Contemporary macroeconomics and the phrase “aggregate demand”

Without meaning to take sides in the controversy, I got a kick out of this sentence, which describes the attitudes of contemporary macroeconomists:

Even something anodyne like “demand might also play a role” would come across like the guy in that comic who asks the engineers if they’ve “considered logarithms” to help with cooling.

The blog post, by JW Mason, is interesting throughout.  I liked this bit too:

Only conservative economists acknowledge this theoretical divide. You can find John Cochrane writing very clearly about alternative perspectives in macro. But saltwater economists — and the best ones are often the worst in this respect — are scrupulously atheoretical. I suspect this is because they know that if they wanted to describe their material in a more general way, they’d have to use the language of intertemporal optimization, and they are smart enough to know what a tar baby that is. So they become pure empiricists.

This is a useful and fun piece for sorting out different attitudes, methods, and terms in contemporary macroeconomics.  Hat tip goes to the excellent Interfluidity.

Comments

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New doors will open with this Aggregate supply - Effective demand model.

I've always said, Interfluidity gives good heterodox.

"participating in this literature is a fucking horror show"

I will make sure to use that line the next time I get a tough assignment at work. Not. I am tired of the macro destructive posts (and the 'my macro' ain't broke posts). Too much work to be done for this silliness. I agree a more open-minded, multi-pronged approach is in order, but how many people do you see gettin' zen and open when you attack their life's work? Talk about a horror show.

"how many people do you see gettin’ zen and open when you attack their life’s work?"

When their life's work is the equivalent of tossing bones to predict the future, and yet has somehow come to be treated as science, you can understand the reaction on both sides.

very good link. do read the whole thing (including Nick Rowe in the comments.)

Wow the ignorance of people who try to be unintentionally ironic. FYI, "have you tried logarithms" *is* a valid question in the heat transfer equation, which is a parabolic partial differential equation that does have a logarithmic solution under certain conditions. See, generally, Wikipedia on this and note this particular instantiation: http://heattransferequation.com/heat-of-vaporization-equation.html

WTF. Did that guy just use the phrase "tar baby?" And did Marginal Revolution just quote it and link to it favorably? This site needs an editor for god's sake.

Why don't you email him your list of banned words?

lol nice try. Editing = censorship now?

Yeah, and? http://en.wikipedia.org/wiki/Tar-Baby

I did have misgivings about using the phrase. Maybe I should have paid attention to them...

I am sure that there a very many really smart, well-schooled economists who are totally immersed in their "models", but never spend much time thinking about the validity of the whole enterprise. Is the cause of knowledge really being advanced, or are the problems being studied just those that are susceptible to model treatment? In other words, is trying to analyze and predict the results of the interactions of millions of intelligent agents really futile? I suspect that a confession of ignorance or recognition of the limits of economic analysis would not be a career enhancer. Such recognition would also call into question some of the massive interventions undertaken by the federal government.

And yet supply curves generally slope upward and demand curves generally slope downward?

This is really fascinating. If you start from the assumption that DSGE is the only real economics you may end up thinking that the DSGE are the generous ones in a debate...starts to sound a bit like "ima let you finish but DGSE is/are the greatest of all time!"

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