (and the president), who appoint / approve FOMC members. If Rand Paul wants to filibuster any of the upcoming 3 appointments to the FOMC (which he will), he already can do that.

      So technically, electing FOMC members just cuts out the middle men (and women).

    3. dwb,

      Yeah, Rand Paul can cause all sorts of trouble, but I doubt he will be able to pass a law that changes how the FOMC is governed or what it does. Just as he can gum up appointments by filibustering, any law he proposes will face the same from others, not to mention likely presidential veto, unless of course he becomes the prez, or maybe Ted Cruz, with a 2/3 majority in the Senate. Not too likely.


  39. Anonymous2:42 AM

    "though the "Austrian" and "heterodox" people do annoy me, since they approach things in a tendentious rather than an inquisitive manner"

    I think this remark is in itself "tendentious" and 'uninquisitive'. Have you read any Austrian or heterodox economists?I do not agree with Hayek, but I do know from people who have read it that it is a very substantial book. It is not gimmick or silliness or bed-time. Ditto for heterodox economists - Maddison, Myrdal, many others.

    Many people who criticise the mainstream profession are concerned about hubris. And it is particularly aimed at New Keynesians (obsessing with things like RBC and sticky prices when a problem somewhere has nothing to do with either). A lot of people deal with economic data and economic-related issues through their own work, they may be historians, political scientists, sociologists, social workers. aid workers or whatever, but they suspect that theoretical workhorses are leading economists up the wrong tree with bad policy results (Asian financial crisis response, ridiculous policies by the World Bank and IMF towards development, or missing dangerous signs during the Great Moderation). It does not help when there is a lot of pomposity from economists about how wonderful their theories are and how they do not need to learn anything from anyone else.

    1. How many Anonymouses are there here? Gag!

      I am friendlier to hets than many here, probably including Noah, indeed, am often categorized as one, although David Colander once loudly and publicly declared that I am "too respectable to be one," something I hope I have sufficiently discredited myself to have stopped being ("too respectable" that is).

      Anyway, 1) Regarding Hayek, it is not "a very substantial book;" he wrote many over many decades, with some of his more substantial ones being the least read, e.g. The Pure Theory of Capital, and b) Angus Maddison was not remotely a heterodox economist. He was highly respectable and most economic historians use his estimates of past GDP levels in countries around the world and through time as the best there available, about as respectable as they get (and way more so than I am, :-)).

      Barkley Rosser

    2. Anonymous4:24 PM

      Rosser you need to understand what is meant by heterodox. It does not mean orthodox. It does not also necessarily mean not being mainstream.

      Traditionally orthodox meant classical. That, for example, rules out Keynes.

      Maddison would certainly not like being considered orthodox, and probably not mainstream either. Yes he is the best economic historian in living memory. He is a post-Keynesian - who are heterodox..Very critical of Friedman/Sargent etc. He really did criticise the direction the profession took from the 1980s.

      I think you can basically sum up a heterodox economist as people who do not believe that (neo-classical) micro-founded macro is the right approach to analysis.

    3. Anonymous4:26 PM

      Sorry that should read," it means not being orthodox, but that does not necessarily mean not being mainstream". Ie you can theoretically be mainstream and heterodox - although it is not common, especially now.

    4. Anonymous,

      Oh, I love this, some anonymous schmuck lecturing me on what it means to be "heterodox." Go to my website and read a few of the papers I have published, some of them rather heavily cited, on the subject, please.

      Anyway, Angus Maddison died in 2010. He may have been sympathetic to Post Keynesianism, although this is the first I have heard of it. The overwhelming majority of his pubs are as I said, on long run growth issues.

      Regarding what distinguishes "orthodox" from "mainstream," well, David Colander and Ric Holt and I say orthodox is an intellectual category, call it "neoclassical economics," if you want, whereas "mainstream" is a sociological category, the people in charge. There are indeed plenty of the latter who are not the former, e.g. George Akerlof and Vernon Smith. A heterodox economist is one who is neither, at least that is what we have argued in various venues.

      Barkley Rosser

  40. Anonymous8:44 AM

    "In a democracy, monetary policy is far too important to leave to the "experts."

