Tuesday, June 29, 2010

Is Macroeconomics Hard?

This weekend, Greg Mankiw linked to a short essay by Kartik Athreya, an economist at the Richmond Federal Reserve, which argued that macroeconomics is considerably harder than most economics bloggers suggest, and that most blogging on macro is useless. He singled out Matt Yglesias, John Stossell, Robert Reich, Robert Samuelson, Brad DeLong, and Paul Krugman for criticism (the last two because they should "know better" - presumably the others don't know any better). His point was that it's hard to communicate good macro in a blog and you really need a PhD education in economics to communicate good macro anyway. The link is broken now for the essay, but I'm sure it will resurface soon. There has been a flood of commentary that I'll link to first, and then provide my own thoughts.

What they said

On my blogroll at least, EconLog's Arnold Kling started off the responses, tentatively agreeing with Athreya but adding that not only do bloggers not know much - trained economists don't know much either. This is a line that you hear from a lot of Hayekians - Russ Roberts and Don Boudreaux peddle it too. It's always slightly irksome because these are some of the most cock-sure economists out there, and they only ever apply this logic to economists they disagree with. Moving on!

Scott Sumner takes exception to Athreya's accusation, and even defends Krugman and DeLong. And speaking of Brad DeLong, he has a predictably great and biting rebuke (he was one of the named bloggers after all!), calling Athreya "Malibu Barbie" (for her famous ditzy line "math is hard!"). What was most interesting about DeLong's (first) post on Athreya was that he cited Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, who a little while back wrote an essay of his own explaining the failure of macroeconomic modeling. This is somewhat ironic because at the time bloggers received Kocherlakota's statement somewhat cooly, since he ended up defending the big, complex macroeconomic models run by the Fed. Now I suppose he seems wise next to Athreya - because at least he was honest about the limitations of these models.

Mark Thoma is also quite critical, and notes the irony of Athreya praising Greg Mankiw when Mankiw regularly links readers to Stossell and Samuelson - two bloggers/journalists that Athreya criticizes.

Jonathan Catalan, at Economic Thought, agrees with Athreya on the point that most bloggers are clueless on macro, but strongly disagrees with the idea that you need to have graduate training in economics to say anything useful. Catalan does make one really strange point that Athreya is "not biased" because he "criticizes all bloggers equally (including Krugman and DeLong)". I think this claim is non-sensical. Athreya's essay was clearly directed against liberal/Keynesian bloggers. Matt Yglesias, Robert Reich, Paul Krugman, and Brad DeLong were all singled out. The other two - John Stossell and Robert Samuelson - are media personalities that also happen to blog (although I didn't realize Samuelson did). Stossell is definitely a libertarian, but the guy is a Fox News talk show host for crying out loud! Catalan responds in the comments that Stossell is widely read, but you know what - so is Sarah Palin. Samuelson is sort of a gloomy, bearish columnist with lots of deficit worries. I suppose I'd guess that he's center-right, but he's not in deep with any side of the debate. So you've got two media personalities, four prominent liberal/Keynesians including two of the best Keynesian economists in the business right now, and oh ya - a Fox News commentator (no major libertarian or conservative thinkers to be seen). The point was blatantly obvious to anyone that knows the community or the discipline. Catalan cryptically responds to me "Given his background, I doubt that he is giving the libertarians a break". I'm not sure what that is supposed to mean - I suppose he thinks that central banks are chock full of liberal Keynesians. Again, I think that betrays an unfamiliarity with the community and the discipline. Or at least an inability to distinguish between a guy like Paul Krugman and a guy like Narayana Kocherlakota, who I think a lot of libertarian/Austrians would treat pretty similarly. I don't think Athreya is a libertarian, mind you. I think they're probably not on his radar.

Brad DeLong resumes the criticism, including a restatement of the history of the idea of a general glut... not sure why... he just kind of throws that in there whenever he can - which is good I suppose. CNN Money has a review here. I don't know if Robert Samuelson typed this up after seeing Athreya's essay, but he had a column out arguing precisely that economics is hard. Dean Baker disagrees with him. And finally, the best response I've read so far is Nick Rowe, a Keynesian who makes a Hayekian critique of Athreya.

What I say

Like a few of these commenters, I'm somewhat torn on Athreya's essay. First and foremost I have to agree with him, simply from a Smithian standpoint. Of course it's hard. That's (partly) why we specialize in it. That's (partly) why compensation for economists is so high relative to other jobs. That's why it takes five years to get an advanced degree in it, and why community colleges don't really offer it. Yes, it's hard.

