Should-Read: Diane Coyle: Economics in Transition: The End of Theory

Should-Read: Diane Coyle: Economics in Transition: The End of Theory: “There has been a huge shift away from the reductionism of an older generation… to which Bookstaber has paid little attention… https://www.project-syndicate.org/onpoint/economics-in-transition-by-diane-coyle-2017-06

…His critique is partly valid…. Macroeconomic models in wide use before the 2008 crisis excluded financial institutions and relied on the fiction of “representative agents.” This is changing all too slowly. The field is full of normative terminology, about “optimal” outcomes, for instance, without ever analyzing the implied value judgments. Mainstream macroeconomists are unwilling to admit there is little hard science in what they do–a stance that, in the name of promoting economics in public opinion, has undermined the profession’s credibility. Bookstaber is also right to point out that much macroeconomic modeling ignores the fact that economic time series are non-ergodic…. But The End of Theory goes on to charge that economics has ignored behavioral psychology. In fact, behavioral economics is one of the most popular areas of the discipline now, among academics and students alike. Bookstaber also asserts that economists ignore the reality of complexity theory, network theory, and agent-based modeling. While these latter areas are not mainstream, not least because most established researchers have never learned the research techniques needed to apply these conceptual frameworks, they, too, are increasingly popular…