no third solution

Blogging about liberty, anarchy, economics and politics

What’s Wrong With Macroeconomics?

October 23rd, 2008

From time to time, I come across something on teh interwebs that really doesn’t require any comment. Here’s the latest, as Arnold Kling describes contemporary macroeconomics:

I have always thought that the issue of the relationship between financial markets and the “real economy” was really deep. I thought that it was a critical part of macroeconomic theory that was poorly developed. But the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men’s urge for mathematical masturbation.

Economists ought to admit that we do not know much about what is going on today. Neither do the Fed Chairman and the Treasury Secretary. Of course, the market demand is for “strong” leaders and for “strong” economists, who can fool the public into believing that they have great knowledge.

I’ve long understood modern macroeconomics to be a joke, of course I’m not a professional economist, so many people will dismiss my opinion, outright. I’m barely an “academic” economist, having studied Econ extensively in Grad School a few years hence.

IMO, the problem with most contemporary macroeconomic theory, is that it’s nearly completely divorced from microeconomics. If you can’t understand what individuals will do in a given economic circumstance, you can never understand a macroeconomy.

no third solution

Blogging about liberty, anarchy, economics and politics