Wednesday, October 5, 2016
Noah Smith — Breaking the Spell That Grips Economics
Where there are no facts, there is no evidence. Macro is based on stylized facts, which boils down to restrictive assumptions that make models tractable. No real facts in and so no real facts out. So evidence is sparse, limited to broad outcomes whose causal factors are disputable or "difficult to determine." The catch-all is "external shock" that no one could see coming because it was "exogenous."
In short, magical thinking based on ideology. So there is left-wing macro and right-wing macro.
Breaking the Spell That Grips Economics