In terms reminiscent of Malibu Barbie's "math is hard," now comes Kartik Athreya from the Richmond Federal Reserve Bank to say "Economics Is Hard":
Matthew Yglesias, John Stossel, Robert Samuelson, and Robert Reich... [are] exceedingly unlikely... [to] have anything interesting to say about economic policy....
Deficits, short-term interest rate targets, sovereign debt are all chewed over with a level of self-assuredness that only someone who doesn’t know more could. The list of those exhibiting this zest also includes, in addition to those mentioned above, some who might know better. They are the patron saints of the “Macroeconomic Policy is Easy: Only Idiots Don’t Think So” movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that it’s all really very simple....
[M]acroeconomics is not, by any reasonable measure, simple. Macroeconomics is most narrowly concerned with the tracing of individual actions into aggregate outcomes, and most fatally attractive to bloggers, vice versa...
The argument appears to be:
The majority of the training of new Ph.D.s in their macroeconomic coursework is giving them a way to come to grips with the feedback effects that are likely present....
Writers who have not taken a year of Ph.D. coursework in a decent economics department (and passed their Ph.D. qualifying exams) cannot meaningfully advance the discussion on economic policy....
[E]conomics is far, far, more complicated than most commentators seem to recognize. Because if they did, they could not honestly write the way they do now.... [J]ust below the surface of all this chatter... there is a vibrant, highly competitive, and transparent scientific enterprise... the public remains largely unaware of this work....
How can this be changed? A precondition for the market delivering this is a recognition by the general public that they are simply being had by the bulk of the economic blogging crowed. I hope to have alerted you to the giant disconnect that exists between the nuanced discussion that occurs between research economists and the noise (some of it from economists!) that one sees in the web or the op-ed pages of even the very best newspapers of the US. As a result, my hope is that the broader public will ask for a slightly higher bar when it comes to economics, rather than self-selecting int oblogs thatmerely confirm half-baked views that might have been acquired from elsewhere...
I'm going to duck out of this one, and leave it to Federal Reserve Bank of Minneapolis President Narayana Kocherlakota.
He will explain to Kartik Athreya that someone who has taken a year of Ph.D. coursework in a decent economics department (and passed their Ph.D. qualifying exams) is unlikely to be able to say anything coherent about our current macroeconomic policy dilemmas:
Why do we have business cycles? Why do asset prices move around so much? At this stage, macroeconomics has little to offer by way of answer to these questions. The difficulty in macroeconomics is that virtually every variable is endogenous – but the macro-economy has to be hit by some kind of exogenously specified shocks if the endogenous variables are to move. The sources of disturbances in macroeconomic models are (to my taste) patently unrealistic. Perhaps most famously, most models in macroeconomics rely on some form of large quarterly movements in the technological frontier. Some have collective shocks to the marginal utility of leisure. Other models have large quarterly shocks to the depreciation rate in the capital stock (in order to generate high asset price volatilities). None of these disturbances seem compelling, to put it mildly. Macroeconomists use them only as convenient short-cuts to generate the requisite levels of volatility in endogenous variables...
If Narayana is right, Kartik is wrong. I'm betting on Narayana.
