Should-Read: JEC: The Next New Macro

Should-Read: JEC: The Next New Macro: “The seeds of disaster… lay…

…in how easily New Classical-style models could be tweaked to get Keynesian behavior…. The mess in macro did not come about because some economists committed to a modelling style which turns out to yield little insight. The mess is a consequence of the… macro-mono-culture…. The fact is that, right now, we do not know the way forward, and no approach, no matter how promising (or how congenial to our pre-conceptions and policy preferences) should be allowed to dominate the field until it has proven itself empirically successful…. Why, then, did the entire discipline latch on to the New Classical approach? In a word: panic. Whatever the flaws in the New Classicals’ positive program, their negative critique of existing econometric practice was both true and devastating…