The Great Ricardian Equivalence Debate of 2011: Do Mainstream Economists Agree on Anything?

Krugman started it, in response to Lucas. Everyone piles on. Plutocracy Files has the list of links. (Plus don’t miss Nick Rowe’s, which includes a long comment thread.)

Here’s what wows me: all these world-classical economists are accusing each other of contradicting “textbook economics,” and circling through extraordinary contortions in their efforts to reconcile that school of economics with some version of reality.

There is no consensus. None.

Every one of these folks is bought into classical assumptions, or at least into the Keynesian/classical “synthesis” that’s embodied in the IS-LM model (a model that was created explicitly to render Keynes classical, i.e. without the the Keynes, and was later disavowed by its own creator, John Hicks, as nothing more than a “classroom gadget”).

And they’re all trying to do intergenerational macro in their heads, as a bunch of stylized and simplified thought experiments.

I just finished re-reading Lucretius, and the methodological similarities are striking.

Given that several of the world’s most notable “textbook” economists can’t agree on how to define what in physics would be the equivalent of angular momentum, some of us have to wonder if the whole discipline as taught today offers any useful macro-level insight or modeling utility at all.

I think it’s significant that an authoritative MMT voice has yet to weigh in (I think they all probably think it’s silly — or would be if it didn’t reveal such dysfunction), aside from a passing shot by Mike Norman.

Cross-posted at Asymptosis.

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