    I agree. Macroeconomist are a pretentious and pompous mob. Krugman does not hesitate to comment on foreign policy, even though he does not know the first thing about international relations theory or models. Do foreign policy experts mind? No. They are not pretentious enough to think that people cannot comment on decisions to go to war unless they know such theory and they understand the importance of wider discussion. Economists wish to keep outsiders out stems from a deep insecurity. They know their models are totally arbitrary and lack explantatory power and do not contribute to deep understanding. And you know what, they don't seem to care.

    1. Sure, Anonymous. Let us turn it over to Rand Paul, who, after all, claims to represent "the people." That will be just great.


    2. "Economists wish to keep outsiders out stems from a deep insecurity"-Anon

      Lol, do you have emperical evidence to back this up? Can you give me a confidence interval on the number of economists who feel "insecure"?

  41. Anonymous9:19 AM

    Noah, I once liked your critical blog. But bit by bit, you have become just another mindless heterodox-basher, like most people who visit your blog. A short overview of the thoughtful lines you and your buddies are writing:
    - The "heterodox" people you meet in the blogosphere are almost all just leftists
    - "heterodox" people do annoy me
    - “awful heterodox/austrian beliefs”

    Maybe you should stop writing about macroeconomics and just show the line:

    “We are the mainstream. You Will be Assimilated. Resistance is Futile.”

    Gives you more time to write about more interesting subjects!


    1. Anton - When I started writing this blog, I had never met the "heterodox". I didn't even know they existed. Now I do.

    2. Anonymous12:48 AM

      You were better off before.

  42. Anonymous1:25 PM

    "But in fact almost none of these terms mean the same thing in macro as in everyday life."

    No kidding. Black's Law Dictionary comes to mind (I'm neither an economist nor a lawyer).

    You economists have a serious domain of discourse problem, right under your nose, that you don't seem to see. If those things in macro are not the same as in everyday life, make sure you don't discuss as if they are the same. Because they're not.

    Medicine (chemistry and biology, among other disciplines) solve this problem that you apparently don't even recognize, neatly, by using Latin - a dead language outside the hierarchy of the Catholic church and their own discipline(s) - as the basis for their domain(s) of discourse. You economists (and lawyers) choose instead to think you have the right and privilege to redefine at your whim the language the rest of us use for everyday things. That not only makes you less than relevant, it makes you duplicitous hypocrites as well In truth, you know very little about everyday things, because you're not talking about everyday things. You just want the rest of us to think that you are talking about everyday things.

    Find a dead language to use instead. Stop killing the language(s) the rest of us use every day.

    1. Anonymous,

      Oh come off it. This is very lame. Just how do you know that macroeconomists are "discuss[ing] as if they are the same"? Since you do not know the economists' meanings for words, there is no way you can tell.

      One simple example, the word "capital." For most non-economists, "capital" is imply money or financial assets. For economists, when it has no modifier, it usually means "produced means of production," with economists usually adding "finanical" in front of it if they want to use it as regular people do. There are many other such examples.

      BTW, while most economists think that they know and agree on what "capital" means, in fact when one pushes down further, this is one of the most contentious words in all of economics. The publicatio and big sellnig of Piketty's book with that word in its title has brought this out as he uses the term in a broader sense than most economists, not only including financial capital, but even land. In fact there are other meanings of the word floating around in the history of economics, with Marx having declared it be a "social relation" and Austrians and even Irving Fisher and some others arguing that it is really "time" or maybe "the roundaboutness of production," with there being even yet other contestable meanings.

      Barkley Rosser

  43. One more comment now that I have gotten all snotty and pompous. Another view on "rudeness" and econ heterodoxy is that of the late Fred Lee, who considered himself sort of the world leader of the organized heterodox economics movement. He distinguished between "heretics" (aka "dissenters") and "blasphemers." He did not like the categorization that Colander, Holt, and I came up with and criticized us publicly for it. His categories had to do with both degrees of belief and also how people should approach each other. To him the "heretics" dissent from orthodoxy but still believe it at some level and try to have friendly conversations with the mainstream/orthodox, whom Lee tended to more or less lump together. He viewed such people as not really heterodox, and shortly before he died he told me that I was one of those mere heretics.

