Mankiw on useless macroeconomics

2 Apr, 2016 at 19:11 | Posted in Economics | 1 Comment

The real world of macroeconomic policymaking can be disheartening for those of us who have spent most of our careers in academia. The sad truth is that the macroeconomic research of the past three decades has had only minor impact on the practical analysis of monetary or fiscal policy … The fact that modern macroeconomic research is not widely used in practical policymaking is prima facie evidence that it is of little use for this purpose.

Greg Mankiw

Macroeconomic models that are ill suited for being applied to real-world problems — such as unemployment and rising inequality — are simply bad models.

If macroeconomists can’t do better than they do today with their RBC-New Classical-New Keynesian-DSGE macroeconomic models, it is indeed high time for Mankiw et consortes to — as Keynes famously had it —  “manage to get themselves thought of as humble, competent people on a level with dentists.”