It's also hard because of the empirical problems that plague macro. In microeconomics you have reasonable hope of getting a solid empirical estimate. We have experiments, but we also have quasi-experimental methods that do a decent job. And when we don't have that we at least have mountains and mountains of data and lots of variables so we can hold a lot of things constant. This plethora of empirical options makes bad interpretation a real danger, but at least it's there. We don't have experiments in macro. We have much less data and much fewer variables, and much fewer events to look at. Identifying counterfactuals is very hard. That means in macro it's very challenging to test theories.

Most of my educational and professional background is in labor economics and econometrics, not macro. However, I have taken graduate level macroeconomics (although I haven't gotten a PhD or anything). Most of what I write on here, though (which I like to think is at least fairly competent), I did not get from my graduate macro course. When the financial crisis hit I got very interested in macroeconomic questions very quickly, and what I write here is mostly derived from my own independent study of the subject. It's not that what we learned in class was bad necessarily - we just never really learned that much about the economics of depressions or the business cycle! We did a lot with growth models, overlapping generations models, the Diamond model, and if we did anything on economic downturns at all it was Real Business Cycle Theory (which of course is widely - although not entirely - considered to be discredited now). Needless to say, I don't reference that stuff all that much here. Graduate macro is much more than that, and I didn't go that far into it at all - but a lot of it is similarly useless at a time like this.

At a certain level, as an amateur blogger that blogs on macro, of course I have to disagree with Athreya. Part of it is simply that I do feel I grasp a lot of the issues pretty well, and you simply don't have to have a PhD to grasp the concepts. Part of it is that I read PhD economist bloggers who I think do a terrible job explaining the issues. And part of it is Nick Rowe's Hayekian point about the value of blogging. Each blogger contributes insights that on their own might not be particularly important or even right. But the point is they interact with each other and critique each other, which in the end fashions a better perspective. I think it's also a matter of robustness. I am a Keynesian, but I'm a slightly different Keynesian than anyone else out there. I've criticized many of them, and I hold slightly different assumptions from many of them. It's important to get a sense of what perspectives are robust to a variety of assumptions and perspectives. For example, regular readers of economics blogs may have noticed that there is a broad convergence across a variety of blogging perspectives on some sort of monetary disequilibrium theory of depressions. They all put a slightly different spin on it and have different solutions to it, but it's a common thread running through monetarists, Austrians, and Keynesians, although sometimes you have to read between the lines to see it. That's a very important thing to tease out and recognize.

I also have to agree (and disagree) with some of Athreya's specific naming of bloggers. Yglesias is worth reading for other things, but you can ignore his economics blogging, and the writing of Stossell, Reich, and Samuelson, and you really won't be worse off for it. Yglesias's economics is a tortured restatement of Scott Sumner and Paul Krugman on the Fed, and that's honestly about all it ever amounts to. I hate the stereotype of the tax and spend liberal Keynesian, but honestly that's all Reich amounts to. Samuelson is usually pretty safe, but he's a one trick pony (which means he's wrong when circumstances require a different trick). Stossell is entirely dismissible. So I agree that there's a lot of bad economics blogging out there. But don't we expect that? There's a lot of bad blogging out there period! You learn that over time. I simply removed Cafe Hayek from my blogroll and added and thoroughly enjoy Coordination Problem and ThinkMarkets. You learn who does bad economics and who does good economics. On the Keynesian side I removed Economic Perspectives and added Worthwhile Canadian Initiative. You learn these things. My most recent useless blogger that I'm encouraging everyone to stop reading is Wayne William Anderson.

I have to simply disagree with Athreya on Paul Krugman and Brad DeLong. These two are quite simply some of the best economic bloggers out there. I think naming them was the source of a lot of the criticism of Athreya, because as soon as he did it was very transparent about what he was doing and where he was coming from. If he had left it at the initial four I think more people would have nodded, said "I think you have a point", and moved on. It's fine not to agree with them (I don't always agree with them), but DeLong and Krugman are good at what they do and they write good posts.

So non-PhD bloggers (myself included) - keep blogging! You will get things wrong. You will be called out on it. The nice thing is, bloggers with PhDs (DeLong, Krugman, Cowen, Mankiw, Boudreaux, Sumner, Kling, Caplan, etc. etc.), and people with PhDs who don't blog and only write papers and books will get things wrong too, and you can call them out on it! It's a beautiful thing, and we're all better off for it. But when you engage in economics blogging - particularly macro blogging - you should be honest and straightforward about one thing that Athreya got right. Macroeconomics is hard. If you don't realize that when you get into it you're going to be more likely to be more confident in yourself than you should be (which, ironically, was really Athreya's own problem).


