I strongly advise you to read this post by Noah Smith and then click his links and read all of Romer (I have) and Kocherlakota (I haven’t yet but advise myself to do it now).
update: Kocherlakota’s post is very brief non-technical and brilliant. I advise you to read it now.
Noah recalls that he has long argued that current mainstream academic macroeconomics is no good at all. I too have argued this. So have the somewhat better known Larry Summers and Paul Krugman. Relatively recently Paul Romer denounced his former field. Most surprisingly so has Narayana Kocherlakota (links in the post). Olivier Blanchard (pdf) and Simon Wren-Lewis are very polite but clearly agree (actually now that I re-read it Wren-Lewis is (finally) getting pretty frank). Robert Shiller, George Akerlof and Janet Yellen have long been at least as harsh as Kockerlakota (although no one is quite as snarky as Romer).
I have really one question. Given the extreme prominence of the critics of the current orthodoxy, how can the orthodoxy remain an orthodoxy ? In particular, all of the linked authors agree that the current mainstream consists of New Keynesian DSGE models. But collectively they are much more prominent than all New Keynesian DSGE modelers put together.
more after the jump
Narayana Kocherlakota in particular is an extremely prominent fresh water economist. As chairman of the U Minnesota economics department then president of the Minneapolis Fed he was pretty much the official chief active fresh water economist. Now he has changed sides and then just kept on going leaping over New Keynesian economics to out and out heterodoxy which I will call post-post-real macroeconomics. How can it still be heterodoxy ?
Noah writes (and I’m sure he is right)
My question is: Who is going to enforce this change? If a few established researchers start doing things the way Kocherlakota wants, they’ll certainly still get published (because they’re famous old people), but will the young folks follow? How likely is it that established researchers en masse are going to switch to doing things this way, and demanding that young researchers do the same, and using their leverage as reviewers, editors, and PhD advisers to make that happen? This doesn’t seem like the kind of change that can be brought about by a few young smart rebels forcing everyone else to recognize the value of their approach – the existing approach, which Kocherlakota dislikes, already succeeds in getting publication and prestige, so the rebels would simply coexist alongside the old approach, rather than overthrowing it. How could this cultural change be put into effect?
It is a puzzle. I think it is clear that the problem is that the DSGE approach which no one likes includes problems which are neither trivial nor impossible. This means that so long as DSGE modeling is accepted by editors of respected journals it will continue to be a very active sub field and much more active than post-post-real macroeconomics. Here I think an important part of the problem is that most economists have (reasonably) concluded that macroeconomics is crap, so macroeconomists are left alone.
But what if all the people named above founded a Journal of Post Post Real Macroeconomics and became its board of editors. Wouldn’t that be a respected and cited journal ? If not, why not.