Noah Smith imagina como seria. A world without macroeconomists.
Would we lose the ability to forecast the macroeconomy accurately? It’s tempting to conclude “No,” since macro models of the type overwhelmingly used, created, and studied by modern macro researchers (DSGE models) haven’t really proven better at forecasting than the non-structural spreadsheet-type models used by most private firms, or than consensus individual forecasts (actually one DSGE model has performed slightly better in recent years, but this might just be data mining and publication bias). It’s telling that private firms don’t hire people to make DSGE models, but do hire people to make forecasts with much simpler tools.However, here’s an interesting thing about research, and about science: Past discovery is no guide to future discovery. Chemists were basically a joke for centuries before they stumbled on a few key principles, and rapidly turned into the most reliable discovery-factories in all of science. Biologists had an even longer history of uselessness before they became incredibly useful thanks to new technologies. So someday, macroeconomists might learn how to forecast the economy extremely well. We really just don’t know. A breakthrough in forecasting power would yield huge payoffs to society.OK, what about policy? Macroeconomists will gladly tell you that modern models are not a lot of use in forecasting – that their main use is in giving policy recommendations, conditional on your assumptions (i.e. “If for whatever reason you believe that the economy works this way, here’s what you should think you can do with policy.”) But as I’ve often griped, I don’t think they really do this particularly well…it’s too hard to choose which one to use, even if you know your own general priors about how the economy works. And people have silly priors anyway. Not to mention that even if you choose a model, its output may be incredibly hard to interpret and use. And when the world seems to hit on a consensus policy that seems to work well – the Fed using interest rates to lean against fluctuations in inflation and GDP, for example – the models seem to follow the policy rather than the other way around.So does this mean that macro research is useless for policymaking? No! Not at all!! Because here’s an interesting thing about policymaking: No matter who advises the policymakers, policy is going to get made. That includes economic policy. So if there were no academic and Fed macroeconomists around to advise policymakers, who would policymakers listen to on economic matters?My guess: Some very dangerous people.For all the talk of academic macro being politicized, it’s much less politicized than the macroeconomic discussion outside of the research community. My own experience is that most macroeconomists are pretty apolitical, and research supports that…but even if my sample is biased, macro’s interventionist and laissez-faire schools are pretty close to each other ideologically, compared to, say A) armchair-theorizing politicians, B) TV commentators, C) the denizens of internet forums. It really is a jungle out there. You have David Stockman. You have Ron Paul and his followers. You have David Graeber and his followers. And worse. You have “Austrians” who think all of economics can be deduced from some vague derp. You have Marxists who think – well, I’m not sure, because they tend to denounce and vilify you if you even ask them what they mean, but it sounds nuts. In short you have a cavalcade of vast unending wackitude, often with a proven track record of wrecking economies and societies.So it’s possible to see macroeconomists as doing plenty of good, simply by sitting there not being absolute wackaloons. A million DSGE models from which it is impossible to select sounds a lot better to me than three or four totally nutcase worldviews, the selection of any one of which is likely to cause human tragedy on a vast scale. (Note: This idea, of macroeconomists as a vaccine against macro-lunacy, was first suggested to me by Justin Wolfers.)