    OTOH, "blasphemers" are the real heterodox who know that neoclassical economics is profoundly and totally wrong and must be attacked, including being tough with those adocating. This toughness can certainly come across as "rudeness," at least from some people, such as especially feisty Ozzies... :-). Of course, Fred himself viewed himself as a blasphemer and was proud of it, may he rest in peace.

    BTW, as an obscure point, Fred was an actual card carrying Wobbly, indeed for awhile onoe of their top people and personally received the ashes of Joe Hill from the National Archives when they were returned to the IWW a couple of decades ago. The guy did not take prisoners or mess around.

  44. Thanks for the link and the snappy summary. To be fair to macro (and defend myself) I really just said that you handn't described any interesting macroeconomic discoveries in your original post. However, you are not a pro-macro advocate.

  45. Thanks for the link and the snappy summary. To be fair to macro (and defend myself) I really just said that you handn't described any interesting macroeconomic discoveries in your original post. However, you are not a pro-macro advocate.

  46. When Ryan Decker wrote in response to Reason #3 above:

    "When I fire up my web browser I'm not bombarded with confident non-expert opinions about earthquakes, despite seismology's apparent inability to predict them."

    He should try

    Oklahoma earthquakes fracking


    italy prosecution sesmologists

    Just sayin

  47. I'm surprised at the summary of blogster's performances about predicting or non-predicting of the great recession and its aftermath that nobody has mentioned Bill McBride's 'Calculated Risk'. there is more truth and accuracy on his blog than many other places and while he mostly is a synthesizer of data, his predictions are usually on the mark. He called the housing disaster as well as the recovery and was out in front along with Krugman and a few others that inflation was nothing to worry about.

    I find this whole discussion rather entertaining but maybe is more akin to looking at how many angels can dance on the head of a pin as opposed to providing any lasting value.

  48. Alan,

    McBride is certainly one of the highest quality econobloggers around. But he is an interesting case in that he shows how an amateur can in fact step out ahead of the pack. While he somewhat a general data synthesizer, he has specialized for a long time in following the housing market closely, and he has earned a reputation for being one of the best informed and most insightful bloggers around on that sector. That he was aware of the housing bubble certainly reflected that, and he certainly looks good on joining Krugman on the inflation forecast. There are some others like him, with Bruce Webb at Angry Bear who has become a leading expert on Social Security, and there is some guy whose name I forget now who has also become the go-to guy on the health care issue, Krugman cites him periodically. These people deserve the respect and attention that they get.

    Regarding Krugman, of course he is at the opposite end, about as prestigious in terms of scholarly background as any econoblogger, with a Nobel Prize and a very high rate of citations of his published works. He also has been documented as having one of the best forecasting recoreds around, although there were others who were a bit ahead of him and more accurate on the events surrounding the crash and Great Recession, while he was well ahead of many others. If I have a complaint with him it is that he occasionally does the "pulling academic rank" game with others. Usually he does it with people who are wrong or misguided in what they are pushing, but not always. When he does that, those are not his better days.

    Barkley Rosser

  49. Jose Romeu Robazzi3:38 PM

    I am not an economist. The reason I am not so fond of any economist and economic bloggers in general (altough i do read them, in order to find some hint that proves useful in the end) is that you can't write down what they say. I have read "The General Theory", I have read the "Wealth of Nations", I have read "Monetary History of the US", I have read "Human Action", I have read Hayek's lectures where he explain his triangles, I have read Krugman's textbook. And to be very frank, the only economic historian tha seems to be fair to what he other authors have written is Murray Rothbard. That is why I am sympathetic to the Austrians. I read, everyday, mockery of Austrians in the blogosphere, and the more I read, the more I see critics haven't read Mises or Hayek. So, what are they really criticizing after all, they seem to not know what they are takling about. But this is just an example. One could go the other way around, and say that many Keynes critics haven't read Keynes at all. And that is probably true. I would also say that many self appointed "austrians" never read Mises, and other "Keynesians" a never read keynes either. In short, the reason non-economists feel that they can talk economics is because economists don't seem to be very professional. In general, the more vocal the economist is, the less professional. Is that a good reason, then ?