  1. "It's fine not to agree with them (I don't always agree with them), but DeLong and Krugman are good at what they do and they write good posts."

    That's one opinion on the matter.

    Anyway, seems much ado about nothing to me. The world of blogging is always getting offended about one thing or another.

  2. I'm not sure "offended" is the right word... it was just something to chew over.

    Athreya's origins - outside the blogosphere, from a central bank, and presumably a party to those massive macro models that central banks run - was a big part of the reason why this got so much discussion. Just like the Great Depression, this downturn has knocked a lot of the mandarins of economic policymaking off their thrones. Now, a lot of people don't differentiate between guys like Krugman and central bankers. The fact is, though, there is a huge gulf between them in attitude, approach to economics, and policy. And of course there's a big gulf between central bank types and libertarians. Add that to the fact that Athreya is a no-name, and there are actually some serious issues here regarding who is worth paying attention to and who isn't.

    As for Krugman and DeLong, that's not really "one opinion". It's just a fact. Even if you don't agree with them, people should be able to recognize that they make important contributions. If we can't get past the point of equating "contribution that doesn't convince me" with "bad contribution", then we're in a pretty sad place.

  3. What I mean by that is that the world of blogging does a lot of navel gazing regarding the internal life of blogging. Really, blogging is most boring, trite and utterly pointless when bloggers are talking about blogging.

  4. Daniel,

    Krugman argued that there are "traitors to the Earth" or something along those lines. I stopped paying attention to Krugman at that point.

    As for DeLong, well, I know him via this: http://cafehayek.com/2009/01/whose-the-parti.html

    I read enough in a week's time already to be able to easily justify avoiding what they have to say.

  5. :) Xenophon critiquing Krugman for outrageous overstatements and wild accusations? This is precious.

    If we stopped reading bloggers that wax hyperbolic, we'd have nothing to read. Besides, you're lingering close to navel gazing yourself there.

    I had the same reaction when Don Boudreaux wrote that post about DeLong. I agree and have said that DeLong is way too harsh sometimes. But of all people, who the hell is Don Boudreaux to criticize him for that? Don is one of the most arrogant economic commentators on the internet right now.

    Read DeLong's second response to Athreya that I linked above, please. It's full of fantastic information on macroeconomics and the history of thought. Considerably more content then I've ever gotten from Cafe Hayek. Sometimes bloggers can get offensive. Are we children? Who cares. It's a fact of life. If that's all they offer then that's a reason to be dismissive. If they do a lot of good posting too, a bad attitude shouldn't make us stop reading.

  6. My statements are never outrageous or wild to me.

    I don't really read Don Boudreaux either. The only reason I visit Cafe Hayek is for the relatively rare comment by Russ Roberts.

  7. "You learn who does bad economics and who does good economics."

    It seems you disagree with nearly everything Economic Thought publishes. Jonathan and I are Austro-anarchist economists - that doesn't seem to mesh with your type of philosophy.

  8. 1. Often if I agree I don't comment because there's nothing more to add. Usually when I comment and disagree I note something I agree with too, because I rarely completely disagree. But I certainly don't disagree with "nearly everything" however you count it. I think I also disagree with you far more than Jonathan.

    2. Austro-anarchism does not "mesh" with my "philosophy". I wouldn't call you guys "bad economics" in most cases (certainly no more often than I am). To a large extent our differences are over (as you allude to) different philosophical positions. I may not agree with your position, but I'm more loathe to say that something is "bad philosophy" vs. "good philosophy". There are some objective ways to determine that, I'm sure - but a lot of the political/ethical philosophy that is the basis of our disagreements seems awfully subjective to me. I'm not going to fault your economics because we have diferences over political philosophy - you guys do decent economics, despite the fact that I don't agree with a lot of it.

    3. I like your blog and continue to read it - I'm not sure if this comment questions that or not, but don't worry about that.

  9. I was just curious, given that statement, why you continue to patronize blogs with antithetical economic views. I certainly wasn't complaining.

  10. I suppose I don't equate disagreement on economics with bad economics.

    Which isn't to say I haven't also commented on bad economics blogs to inform them that they're bad. I got a little too caught up on that with Cafe Hayek, but have cut down on it there considerably. I do it every once and a while with Wayne Anderson. But I don't feel like an argument that I don't find convincing has to be an argument that I don't find to be good.


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