faulker020

I've sworn off macro-bashing . I said what I had to say. And I'm seeing lots of young macro people doing good stuff . And the task of macro-method-criticizing has been taken over by people who are better at it than I am , and who have much better credentials . My macro-bashing days are done. But sometimes I just have to offer macro folks some marketing advice. The new defense of DSGE by Christiano, Eichenbaum, and Trabandt is pretty cringe-inducing. Check this out: People who don’t like dynamic stochastic general equilibrium (DSGE) models are dilettantes. By this we mean they aren’t serious about policy analysis. Why do we say this? Macroeconomic policy questions involve trade-offs between competing forces in the economy. The problem is how to assess the strength of those forces for the particular policy question at hand. One strategy is to perform experiments on actual economies. This strategy is not available to social scientists. As Lucas (1980) pointed out roughly forty y...