A macro guy defends macro theory by telling us all we’re not smart or trained enough to “get it”

My colleague Richard Green commented on the Kartik Athreya’s critique of economics bloggers. He writes:

But George Akerlof did, way back in 2006, during his American Economic Association Presidential Address. which was entitled “The Missing Motivation in Macroeconomics.” I remember finding the piece enthralling (I know, we economists aren’t supposed to use such emotion laden words), because in made the very simple but devastating case that when the foundations of modern macro (the independence of consumption and current income (given wealth); the independence of investment and finance decisions (the Modigliani-Miller theorem); inflation stability only at the natural rate of unemployment; the ineffectiveness of macro stabilization policy with rational expectations; and Ricardian equivalence) are tested against data, they generally fail the test. I remember at the time that some economists thought that Akerlof had taken leave of his senses (and some friend of mine thought I had taken leave of mine because I so admired the address).

link: Richard’s Real Estate and Urban Economics Blog: One more take on Kartik Athreya’s critique of economics bloggers

Athreya’s essay may be found here. My favorite quote is:

So far, I’ve claimed something a bit obnoxious-sounding:that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy. Taken literally, I am almost certainly wrong. Some of them have great ideas, for sure.But this is irrelevant.The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new.

Nope, Athreya, that’s not the issue. You might want to make it the issue, but that’s not the issue. The issue is, as Akerlof pointed out in his manuscript, whether modern macro theories have any predictive value at all, and if not, whether the profession legitimately merits a privileged position as a consultant to institutional power. The dribbling bit at the end about how the topic is “pathologically riddled by dynamic considerations and feedback effects”? Welcome to social science, cupcake. Do you really think deriving a verifiable theory of culture or society or cognition is a picnic?

Yes, economics is hard. So is driving a bus. Most of us can’t drive a bus, in fact. But most of us, when we are riding on a bus, can tell when there is an incompetent driver. So if Athreya wants to blame the traffic and the potholes and the sun in his eyes, that’s fine, but:

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