After my critical post about Krugman and WL's defense of mainstream macro, I almost wondered if I was unfairl to them. I don't relish criticising Krugmnan .
http://diaryofarepublicanhater.blogspot.com/2013/11/krugman-and-simon-wren-lewis-in-defense.html
As regards WL, his views come across as considerably more nuanced if you read some of what he wrote further down the page in his recent defense. He does admit that mainstream macro has some real issues that need to be addressed soon.
"Having said all this, it would also be a mistake of equal magnitude to think that everything is just fine in the land of academic economics. I am struck about how economists, while at least partially defending their own particular field, are quite happy to express grave concern about what some of their colleagues in other fields do. I’ve noted Andy Haldane and Diane Coyle’s criticisms of DSGE modelling before, and you will find plenty of economists who can be very rude about their colleagues doing finance. More generally I suspect slightly less shrill versions of the sentiments expressed by the two Guardian columnists would attract considerable sympathy from lots of very sensible people who know quite a lot about economics."
http://diaryofarepublicanhater.blogspot.com/2013/11/krugman-and-simon-wren-lewis-in-defense.html
As regards WL, his views come across as considerably more nuanced if you read some of what he wrote further down the page in his recent defense. He does admit that mainstream macro has some real issues that need to be addressed soon.
"Having said all this, it would also be a mistake of equal magnitude to think that everything is just fine in the land of academic economics. I am struck about how economists, while at least partially defending their own particular field, are quite happy to express grave concern about what some of their colleagues in other fields do. I’ve noted Andy Haldane and Diane Coyle’s criticisms of DSGE modelling before, and you will find plenty of economists who can be very rude about their colleagues doing finance. More generally I suspect slightly less shrill versions of the sentiments expressed by the two Guardian columnists would attract considerable sympathy from lots of very sensible people who know quite a lot about economics."
"Whether this should, or will, lead to any major upheaval in economic thinking – as suggested by Martin Wolf in this lecture for example – is a question for perhaps another post. What I want to focus on here is how the subject is taught, if only because that has a large influence on how the subject is perceived and how it develops. Both Guardian articles talk about student dissatisfaction (as expressed here for example), and there seems to be widespread support for the idea that economics teaching needs some fairly radical reform: see this recent meeting at the UK Treasury (which followed this) and Wendy Carlin’sarticle in the FT."
"I think part of the problem with economics, which is very evident in the way it is taught, is how economists see themselves. (I think Alex Marsh describes this well.) The vision that I think many economists are attached to is that economics is like a physical science. So there is a body of knowledge, which has been accumulated over time in much the same way as the physical sciences have developed. This approach plays down the context in which that knowledge was developed - it may provide a bit of diversion in a lecture, but is not essential. There is certainly no need to worry about the methodology behind the way the discipline works."
"An alternative and I now think better, vision would give more emphasis to how economics developed. Economic history would play a central role. Economic theory would be seen as responding to historical events and processes. For example placing Keynesian theory in the context of the Great Depression is clearly useful, given the events of the last five years. I think it is also important to recognise the links between economic theory and ideology. This is partly to understand why governments might not act on the wisdom of economists, but it also leads naturally to recognising that economists need to adapt to the social and political context in which they work. We should also be more honest that our wisdom might be influenced by ideology. Given the limits to experimental and econometric evidence, but with a very clear axiomatic structure, methodology is always going to be an important issue in economics."
In this he would seem to be endearing himself to heterodox economists. Yet, here, he shows that he doesn't get it on the history of economics.
"Of course this alternative vision can be taken too far. I do not think it is helpful to teach the subject like a course in the history of economic thought. The insight gained from trying to understand what some past great economist actually said (or still worse, actually meant) is small. We do not necessarily need to know the details of every historical debate. In addition some important ideas in economics do not come from problems thrown up by major historical events or ideology: rational expectations is a clear example. We do try and integrate solutions to new problems into a coherent overall framework. I do not want to go back to teaching a schools of thought type of macro, because the mainstream is much more integrated."
This is what Krugman says as well-that it doesn't matter what some great past economist actually meant. I don't get why that's so unimportant a detail. I guess that's why he doesn't think us heterodox guys can have a conversation with him.
So on balance I guess I wasn't unfair. WL certainly doesn't get it on the history of economic ideas. As I've said many times, one who does get it: the Market Monetarist David Glasner. He may be an MMer but he knows his history and has a very healthy respect for it.
As to the claim of Krugman that the textbooks were right-I think it depends what textbook you have in mind. It may well be that if the textbook you're talking about is Paul Samuelson's 1948 edition of The Foundations of Economics there's a lot of truth in that. However, even though Krugman and WL say that you have to have a nuanced reading of EMH, it seems clear that the reason they never saw the possibility of a housing bubble mattering is because they believed in the EMH.
P.S. Yet I do think that WL is on the right track in his diagnosis of what dogs mainstream econ-that most economists like to think of economics as just like the physical sciences. It's a social science which is very different and which values and judgments do play an important part.
P.S. Yet I do think that WL is on the right track in his diagnosis of what dogs mainstream econ-that most economists like to think of economics as just like the physical sciences. It's a social science which is very different and which values and judgments do play an important part.
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