Saturday, March 3, 2018

Brian Romanchuk — The Easy Way To Deal With Factionalism In Economics

Must-read. This should suffice as the last word on Simon Wren-Lewis's recent post. But it probably won't be.

Bond Economics
The Easy Way To Deal With Factionalism In Economics
Brian Romanchuk


My comment was finally approved and posted along with many others in the moderation queue:

Tom Hickey2 March 2018 at 07:38
Who is being intransigent? As a non-economist MMT advocate (my PhD is in philosophy), it looks to me like the mainstream is the intransigent party. "The methodological debate is over."

JKH, not an MMT advocate, also makes a key point above that the mainstream largely fails to take accounting into consideration when accounting is the language of business and finance and is dismissive of its importance in comparison to mathematics.

MMT is hardly original emphasizing accounting, finance, institutional arrangements, the difference between risk and uncertainty, etc. These were pointed out by Keynes, Lerner, Tobin, Godley, Minsky, etc., before the MMT economists came on the scene.

I would argue that what seems to be needed from an outsider's point of view is a renewed debate on methodology that questions key assumptions like methodological individualism, maximization, equilibrium, etc. that the mainstream considers settled issues.

I agree that the present form of "debate" such as it is tends to get overheated. But this appear to result from the perception on the MMT side that the mainstream is being intransigent about what is settled, on one hand, and the dire results in terms of policy and its effects on real people, on the other.

It would be nice to have a calmly reasoned debate in an open forum but the parties have to be willing to join it. I don't see many mainstream economists willing to debate openly with so-called heterodox economists, not limited to MMT. Where are the Post Keynesians, the Paleo Keynesians, the Institutionalists, the Marxians, etc.

The issue usually boils down to "Where is your model?," meaning a model in the form that the mainstream stipulates, or "The methodological debate is already settled."

I get that the mainstream considers that its "orthodox" (that word should scare you) approach is the paradigm for doing normal science in economics in the Kuhnian sense, and that if the normal paradigm is to be challenged it must be approached in terms of failures and the resort to ad hoc fixes that basically negate falsifiability. I would say that this has been done adequately and most of the mainstream refuses to recognize it.

These issues are going to be settled one way or the other because they affect policy and policy is, well, political. The present system in not working for a lot people and they are not going to be convinced by the mainstream arguments much longer. The mainstream has to deliver or they will be replaced and there are various options available along a range from extreme right to extreme left. This is not just an academic debate, as the macroeconomists offering policy advice are well aware. Lives are at stake as well as political regimes.

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