Enter Lars Syll11 September, 2012 at 15:37 | Posted in Economics, Theory of Science & Methodology | 2 Comments
Enter Lars Syll, an economist at Malmö University in Sweden who specializes in economic philosophy and methodology and seems to be a kind of Post-Keynesian, not a New Keynesian like Krugman and Wren-Lewis. Post-Keynesians have long tried to return to Keynes’ original thought, particularly on uncertainty, and not on the disciples that followed. Syll went hard after Wren-Lewis’ post with one of his own titled, “Wren-Lewis Drivelling on Macroeconomics.” Syll does not mince words: “Again, this self-congratulatory attitude. All macroeconomists share the same (mainstream neoclassical) basic theory, so when we discuss and argue it’s only about which policy and model to choose. All the more or less licensed and shared models and policies are already there on the shelf and we just have to decide which one to pick for today’s problem solving.” Syll declares a pox on both the Classical and the New Keynesians, both of which, he says, use unrealistic and unrepresentative models. Again, Krugman steps in to argue Wren-Lewis’ point: In research, playing with models, even if they are unrealistic, can help clarify thinking. It’s when you apply these models to policy issues that you usher politics into the game. Krugman makes the distinction between “gadgets,” that is some “brilliantly silly” theoretical models he has found useful, and fundamentals. A gadget is an aid to thought; a “fundamental” is some inevitably inadequate representation of reality. Krugman ends with a sigh. “But I guess not everyone on the sensible side [his side, of course] of macro sees it that way. And that is a problem. A gadget is a gadget, and you should not let it define your field.”
In a long post a day later, Syll describes himself as a heterodox economist (he now calls Krugman a “sort-kinda New Keynesian”) who draws his inspiration from Keynes, but not from those who followed him and tried to formalize his thinking, like John Hicks and his IS-LM model, which Krugman defended as an aid in his work on liquidity traps. Again, it’s all about the models–it’s all about how we even begin to think about the foundations, or the microfoundations, of economics. “On most macroeconomic policy discussions I find myself in agreement with Krugman,” writes Syll. “To me that just shows Krugman is right in spite of and not thanks to those models he ultimately refers to. When he is discussing austerity measures, ricardian equivalence or problems with the euro, he is actually not using those models, but rather simpler and more adequate and relevant thought constructions in the vein of Keynes … A gadget is just a gadget–and brilliantly silly models do not help us working with the fundamental issue of modern economics.”
OK, for anyone without an economics degree, this back-and-forth may seem like the nattering of some lost tribe in the jungle: Hicks and Keynes; Lucas and Krugman; views of dynamic stochastic general equilibrium models or the Dixit-Stiglitz model of monopolistic competition; gadgets and fundamentals; New Keynesians and Post-Keynesians; and a dash of intertemporal optimization. Where will it all end? Again, while the debate gets quickly technical, the larger question is sitting right there. What kind of endeavor is economics? Is it a science like physics? What are its limits? Can we accurately model human behavior? How much certainty can we reasonably expect from economists? This is not just ivory tower philosophizing. We live in an age when economics, for better or worse, rules. Nations rise and fall because of economics. Elections hang on judgments of economists, and vast forces are either restrained or unleashed (look at British austerity policies). They are the technocratic agents par excellence; they even get op-ed columns in major newspapers. It is useful to recall these debates over methodologies (which continue unabated, with newish posts from nearly everyone) when economists declare this or that with ineffable certainty. It may be wonkish, but it may be the most important debate of all.
Robert Teitelman The Deal