Must-Read: Simon Wren-Lewis: Being Honest about Ideology in Economics

Simon Wren-Lewis: Being Honest about Ideology in Economics: “Noah Smith… says the fundamental problem with macroeconomics is lack of data….

…That is not in my view the whole story…. Real Business Cycle (RBC) research… was only made possible because economists chose to ignore evidence about the nature of unemployment in recessions…. In the RBC model there is no problem with recessions, and no role for policy to attempt to prevent them or bring them to an end. The business cycle fluctuations in employment they generate are entirely voluntary. RBC researchers wanted to build models of business cycles that had nothing to do with sticky prices. Yet here again the evidence was quite clear…. Why would researchers try to build models of business cycles where these cycles required no policy intervention, and ignore key evidence in doing so? The obvious explanation is ideological….

I do not think this is just a problem in macroeconomics. David Card is a very well respected labour economist…. His research involved no advocacy, but was simply about examining empirical evidence. So the friends that he lost objected not to the policy position he was taking, but to him uncovering and publishing evidence. Suppressing or distorting evidence because it does not give the answer you want is almost a definition of an illegitimate science….

I suspect there is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds. This is the essence of Romer’s critique, first in his own area of growth economics and then for business cycle analysis. Denying or marginalising the problem simply invites critics to apply to the whole profession a criticism that only applies to a minority.