That back-of-the-envelope calculations are all we have should not be surprising. In Keynes’ words, macroeconomists should be humble.

via Economist’s View: “Equilibrium and Meltdown”.

The referenced article provides a great overview of the state of macroeconomics. It also offers an explanation of why macroeconomists are “all over the map” concerning policy recommendations.

Macroeconomics is a form of modeling, and as with all modeling, the best it can hope for is to provide rough guides regarding what will happen in the future. There are lots of macroeconomic models and lots of disagreement about which is best. My question is this: even if we knew which was best, would it be good enough to trust for guiding public policy? And how would we know?

My impression is that the best models we have aren’t nearly good enough. It’s possible that they may never be good enough. The real economy is a complicated thing and a little more humility by macroeconomists and policy makers would be appreciated.


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