by Mario Rizzo
The current issue of The Economist has a very interesting article on the turmoil among macroeconomists (“The Other-Wordly Philosophers”). Essentially, the article argues that although the dominant macro model, dynamic stochastic general equilibrium theory [DSGE], appears to be in a state of near-total breakdown, there is no agreement among economists as to what should replace it.
“Would economists be better off starting from somewhere else? Some think so. They draw inspiration from neglected prophets, like Minsky, who recognised that the “real” economy was inseparable from the financial. Such prophets were neglected not for what they said, but for the way they said it. Today’s economists tend to be open-minded about content, but doctrinaire about form. They are more wedded to their techniques than to their theories. They will believe something when they can model it.” Read the rest of this entry »
