The inertia in academic institutions provides a very good reason to expect very little progress within mainstream business cycle macroeconomics. Nevertheless, that segment of the profession could be dragged kicking and screaming back to reality by central banks, and so there is no reason for total pessimism on that score. This article is written from the perspective of an outsider analysing the field from the perspective of the history of ideas, and not arguing about the validity of any school of thought.
This article bookends my earlier article "Whither Post-Keynesian Economics?" It is no secret that I believe that post-Keynesian economics is the best way to approach economics. I discuss how post-Keynesian economics fits into my discussion here in an appendix.…
My interpretation of post-Keynesian economics leads to a somewhat pessimistic conclusion: we cannot hope to assign a single probability distribution to the future value of macroeconomic variables using a single model. (The existence of such a model would allow for a "scientific" determination of the validity of the model using statistical tests.)….
If we assume that my assertion is correct, the implication is that we cannot blindly hope to apply the lessons of science (particularly Physics) to economics. Any theory that offers quantitative predictions can be shot down for one reason or another -- either problematic observed data, or theoretical incoherence. This means that there can be no "final answer" for macro theory, which is why we are stuck with battling tribes with different interpretations.
It should be noted that this theoretical ambivalence is not novel; it is effectively how market economists operate.
The side effect is that this puts academic post-Keynesians in a bind. Since they cannot produce a model that is "scientifically true," there is no reason that their theories must be adopted on "scientific" grounds. All that can be done is package their theories in a way that makes them more attractive than their competitors. As time passes, they will be absorbed into the "mainstream." Although this process seems inevitable, the question remains whether mainstream authors will properly cite the post-Keynesian authors, or else pretend that they came from within the New Consensus tradition.…Bond Economics
Whither Mainstream Economics?