Greg Clark writes:
Dismal scientists: how the crash is reshaping economics: The current recession has revealed the weaknesses in the structures of modern capitalism. But it also revealed as useless the mathematical contortions of academic economics.... The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner. The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.
It has seen people like Brad DeLong accuse distinguished macro-economists like Eugene Fama and John Cochrane of the University of Chicago of at least one "elementary, freshman mistake."
Well, Greg? Don't be shy. Be brave! Tell us: Is Fama right? Does the NIPA savings-investment identity guarantee that the stimulus cannot work because of 100% crowding out? Or has he made an elementary, freshman mistake?
Greg goes on:
Bizarrely, suddenly everyone is interested in economics, but most academic economists are ill-equipped to address these issues. Recently a group of economists affiliated with the Cato Institute ran an ad in the New York Times opposing the Obama's stimulus plan. As chair of my department I tried to arrange a public debate between one of the signatories and a proponent of fiscal stimulus -- thinking that would be a timely and lively session. But the signatory, a fully accredited university macroeconomist, declined the opportunity for public defense of his position on the grounds that "all I know on this issue I got from Greg Mankiw's blog -- I really am not equipped to debate this with anyone"...