logo
  Join        Login             Stock Quote

Nothing New In Macroeconomic Methodology? (Wonkish)

 March 05, 2012 10:08 AM


Simon Wren Lewis who is a professor of economics at Oxford University has an interesting piece (hat tip: Mark Thoma) on the distinction and choice between micro founded macroeconomic models and top-down models such as the IS/LM (Keynesian) or other variants such as Modern Monetary Theory (MMT).

I think this is an interesting discussion and I have penned my own thoughts on microfoundations in macroeconomics here. Mr Lewis is balanced but seems to be on Paul Krugman's side (by and large) who has been devastating in his critique of modern macroeconomics especially in the wake of the financial crisis. 

[Related -Germany Is On The Rebound - Time To Buy?]

For good order, my own views are summarized in the following snippet. 

[Related -Is Drought Risk In The American West An Economic Threat?]

Two obvious questions impose themselves at this point. One is whether the use of representative agents in macroeconomics has something, in general, to do with the recent soul searching among macroeconomists and the critique against the profession. And the second is whether the study of macroeconomics and demographics in particular calls for the non-use of representative agent modelling.

On the first I don't necessarily think that it exists to the detriment of macroeconomics as a discipline, but I do think that a couple of points need mention. First of all I will echo the point made in Hartley (1997) that given the widespread use of representative agent modelling in almost all corners of macroeconomics and the almost religious devotion to it in graduate and PhD economics I think it is highly problematic that we have not had a more serious debate of its methodological merits. I would emphasize this in particular in the context of the fact that the use of representative agents leads to very inflexible (although rigorous) mathematical models and the blind faith in these models tend to steer macroeconomics onto a very narrow methodological path.


Next Page >>123
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageGermany Is On The Rebound - Time To Buy?

Based on this year's 17% spike in the Stoxx Europe 600 Index, it seems investors have found a home in read on...

article imageIs Drought Risk In The American West An Economic Threat?

The historic and ongoing drought in California is getting harder to ignore in terms of its potential impact read on...

article imageFunds Behaving Badly

Discipline is still the key to read on...

article imageGenuine Parts Co. (GPC): This Company's Raised Dividends For 59 Years

There are 253 million cars and trucks driving along U.S. roads. And the average age of those automobiles is read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.