Wednesday, April 15, 2009

They took these non-linear stochastic dynamic general equilibrium models into the basement and beat them with a rubber hose until they behaved

--- Willem Buiter, a former member of the UK’s Monetary Policy Committee who blogs for the FT, complaining that macroeconomists have simply discarded the difficult stuff to make their models more elegant. Quoted in an FT opinion piece by Tim Harford, "Are those who sweat the big stuff in meltdown?", April 11 2009.

Also amusing in this piece was a recollection of P.J. O’Rourke’s explanation of the difference between micro and macro: microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things that they are wrong about generally.

And Mark Thoma of the University of Oregon, another economics blogger, is reported as saying: “I think that the current crisis has dealt a bigger blow to macroeconomic theory and modelling than many of us realise.”