Sunday, April 17, 2011
Mark Thoma on Empirical Macro
This is a really excellent post by Mark Thoma. This is how people need to approach empirical macro, and why history is so important for good macroeconomics.
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Yes, Mark Thoma says that history makes up for incomplete information, but historical information is the biggest source of confirmation bias and narrative fallacy ever known.
ReplyDeleteHow many people do you know who were both good macroeconomists and good historians? Both very different and very difficult fields.
What do you think about the role of the Lucas critique/Black Swans?
ReplyDeleteThis would be the reason for doing the sort of critical historical thinking that Thoma is suggesting, right? If the Lucas critique is substantial, don't derive a general theory from a swath of data that may not apply under other circumstances. Or - take estimates from a certain period and understand their relevance to theory in light of the Lucas critique. Same with black swans. A liquidity trap theory ought not to be dismissed just because it's rare, and a multiplier relevant to a liquidity trap situation can't be derived from a post-war time series.
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