What to do to make economics a relevant and realist science
July 8, 2014 Leave a comment
The other day yours trulywrotereKrugman‘s dangerous neglect of methodological reflection:
The financial crisis of 2007-08 and its aftermath definitely shows that something has gone terribly wrong with our macroeconomic models, since they obviously did not foresee the collapse or even make it conceivable … Modern mainstream macroeconomics obviously did not anticipate the enormity of the problems that unregulated ‘efficient’ financial markets created. Why? Because it builds on the myth of us knowing the ‘data-generating process’ … Mainstream macroeconomists … want to be able to use their hammer. They decide to pretend that the world looks like a nail and that uncertainty can be reduced to risk. So they construct their mathematical models on that assumption–and the ensuing results are financial crises and economic havoc.
Now Brad DeLong earlier today commented on my critique:
OK …
Suppose we decide that we are no longer going to:
Pretend…
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