Kocherlakota's general point was that people like Krugman greatly exagerrate in their characterizations of macro-econonists. But underneath, I sense that he agrees with Krugman, albeit in a much grayer shade.
a key point was 9. Macroeconomics is mostly math and little talk.
One of Krugman's main points is that many macro-economists have fallen so much in love with their math that they're unwilling to recognize the limitations of their models. As a result they failed to see the seriousness of the events that led to the current economic crisis.
Kocherlakota argues that economists generally recognize that macroeconomic models leave out many real world features - because it's impossible to build a useful model that perfectly corresponds to full complexities of reality. And Kocherlakota is probably correct about economists being very aware of this.
But it also seems very plausible that some (all?) economists do "fall in love with their mathematical models" to some extent. This would seem especially likely in a field where math plays such a dominant role. It just seems like human nature. It's easier to pooh-pooh conflicting data than to have to admit your elegant model might have some severe shortcomings.
Originally posted by Melanerpes Kocherlakota's general point was that people like Krugman greatly exagerrate in their characterizations of macro-econonists. But underneath, I sense that he agrees with Krugman, albeit in a much grayer shade.
a key point was 9. Macroeconomics is mostly math and little talk.
One of Krugman's main points is that many macro-economists have fallen so mu ...[text shortened]... icting data than to have to admit your elegant model might have some severe shortcomings.
I respectfully disagree. 🙂
The first points clearly show what macro is at the moment and how radically different it is from Krugman's description. Krugman is a great economist, but he seems out of touch with modern macro and so makes his attack on it look foolish and completely negate Krugman's conclusion by showing that economist have been doing what he says needs to be done!
In his point 9, he starts by saying that these economists are also gifted economists BUT that they do not commit the mistake of neglecting the importance of modelling. Furthermore he goes on to say that intuition alone is dangerous. Intuition is a sort of partial equilibrium view of the economy and research has shown that general equilibrium results often are at odds with partial equilibrium ones, due to complex rippling effects that may be hard to grasp intuitively WITHOUT formalism.
I really don't see his point 9 has being against formalism or that macro should be more talk and less math. Quite the contrary.
Originally posted by Palynka I respectfully disagree. 🙂
The first points clearly show what macro is at the moment and how radically different it is from Krugman's description. Krugman is a great economist, but he seems out of touch with modern macro and so makes his attack on it look foolish and completely negate Krugman's conclusion by showing that economist have been doing what he being against formalism or that macro should be more talk and less math. Quite the contrary.
I'm not arguing that macro-economics should become "more intuitive". I agree that the mathematical models play an extremely important role.
My point is that it's precisely because math plays such a vital role, I can easily see the experts "falling in love with their models". The discipline is going to attract people who are inherently "in love with math" - so I can very easily imagine such people overestimating how much of reality the models actually explain.
I can also see the experts "falling in love with the establishment" - especially when it effectively explains a lot of things. It becomes easy to dismiss dissenting views.
But these are just things that are part of human nature. I may be wrong about economists. Perhaps most or all are disciplined enough to rise above these tendencies. Perhaps.
Originally posted by Melanerpes I'm not arguing that macro-economics should become "more intuitive". I agree that the mathematical models play an extremely important role.
My point is that it's precisely because math plays such a vital role, I can easily see the experts "falling in love with their models". The discipline is going to attract people who are inherently "in love with mat s. Perhaps most or all are disciplined enough to rise above these tendencies. Perhaps.
Ok, but that's not what he said.
(if you want, we can talk about this further. So far, I was just trying to point out that the author isn't agreeing with Krugman at all, quite the contrary)
Originally posted by Palynka This is by far the best reply I've read. Cochrane was much less clear-minded. I haven't seen Lucas'. Do you have a link?
Google "in defense if the dismal science"
It isn't a direct response to Krugman's now infamous article which was written almost a month later. Nevertheless, it touches on a lot of the criticisms that Krugman puts forth.
Correcting Paul Krugman
18 Sep '09 12:35
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