    1. Anonymous12:47 AM

      Austrians aren't economists, so we're not obligated to read them.

    2. Jose Romeu Robazzi4:59 PM

      Nobody is obligated to read anything. Pls, don't read anybody you don't like, keep your confirmation bias going

  50. Much of this surely must be a function of the relatively recent development of the internet and the blogosphere, along with the occurrence of the financial crisis in the same time period. That’s a lot of grist for the mill. “The financial crisis” opens up debate on the performance of economists in assessing finance and banking, with lots of experts in those areas who aren’t economists. Mix all that up and you have certain chaos in the analysis of these things.

  51. If I had seen in my lifetime, any evidence that the purveyors of macroeconomics had the slightest clue what was happening I'd be more impressed.

    If I had any faith that macroeconomists acknowledged and respected the laws of thermodynamics, I'd be less likely to hand them their heads when I encounter them... as I am wont to do.

    Real money represents work done. It cannot represent debt. If you deal with it that way it becomes a standard which can be used to measure everything that it is supposed to measure, and the (many) errors in its use become obvious to anyone who understands physical laws.

    You want respect? Earn it.

  52. If I had seen in my lifetime, any evidence that the purveyors of macroeconomics had the slightest clue what was happening I'd be more impressed.

    If I had any faith that macroeconomists acknowledged and respected the laws of thermodynamics, I'd be less likely to hand them their heads when I encounter them... as I am wont to do.

    Real money represents work done. It cannot represent debt. If you deal with it that way it becomes a standard which can be used to measure everything that it is supposed to measure, and the (many) errors in its use become obvious to anyone who understands physical laws.

    You want respect? Earn it.

  53. Anonymous1:51 PM

    Hee hee! I just love the original post as one of those alluded to therein.
    I give you a 10 / 10 on your trolling, for here I am, a non-degreed macro enthusiast as well as a troll.

    For my personal, mmm, 'qualifications', let me say that I have an IQ well above average, lots of free time (this is not an inconsequential thing), and enjoy many types of thought experiments.

    I first learned of Keynesian Macro in high school, where the basic building blocks of macro were explained to me at a time when I was rather more receptive to it than not.

    After that, for much of my life, I have given macro and econ serious thought without the benefit of any teachers, professors, or otherwise qualified people around that I could turn to for guidance.
    I have come to some interrrrrresting conclusions, lol, about some aspects of both macro and econ that are not contradicted in any way by any credible professor.

    Now would be a good time to mention that I am a solid fan of Professors Krugman, Thoma, et al in that school of thought. They are solid on what they speak and I just love that about them.
    Krugman is exceptional in that he has a writing voice comparable to many great writers in that his writing is easy to understand and absorb in a non-stuffy way. He's a person and talks like a regular guy. Some of you might try that if you want a wider audience.
    Thoma is like this too, but it is harder to find his words on his blog.

    I do see, on occasion, a few small errors in, say, theory or labeling or indexing of certain facets of the data they use to great effect, but until this gets out of hand, I will trust them to self-correct once they take a moment to reflect on that part of what they are doing and see what I see as error.

    To my own understanding of macro and econ, I am okay with what I know and do not need to memorize the formulae or do worky wonky modeling using graphs to see the ebb and flow of economic influences in the world around me, or even for historical analysis.
    No, I have "gotten" Keynes on my own from the basic building blocks which have not changed in all this time and am more than glad that there are people like "Krugmaster P" (that made me laugh when I saw it above) who are famous enough that I rely upon them to do much of what I would have attempted were I in a similar position of ability and authority.

    I only learned of people like PK relatively recently after many years of distraction. I am an old man now. High school is a distant thing to me now. I do my own analysis and am always willing to turn to qualified professors like PK and Thoma to get the complicated details more or less correct when I feel the need.

