Recent Macroeconomic Thought as an Interrupted Three-Cornered Cage Match

Recent Macroeconomic Thought as an Interrupted Three-Cornered Cage Match: "Recent Macroeconomic Thought as an Interrupted Three-Cornered Cage Match
Greenspanists, Producerists, Punchbowlers—and Nihilists
Download pdf version: 70.pdf">20090921 macro thought >70.pdf.

Also second part here. 

Economist's View: What's Wrong with Macroeconomics?

Economist's View: What's Wrong with Macroeconomics?: "Some recent contributions to 'what's wrong with macroeconomics?'"

Economist's View: "On Krugman"

Economist's View: "On Krugman": "On Krugman, by Robert A. Levine, Rand Institute: Being a saltwater economist, by ideology and a bicoastal education and career, I of course think that Paul Krugman’s “How Did Economists Get it So Wrong?” made some major points that needed making, and as usual made them very well. But he also left two major omissions, inclusion of which may change the states of both theory and the economic outlook."

Priceless: How The Federal Reserve Bought The Economics Profession

Priceless: How The Federal Reserve Bought The Economics Profession: "The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

'The Fed has a lock on the economics world,' says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. 'There is no room for other views, which I guess is why economists got it so wrong.'"

Krugman: Getting Economists Wrong | Capital Gains and Games

Krugman: Getting Economists Wrong | Capital Gains and Games:

Samwick argues that economists missed the economic crisis because of empirical errors rather than due to ideological blinders. He argues that Krugman is wrong in saying that the Chicago School and related free-market fundamentalists caused the profession to miss the building problem. The economists Krugman criticizes are not the sort of mainstream Republican economists who advised the Bush administration. Krugman did not predict the banking system failure either. Many economists (including Krugman) were more concerned with a dollar collapse than with a financial collapse.

"Krugman's essay is written as if the failure of economists was a failure of the profession to correctly advise policy makers on what to do, either before the financial crisis or during and after the recession. I don't see the policy advice being given to recent Presidents as being too tainted by this controversy. The Chicago School may not be of much help in getting out of the recession quickly, but neither has it been at the center of policy making. Consider the recent members of the Council of Economic Advisers -- there is hardly a Chicago-school devotee in the mix. Presidents over the last two decades have been getting their advice from academic economists who generally believe that the government has a role to play in making up for weak demand during a recession. If we failed to provide good advice, it has nothing to do with our profession's internal disagreements."

How Did Economists Get It So Wrong? - NYTimes.com

How Did Economists Get It So Wrong? - NYTimes.com: MISTAKING BEAUTY FOR TRUTH "...financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts."

The National Interest

The National Interest: "THE GREAT Credit Crisis has cast into doubt much of what we thought we knew about economics. We thought that monetary policy had tamed the business cycle. We thought that because changes in central-bank policies had delivered low and stable inflation, the volatility of the pre-1985 years had been consigned to the dustbin of history; they had given way to the quaintly dubbed “Great Moderation.” We thought that financial institutions and markets had come to be self-regulating—that investors could be left largely if not wholly to their own devices. Above all we thought that we had learned how to prevent the kind of financial calamity that struck the world in 1929."

Read the whole thing.

Matthew Yglesias » The Trouble With Prescience

Matthew Yglesias » The Trouble With Prescience: "And in the reputational economy of analysts the consequences are even worse. If you go along with the herd and then predict a problem a month before it arises, then you strike everyone as prescient. But if you start warning about something and then it doesn’t happen, and then you keep nagging people, and then you keep complaining about how nobody’s listening to you, you start getting dismissed as a crank. And when you’re proven right, you’re still that crank nobody wants to listen to. You don’t get hailed as a hero. But Ben Bernanke who made very mainstream mistakes and then pivoted adroitly once the bill came due does."

Japan's Lost Decade and Financial Crises

Why we need a new macroeconomic paradigm | vox - Research-based policy analysis and commentary from leading economists: "Do the US and Europe risk repeating Japan’s lost decade? This column warns that if the US or European financial clean-ups falter, they will be vulnerable to recurring financial crises. It argues that macroeconomic models should not treat finance as an innocuous veil and calls for a new approach that places financial intermediaries at the centre of its models."

Part of the problem of macroeconomics is that macroeconomists mostly ignore finance and a big problem with finance economics is that they ignore macroeconomics.  More cross-specialty work please.