John Q. Policymaker is driving a minivan. Maynard Keynes is in the passenger seat, Ed Prescott and Robert Lucas are in the second row of seats and Eugene Fama and John Cochrane are in the back seats.
John Q: We are heading for a cliff !
Maynard: slam on the brakes.
Prescott: I don’t see how brakes work. Alan Greenspan has had fewer traffic accidents, since he stopped using brakes. I know some people still teach about friction in third rate departments, but they aren’t really advancing the science. You’ll go just as fast whether you slam on the brake or not. In modern bicycle theory it is assumed that there is no friction so the concept of “braking” is meaningless.
Maynard: Don’t listen to him. Slam on the brake pedal. We’re all about to die.
John C: Yes this is a stressful situation and in stressful situations it is tempting to turn to the fairy tales of our childhood.
Maynard: It’s not a fairy tale. It’s a brake. It’s worked before.
John C and Eugene in unison: Brakes are supposed to work because the disk spins under the brake shoes. If the disk is spinning we are going forward. Therefore brakes can’t slow us down. There is a logical contradiction between saying we should brake and that we shouldn’t keep going forward.
John Q: You guys in the back seats, don’t just tell me Maynard is wrong. Tell me what to do to avoid going over the cliff.
Robert L: Serious analysis is a difficult process and requires a step by step approach, starting with simple frictionless models. We expect to have a useful model in roughly thirty years.
Robert W: If you think I’m exaggerating explain exactly what is overstated in the above dialogue.