    I am not an average troll. I rarely bother to comment, but when I do, it is as an undegreed enthusiast who nonetheless understands a great deal about macro and econ.
    I don't need a smelly bit of sheepskin with fancy scrollwork along the edges to validate what I already know or to give me authority to speak. It is too late for me to bother with all that, for I have other things I understand that preclude such a course of action.

    The intellectual blindness in your original post is understandable. You do not believe that thoughtful, intelligent people could possibly have anything worthwhile to say if they haven't wasted years getting a degree in whatever. This is a normal human response but a wrong one.
    Yes, I said you were wrong on that.
    Now you can dismiss me as just another troll and go about your biased day.
    Did you read this all the way through? Thank you for taking the time. I hope you weren't completely disappointed in how I have responded to your trolling.
    Have a nice and, hopefully, unbiased day.

  54. I may speak for myself: I don't think I am an expert, I think most of the so called "experts" have no clue whatsoever. Sumner is a case in point, he pontificates about monetary policy but has not the slightest clue how the monetary system works, what banks do and don't do. I one discussion he and his acolytes were thoroughly shredded by some guys who work in finance, he was reduced to asking for links to post Keynesian literature to read up on the reality, but since then his output has not improved.

    One of the central facts in macro is monetary sovereignty and distinction of currency issuers. The mainstream had no clue as late as 2011 why sovereign issuers have low and controllable rates, Krugman documented his own cluelessness on his blog. You wrote a whole blog post parading your obliviousness about financial repression and public debt in Japan. You managed to get a PhD and you don't know anything about finances of sovereign money issuers. It's like physicists not knowing about gravity.

    As for your dissing of the heterodox, this is just funny. Look at whom the market hires: it doesn't hire people like you, Krugman, Sumner or Kimball. It hires Ian Hatzius (Wynne Godley's student) and Paul McCulley. They are giants making multimilion dollar salaries working in heterodox tradition, are they annoying to you? McCulley thinks that your little paradigm is basically worthless, he thinks MMT had relevant things to say before and during the crisis.

    I would never think I know more than Hatzius or McCulley, because I am no expert, but I see the mainstream spouting inanities every day. Sumner view on bank operations is objectively wrong, Krugman's as well.

    Your blog is great because you show why your paradigm is worthless (great entry on DSGE swamp), sometimes unintentionally (financial repression in Japan). We need more positive, constructive macro, that's why I wish Hatzius and McCulley blogged. Mainstream macro as you explained as well is great for getting a safe job in academia, not much more.

    1. Jose Romeu Robazzi3:39 PM

      Great comment, most people in blogosphere don't understand how financial markets really work. They never bothered to go to a big bank, sit a few days beside a head trader or banker and understand what those people do. I would just add that most really good people in academia are much more judicious in their comments than most bloggers, who just have political agendas. But, in defense of economists, let's be fair, their life is not easy: everything that was tried in macro failed. Keynesianism failed (yes, despite some very vocal bloggers, observed multipliers are so close to 1 that people who actually make decisions don't believe it), new classicals failed, RBC failed, and until 2007, what seemed to be almost good, new neoclassical synthesis (RBC + New Keynesian models = recent DSGEs), also failed. They are in search of a model that actually can be used safely in policy design. Scott Sumner has one suggestion: stabilize NGDP. At least this is something (somewhat) new ...

  55. Anonymous11:20 AM

    A lot of people who believe that they can speak about macroeconomics, but are not Ph.D. economists, may have insights into the workings of the economy that is superior to that of an economist working strictly from an econometric model. I would put professionals who work in the commercial sphere and have substantial commercial experience, and thoughtful politicians who have lived through business cycles and have to vote on and live with the results of their decisions. No econometric model that I have heard of predicted the collapse in the housing market, but there were astute investors who presciently bet on just that, and got rich doing so. Alternately, one of these individuals subsequently made an outsized bet on gold (with other peoples money) and lost a substantial amount of money lest anyone think that one can always make the right call.

  56. Kudos on calling out the Austrians. They are the worse. Very rarely do they approach things with the attitude of wanting to know something. They already know the answers, they just need to invent their own reality until it fits with their answers. That shit is annoying.