Macro Imploding

Not the macroeconomy, just the science. Not that it every really was a science, just that 40 years ago everyone thought it was, now, not so much. Yesterday I read a really fun catfight between Krugman and everyone (e.g, Tabarrok, then Krugman, then Cowen, then Krugman, but this is typical). Now, losing one’s temper in an argument is usually symptomatic of losing the argument, and so I am quite pleased watching Krugman boil over. Yesterday’s Krugman post was precious, as he defending being peevish by noting that he only treats people like ‘mendacious idiots’ if they are so, and civility is irrelevant when the stakes are important!

He doesn’t understand that civility is more important the greater the stakes, because they are helpful and takes discipline. It’s easy to lose it and just start calling someone names, questioning their motives, but this is just appealing to your base emotions, as highlighted by the behavior people with their frontal lobe activity reduced (i.e., drunk people). On the other hand, on issues that are not important, well, it’s easy to be gracious about things that don’t matter because it takes no effort, there’s nothing to restrain, there’s no cost of doing so because you don’t care if you ‘lose’. If you are trying to bring a crowd to your point of view, manners are very helpful, they are a better sign of good faith argumentation. If you are just being angry, this can help incite a predisposed mob, but little else because everyone knows that someone highly emotional is not reasoning at all, just rationalizing. Sure, we all do it, but if we don’t at least pretend not to, we clearly are not coming close to the rational objective we all aspire to in less heated environments.

Then there’s Matt Yglesias trying to mix it up with Chicago-school type John Cochrane:

Chochran: Defenders think that devaluing would fool workers into a bout of “competitiveness,” as if people wouldn’t realize they were being paid in Monopoly money. If devaluing the currency made countries competitive, Zimbabwe be the richest country on Earth.

Yglesias: Try this mode of argument on for size. If water made agriculture possible, then the Pacific Ocean would be the breadbasket of the earth.

I found that analogy incredibly lame, and it made me think of Bulwer-Lytton contests. (this year’s winner: “Cheryl’s mind turned like the vanes of a wind-powered turbine, chopping her sparrow-like thoughts into bloody pieces that fell onto a growing pile of forgotten memories.”), but Keynesian Brad DeLong thought it was devastating, highlighting the importance of ideology.

In contrast to this, I listened to much of the two latest Nobel prize winning economists–macroeconomists–giving their Nobel speeches…and they are as boring as any you might have remembered from college.

So, it’s either a rather unfocused, nasty fight about whether Keynesian stimulus is good or bad, or experts unconsciously imitating Ben Stein in Ferris Bueller.

Econ grad students going to the big annual econ and finance meetings this weekend in Chicago should ask themselves whether this is a club worth joining. Sure, the top 10 make a good living, but no one else does, as companies and municipalities don’t need macroeconomists any more than they need sociologists.

Disclaimer: This page contains affiliate links. If you choose to make a purchase after clicking a link, we may receive a commission at no additional cost to you. Thank you for your support!

About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

Be the first to comment

Leave a Reply

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.