Out there, in the blogosphere, you can find...
Out there, in the blogosphere, you can find a nice and polite exchange between Simon Wren-Lewis and Jo Michell on the relative merits and problems of mainstream and heterodox macroeconomic modelling (see here, here and here). While they are raising a series of interesting and noteworthy points I was surprised to find that an even more inspiring read on this subject is provided by Paul Romer. Although Paul focuses solely on the mainstream and although I critized his superficial account on “mathiness” in the past (here), I think in his recent paper on The Trouble with Macroeconomics he gets a lot of things right and thereby underscores my past assertion that his views are endogenously evolving in the right direction (see here).
In his criticism he focuses on the role of calibration exercises in mainstream macroeconomic modelling shows why “calibration” often implies an obfuscated form of introducing unwarranted assumptions. Additionally, he correctly identifies disciplinary groupthink as a main source of the uncritical acceptance of these practices and chastises the related tendency to use exogenous shocks for incorporating otherwise unexplained developments (as in standard S/D-analysis, see here). He also makes a series of interesting remarks in passing - e.g. that relations between individuals matter for aggregate outcomes or that the increasing variety of models in mainstream economics invites arbitrariness when it comes to judging their relative importance and relevance.
“More recently, ‘all models are false’ seems to have become the universal hand-wave for dismissing any fact that does not conform to the model that is the current favorite.” (Romer 2016, p. 5)
I actually made a similar argument about the still problematic treatment of unrealistic assumptions and an ever-widening variety of models within the mainstream in a panel-discussion on reforming economic education, which has been invited at the annual meeting of the German Economic Association. While my argument was intelligible to some parts of the audience, other participants ensured me that they could not see any problems and, hence, did not understand what I was talking about. As I was aiming for gently expressing my point of view in the panel-debate, I hope that Paul’s more direct formulations might provide some addtional clarification.
All the Best,
Jakob