Publish and Perish: Creative Destruction and Macroeconomic Theory

Chatelain, Jean-Bernard and Ralf, Kirsten (2017): Publish and Perish: Creative Destruction and Macroeconomic Theory.

Abstract

Macroeconomic theories of the 1980s faced accelerated depreciation when not sudden death. By contrast with econometrics and microeconomics and despite massive progress in access to data and the use of statistical softwares, macroeconomic theory appears not to be a cumulative science so far. When attempts are done to settle controversies by "nature" (testing the theories), they are designed to fail due to Gresham's law of selecting theories based on too many parameters, which are weakly or non-identified when testing them. Two examples are provided, one in growth theory and testing convergence, one in business cycles theory and testing inflation persistence.

• Item Type: MPRA Paper
• Language: English
• Keywords: Macroeconomic theory, controversies, identification, economic growth, convergence, inflation persistence.
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B23 - Econometrics ; Quantitative and Mathematical Studies; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

References

Abreu, M., De Groot, H. L., and Florax, R. J. (2005). A Meta-Analysis of β-Convergence: the Legendary 2%. Journal of Economic Surveys, 19, 389-420.

Aquinas T. (1920). Summa Theologiae. Translation Fathers of the English Dominican Province. Online Edition Copyright © 2016 by Kevin Knight.

Blanchard O.J. and Kahn C. (1980). The solution of linear difference models under rational expectations. Econometrica, 48, 1305-1311.

Blanchard O.J. (2016). Do DSGE models have a future? Working paper, Peterson Institute for International Economics. PB 16-11. August.

Barro R.J. and Sala-I-Martin X. (2004). Economic Growth, MIT Press, Cambridge, Massachussetts.

Calvo, G. A. (1983). Staggered prices in a utility-maximizing framework. Journal of Monetary Economics, 12, 383-398.

Canova and Sala (2009). Back to square one: Identification issues in DSGE models. Journal of Monetary Economics, 56, 431-49.

Cochrane J.H. (2011). Determinacy and identification with Taylor Rules. Journal of Political Economy, 119, 565-615.

Colander (2009). Economists, Incentives, Judgment, and the European Cvar Approach to Macroeconometrics. Economics: The Open-Access, Open-Assessment E-Journal, 3, 1-21.

De Vroey, M. (2016). A history of macroeconomics from Keynes to Lucas and beyond. Cambridge University Press.

Drakopoulos S.A. and Karayiannis A.D. (2005). A Review of Kuhnian and Lakatosian "Explanations" in Economics. History of Economic Ideas, 13, 51-73.

Duarte, P. G. (2012). Not going away? Microfoundations in the making of a new consensus in macroeconomics. Microfoundations Reconsidered, The Relationship of Micro and Macroeconomics in Historical Perspective. Cheltenham, UK: Edward Elgar, 190-237.

Duarte, P.G. (2015). From Real Business Cycle and New Keynesian to DSGE Macroeconomics: Facts and Models in the Emergence of a Consensus. SSRN working paper. 2596590.

Duarte, P.G. (2016). Macroeconomists as Revolutionary Schoolmates. Comments on Michel De Vroey's A History of Macroeconomics from Keynes to Lucas and Beyond. Œconomia. History, Methodology, Philosophy. 6, 129-137.

Fève, P., Matheron, J., and Poilly, C. (2007). Monetary policy dynamics in the Euro area. Economics Letters, 96, 97-102.

Gali J. (2015). Monetary Policy, Inflation and the Business Cycle. 2nd edition, Princeton University Press, Princeton.

Glass, D. H. (2016). Science, God and Ockham's razor. Philosophical Studies, 1-17.

Ireland P. (2004). A Method for taking Models to the Data. Journal of Economic Dynamics and Control, 28, 1205-26.

Hoover, K. D. (2015). The ontological status of shocks and trends in macroeconomics. Synthese, 192, 3509-3532.

Juselius K. and Franchi M. (2007). Taking a DSGE Model to the Data Meaningfully. Economics, The Open-Access, Open-Assessment E-Journal, 2007, 1-38.

Kydland, F. E., and Prescott, E. C. (1982). Time to build and aggregate fluctuations. Econometrica, 1345-1370.

Krueger, A. B. (2003). An Interview with Edmond Malinvaud. The Journal of Economic Perspectives, 17, 181-198.

Latour (1988). Science in action. Harvard University Press. Boston.

Lucas, R. E. (1976). Econometric policy evaluation: A critique. In Carnegie-Rochester conference series on public policy (Vol. 1, 19-46). North-Holland.

Mavroeidis, S., Plagborg-Møller, M., and Stock, J. H. (2014). Empirical evidence on inflation expectations in the New Keynesian Phillips Curve. Journal of Economic Literature, 52, 124-188.

Poudyal N. and Spanos A. (2016). Confronting theory with data: Model validation and dsge modeling. Working paper. Virginia Tech.

Reinhart, C. M., and Rogoff, K. (2009). This time is different. Eight Centuries of Financial Folly, Princeton University, Princeton and Oxford.

Ramsey F.P. (1928). A Mathematical Theory of Saving. Economic Journal, 38, 543-559.

Romer, P. M. (2015). Mathiness in the theory of economic growth. American Economic Review, 105, 89-93.

Romer, P.M. (2016). The trouble with Macroeconomics. Working paper. Paul Romer's website, 14th September.

Smets, F., and Wouters, R. (2007). Shocks and frictions in US business cycles: A Bayesian DSGE approach. The American Economic Review, 97, 586-606.

Smets F., Wouters R. and Linde J. (2016). Challenges for Central Banks' Macro Models. Handbook of Macroeconomics, volume 2 (John B. Taylor and Harald Uhlig, editors, Elsevier Press), forthcoming.

Spanos A. (2009). The pre-eminence of theory versus the European CVAR perspective in macroeconometric modeling. Economics: The Open-Access, Open-Assessment E-Journal, 3, 1-10.

Taylor, J. B. (1993). Discretion versus policy rules in practice. In Carnegie-Rochester conference series on public policy (Vol. 39, 195-214). North-Holland.

Taylor, J. B. (2001). An Interview with Milton Friedman. Macroeconomic Dynamics, 5(01), 101-131.

van Inwagen, P. (2005). Is God an unnecessary hypothesis? In A. Dole & A. Chignell (Eds.), God and the ethics of belief (131-149). Cambridge: Cambridge University Press.

Vaughan, D. (1970). A nonrecursive algebraic solution for the discrete Riccati equation. IEEE Transactions on Automatic Control, 15, 597-599.

Wasserstein, R. L. and Lazar, N. A. (2016). The ASA's statement on p-values: context, process, and purpose. The American Statistician, 70(2), 129-133.