"Noah Smith joins a long list of people noting that I don’t have a formal (i.e. mathematical) model. Of course I do have a model, but verbal descriptions don’t count in the eyes of many people. So I’ll describe the principles I’d use to construct a formal model, leaving the actual construction to others."
http://www.themoneyillusion.com/?p=14826#comment-163519
Let me be the first to admit that while this is a very interesting question I have no idea how to write a mathematical model for Macro, however you'd think that Sumner might. Is it that he can't write one or is too lazy? Mark Sadowski got his goat a little:
"Scott, you are even more lazy than I am. Here’s how you do it.
1) Go find a paper by someone who has published something on this in the past (e.g. McCallum or Chinn & Frankel).
2) Steal their model but add your own touches.
3) Put you name on it.
That’s how I got through grad school.
Sumner sniffed:
"You say it’s really easy to do, but neither you nor any of the other commenters have done what I asked. So I assume it’s probably not that easy. Or perhaps I should say it’s easy, but time-consuming."
True I haven't because I have no idea how to do it. But again you would think Sumner might have an idea-maybe he does and is just lazy. Interestingly Lars Christensen point out that Milton Friedman never had a model either and finally tried and failed pretty badly. Have I not said repeatedly that this is who Sumner is? Milton Friedman 2.0.
To spike the ball on that point a little more consider that he fired back at me for stating that Friedman's 3% Rule failed. No it didn't fail Sumner claims, it was never tried. Ok, so why aren't you doing it now?
In all seriousness I do take Noah's point that models do matter. They enable you to check an idea without simply going through the endless trial and error of empirical failure. Obviously it's costly to just try ideas and see which ones fail. Still, let's face it if Sumner is Friedman 2.0 nothing suggests that his lack of a model will matter. Friedman got his idea taken on by the Fed and the BOE without one.
What all this amounts to is shown by Noah's answer to a comment Sumner just wrote over at his site:
"Now this may be going a bit far afield, but what about the Lucas Critique? If NGDP hasn't been targeted, how do we know that the gut-instinct relationship between NGDP and AD will hold if we try to use NGDP as the lever to control the economy?"
http://noahpinionblog.blogspot.com/2012/05/economists-who-dont-do-it-with-models.html?showComment=1339251913478#c3286095035666750859
Now how's that for cruel? His other idol after Friedman-Robert Lucas-could be the one to pull the rug out from under him!
Lars Christensen seems to be the one who has the best shot at giving Sumner the kind of model he needs:
"Scott, the search for a model remind that Friedman always was criticized for not having a formal model. When he finally wrote a model of somekind I think he failed pretty badly. Then Brunner and Meltzer tried to come up with a monetarist model – and that became unduly complicated. I think logic works fine here. I have already suggested that the equation of exchange and what I termed the Sumnerian Phillips curve makes pretty good sense on its own."
"See here: http://marketmonetarist.com/2012/05/29/dude-here-is-your-model/"
"And here: http://marketmonetarist.com/2012/06/01/the-sumnerian-phillips-curve/
And if you think you need more math. Then I think Eggertson’s and Pugley’s model for the 1937 recession captures a lot of the MM logic – even though it is overly focused on interest rates. See here: http://www.ny.frb.org/research/economists/eggertsson/Eggertsson_1108.pdf"
"Their empirical analysis is very much of the same style as your analysis in your book on the Great Depression."
"PS in my day job I used models based on MV=PY and the Sumnerian Phillips curve to analyze a Emerging Markets like Russia and Poland."
http://www.themoneyillusion.com/?p=14826#comment-163519
So Lars knows how to write the models and doesn't think they matter too much-that logic works fine here. Maybe. As I'm just an interested layman it's sort of the easy way out for me too if I take the bait. Still think there is something to what Noah's saying about the Lucas Critique, etc.
Still here's the really ironic part. Listen to the commentator who defended Sumner over at Noahpinion:
"Scott Sumner is right about models."
"I beat up on John Maynard Keynes a lot, but from re-reading the General Theory he understood this point, in a way that Hicks and Hicks' descendants like Krugman don't."
http://azizonomics.com/2012/05/02/the-pseudoscience-of-economics/
You could make the counter critique that not many great economists you can think of had a model-what was Adam Smith's model? How about Keynes or Friedman?
In a way, if Sumner's right about models that validates Keynes against Lucas-who criticized Keynes so much for being merely "ad hoc."
UPDATE: While it seems like Lars is saying models don't matter for Scott in the comment quoted above-that all he needs is logic, Lars did say this in his first post-linked above-'Dude, Here's Your Model"
"That said, I think it is very important to demand to see people’s models. In fact I often challenge people to exactly spell out the model people have in their heads. That will show the inconsistencies in their arguments (the Austrian Business Cycle model is for example impossible to put on equations exactly because it is inconsistent). Mostly it turns out that people are doing national accouting economics and there is no money in their models – and if there is money in the model they do not have a explicit modeling of the central bank’s reaction function. So Scott you are certainly wrong when you tell of to get rid of the models."
http://marketmonetarist.com/2012/05/29/dude-here-is-your-model/
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