Battlepanda: More economists against economists


Always trying to figure things out with the minimum of bullshit and the maximum of belligerence.

Wednesday, April 20, 2005

More economists against economists

This quote from Brad DeLong's review of Richard Parker's new book on John Kenneth Galbraith seems apropos to our recent discussion on how economics is taught (badly) in America:
Late-twentieth-century American economics centers on the use of mathematical models to reach one of two conclusions: that the market is already doing a good job, or that some imperfection is causing "market failure" and correcting or counterbalancing the imperfection will make everything okay.

Thus there are New Classical macroeconomists, who believe that the market works fine and that even depressions are necessary and inevitable; Monetarists, who believe that recessions result from failures in the banking system, which can be corrected by ensuring stable growth of the money supply; and New Keynesians, who are indistinguishable from Monetarists save for their identification of market failures in the labor market or in the investment decisions of firms. In all these cases, it is clear what an economist must do to belong to a particular school: start underneath the lamppost, take a few steps in one direction by describing a market failure, and then start searching for lost keys. New Classicals master the solutions of "dynamic stochastic general-equilibrium representative-agent models." Monetarists analyze the details of the financial system in an effort to define a "neutral monetary policy." New Keynesians trace the implications of subtle differences in labor-and capital-market failures.
That's just what I would have said. But much more succinctly and wittily than I could've said it. Brad DeLong is a national treasure.