Challenging mainstream macroeconomics
Macroeconomics exists not to study “the economy” in the abstract — there isn’t any such thing — but to help us address concrete problems with the economies that we live in. The questions of what topics are important, what assumptions are reasonable, what considerations are relevant, can only be answered from a perspective outside of theory itself. A useful macroeconomic theory cannot be an axiomatic system developed from first principles. It needs to start with the conversations among policymakers, business people, journalists, and so on, and then generalize and systematize them.
Could mainstream macroeconomics develop a toolkit of models addressing concrete questions about the economy we observe? J.W. Mason argues that there are two reasons why such change might occur:
- Currently, academic macroeconomics has lost much of its hold on public debate as strong deductive claims about the relationships between employment, inflation, wage growth, etc. are no longer taken seriously. When academic economics will recognize that they are left out of the policy conversation, they will adjust in an effort to catch up;
- Economists might soon realize that the microfoundations approach is not helping them answer the questions they’re interested in, and instead it simply represents sociological conventions within the discipline. This will lead to the understanding that one doesn’t need to base models on optimization by anyone and chase the general equilibrium axiom.
A new macroeconomics?
By: J. W. Mason – City University of New York
Taking the critique of microfoundations a step further
The microfoundations approach looks for explanations of economic outcomes based on detailed descriptions of individual characteristics and interactions which economists call “structural parameters”: features that are stable and unchanged during the processes under consideration. Dos Santos and Wiener argue that this implies that individual economic characteristics and the ways individuals interact are not themselves a product of the functioning of economic systems. A clear fallacy since individual economic characteristics are not idiosyncratic “givens”; they are social outcomes.
Market economies are complex systems.[…] How can we make robust inferences about the functioning of those systems based on observed differences in distributions of important economic outcomes across social-identity groups—especially given the impossibility of developing successful detailed descriptions or models of the processes and relationships defining those differences?
We Need to Talk about Economics
By: Paulo L. dos Santos, Noé Wiener – The New School, University of Massachusetts Amherst
