The influence of MIT on macroeconomic policy

by on January 16, 2012 at 2:33 pm in Economics, Education | Permalink

From Rich Miller and Jennifer Ryan:

At MIT, King, 63, and then-professor Ben S. Bernanke, 58, had adjoining offices in 1983, spending the early days of their academic careers in an environment where economics was viewed as a tool to set policy. Earlier, Bernanke and European Central Bank President Mario Draghi, 64, earned their doctorates from the university in the late 1970s, Draghi with a thesis entitled “Essays on Economic Theory and Applications.”

Fischer, 68, advised Bernanke’s thesis on “Long-Term Commitments, Dynamic Optimization and the Business Cycle,” and taught Draghi. Greek Prime Minister and former ECB vice president Lucas Papademos and Olivier Blanchard, now chief economist for the International Monetary Fund in Washington, earned their doctorates from MIT at about the same time.

Other monetary policy makers who have passed through MIT’s doors include Athanasios Orphanides, head of the Central Bank of Cyprus, Duvvuri Subbarao, governor of the Reserve Bank of India and Charles Bean, King’s deputy in the U.K.

Central banking is filled with former attendees of the Cambridge, Massachusetts, university not just because it was and is one of the world’s top schools for economics.

Arnold Kling comments.

josh January 16, 2012 at 3:02 pm

I get the feeling that Arnold Kling is just bitter because he’s not able to do more math… probably only a few steps up from a Sloanie, that guy.

Andrew' January 17, 2012 at 7:34 am

I don’t think Arnold expects to convince you.

Martin January 16, 2012 at 3:37 pm

So all this mess is because of ill-advised scholars from MIT? Thanks a million!

MK January 17, 2012 at 6:41 am

Err reverse causality bias!

Rahul January 16, 2012 at 3:40 pm

At this point in time MIT might be wise to not advertise its macroeconomic legacy too loudly. “Central banker” is hardly the flavor of the month (decade?!).

Claudia January 16, 2012 at 4:10 pm

I was a little surprised by Kling’s comment. I would not expect any economics PhD program to teach “humility” (that’s a life lesson, not a seminar). And I know plenty of economists, MIT trained and otherwise, who understand that the world is complex. Math is a tool to simplify reality, but it is not the only one. This piece reminds me why it’s important to change your intellectual community from time to time. It’s uncommon for individuals to get their entire education and spend their whole career at one organization. It fun to learn about past connections, but I think current colleagues might be even more important.

Sargeant Tomato January 16, 2012 at 5:05 pm

Claudia,

Besides math, what are the other tools to simplify reality?

Claudia January 16, 2012 at 5:24 pm

Graphs are nice. Simple tables (which should stand behind any complicated econometric model IMHO). Stories (with words, not popular here). Rules of thumb. Math is just a language with strict grammar. It’s what you *say* that matters.

Sargeant Tomato January 16, 2012 at 5:33 pm

I agree with you. But graphs and words (assuming they are grounded in logic) are fundamentally math, are they not?

NAME REDACTED January 16, 2012 at 5:42 pm

No, math is fundamentally graphs and words.
Math provides extra constraints.

Sargeant Tomato January 16, 2012 at 5:47 pm

So, reason versus logic?

Why doesn’t “name redacted” have a reply option? Is there a limit to the number of branches?

Mark January 17, 2012 at 4:42 am

@Claudia: excellent comment. Also remember Friedman: “I have long had relatively little faith in judging statistical results by formal tests of significance. I believe that it is much more important to base conclusions on a wide range of evidence coming from different sources over a long period of time.”

The Original D January 16, 2012 at 10:36 pm

Qualitative research. To cite an example, usability studies of human-computer interfaces can learn so much more from qualitative interviews than A/B testing alone.

Andrew' January 17, 2012 at 7:39 am

I have no problem with math. The problem with people doing math is if you forget or neglect one variable your whole answer is wrong. This is why it is easy to grade and makes a good signaling filter. But if you are spending so much time mastering the math, you probably aren’t thinking about all the complexity. You are thinking about tractability.

NAME REDACTED January 17, 2012 at 8:26 am

This is the best way of putting it, that I have heard!

broseph January 16, 2012 at 4:46 pm

the track record of advising humility on difficult/complex tasks is abysmal.

derek January 16, 2012 at 9:26 pm

I’d say it differently. The track record of enforced humility on difficult/complex tasks is pretty high.

RM January 16, 2012 at 5:03 pm

When I was in grad school 10 years ago, taking numerous classes in the Econ dept, I always heard that MIT was not the most mathematically rigorous econ dept., this coming from a guy who got his Ph.D. under Samuelson. Now I was at a school whose econ dept was 0.25 of a notch down from MIT. Envy — I don’t know. But I did hear this a few times.

I did hear–as I still do today–that MIT has a knack for producing work-horse models: simple models that live for a long time producing useful results.

Badger January 16, 2012 at 5:08 pm

Funny, because I’ve always tried to fill my econ classes with the ideal of intellectual humbleness, particularly through the discussion of historical episodes when leaders of the profession got things awfully wrong.

Not that it matters — I’ve never been Ivy or MIT material anyway… :-)

Claudia January 16, 2012 at 7:10 pm

Badger, I agree that intellectual humility (which is a form of honesty about what economics currently can and can’t tell us) is important. I just take issue with singling out one department for falling short.

Yancey Ward January 16, 2012 at 6:06 pm

This is good- we will be able to direct blame at a single institution.

Bill January 16, 2012 at 7:01 pm

Chicago?

Tom January 16, 2012 at 9:26 pm

We’re talking econ, not politics, Bill

Bill January 16, 2012 at 10:02 pm

I was talking Econ as well: deregulation, monetary and not fiscal policy. Ask yourself: would Milton Friedman’s or Paul Samuelson’s picture be on George Bush’s or the Maestro’s office wall.

Yancey Ward January 17, 2012 at 12:02 pm

I don’t know, Bill, who is in charge today?

Bill January 17, 2012 at 6:59 pm

Yancey, If we are talking about what got us in the mess is a different school than is getting us out of it.

CBBB January 16, 2012 at 6:31 pm

Isn’t that Arnold Kling says about the math content at MIT equally or even MORE true about Chicago?

Chris January 16, 2012 at 9:19 pm

No. Whatever you may think of Chicago economics, excessive mathematical formalism was not one of its faults. If you’re looking to bash a “right wing” mathematical macro school, think Minnesota, not Chicago.

Neal January 16, 2012 at 7:55 pm

WWSSS? (What would Scott Sumner Say?)

UnlearningEcon January 17, 2012 at 3:11 pm

A lot, but none of it would make sense.

Jose Carlos January 17, 2012 at 5:15 am

Now we’re blaming Math? Really?

NAME REDACTED January 17, 2012 at 8:32 am

Math is hard to make tractable in some situations. This means that mathematical models are necessarily deceptive. Keynes understood this and in his later days explained that his models where only useful in very limited situations. Samuelson did not understand this.

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