There's More to Economics than Macro

Gregory Clark calls out economists as failures in an interesting piece over at the Atlantic's business section:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.

I find this an extremely frustrating line of argument. Look, you'll get no arguments from me that modern macro has not been a beacon of light in the financial turmoil. But the idea that somehow the failure to predict, or solve, banking crises somehow discredits all of economics, from industrial organization to labor and everything else, is bizarre. Really, Greg, do you think your excellent book on economic history has been revealed as rubbish because GDP might decline 5%? Nonsense.

Or, as Will Wilkinson (who has been on fire lately) put it: It's macro that's embarrassing.

Share this

The bailout debate has also

The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.

One could read this as "there has been essentially been no advance in our knowledge of macroeconomic policy in 80 years", since he is referring to a specific debate.

You could. Mainly, I'm just

You could. Mainly, I'm just annoyed at the tone of the article, which really does seem to treat macro as all there is. At least in my program, the vast majority of the class endures our ritual hazing in macro, learns to slam through the problems on exams, and promptly dumps it in the trash when we pass the prelim.

This has bothered me for a while though. If you meet a random economist, there is at least an 80% chance she does something other than macro, and yet everyone just assumes we all study inflation and interest rates.

Two economies

(Not an expert but seems to me) There exists two parallel economies, one for people who earn wages and borrow money, another for people who loan money and live on capital gains. In the 1950's and 1960's, both economies increased. In the last 10 or so years the economy for the wage workers and borrowers has been decreasing while the economy for the lenders has been climbing. For the people in the middle, the upper middle class, the results have been variable.

Maybe the lenders depend upon the macro economy, the borrowers on the micro. During the 1930's it wasn't the very rich who were jumping out of windows but the wannabees, the people in the middle who had been spending paper profits. The very rich raised their position on the food chain as the bottom sank.