Economics quote of the century

17 Jul, 2012 at 10:42 | Posted in Economics | 9 Comments

Macroeconomics was born as a distinct field in the 1940s (sic!), as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.

Robert Lucas (2003)

9 Comments

  1. Wren has responded to you and others in an interesting way. I think he makes some good points. In some ways, he makes a good case as to why some gadgetry is needed.

    Comment by Dwayne Woods— 17 Jul, 2012 #

    • Maybe, but I think Unlearningeconomics has a good point in his comment on SW-L blog:
      “”I always say to PhD students, start simple, understand the simple model, and then complicate. So we start with a representative agent.”

      The problem being that more advanced models tend to introduce further assumptions rather than relax them.

      Many assumptions in economics are ‘domain’ assumptions, where the conclusion only applies when the assumption does. Perfect information is an example of this – once you abandon that, you must start again a la Akerlof. Full employment is another one (Keynes believed neoclassical theory only applied at full employment).

      The point is that models must have clear boundaries for what to do when assumptions when they are relaxed. If all you can do to make the model remain consistent is add more assumptions then I’m sorry but you are performing an exercise in Ptolemy.”

      Comment by Lars P Syll— 17 Jul, 2012 #

  2. What you cite is better but here is a gem from the “scientist” in The Wall Street Journal (September 19, 2007). It is an opinion piece titled “Mortgages and Monetary Policy”

    “So I am skeptical about the argument that the subprime mortgage problem will contaminate the whole mortgage market, that housing construction will come to a halt, and that the economy will slip into a recession. Every step in this chain is questionable and none has been quantified. If we have learned anything from the past 20 years it is that there is a lot of stability built into the real economy.”
    Source: http://online.wsj.com/article/SB119017085710932141.html

    Comment by Arijit Banik— 17 Jul, 2012 #

    • I’m totally gobsmacked. Sancta simplicitas!
      Nice quote – and hadn’t it been for the fact that Lucas is a Nobel laureate, this quote would be a strong runner up for a title match.

      Comment by Lars P Syll— 17 Jul, 2012 #

      • Well i prefer this qoute by old John Kenneth Galbraith ” Economics is extremely useful as a form of employment for economists.” :
        Thank you for wonderful blog articles Lars!And all the best to you!Jan Milch

        Comment by Jan Milch— 17 Jul, 2012 #

        • Thanks Jan. A great quote.
          I’ll save it for a forthcoming Top 10 economics quotes of the century.

          Comment by Lars P Syll— 17 Jul, 2012 #

      • Well Lars, it would be a Lucas vs. Lucas title match as he wrote the tripe in the Wall Street Journal that I mentioned above. I mockingly refer to him as the “scientist” as that is the label given to him by his followers.

        Comment by Arijit Banik— 17 Jul, 2012 #

  3. Talking about rational expectation run amok

    Comment by Dwayne Woods— 17 Jul, 2012 #

    • Obviously Lucas himself isn’t as “rational” as the agents he portrays in his “robot-imitation models”!

      Comment by Lars P Syll— 17 Jul, 2012 #


Sorry, the comment form is closed at this time.

Blog at WordPress.com.
Entries and Comments feeds.