Sunday, October 16, 2011

Sims and Sargent: Not "Non-Keyesians"

When the Nobel Prize for Sims and Sargent was announced, David Henderson wrote an op-ed calling it "a Nobel for non-Keynesians", and wrote about it on his blog. I took issue with that approach to the award, and wrote this in the comments:

"I agree with your praise of Sargent and Sims, but how do you square your op-ed's lede with the fact Keynesians have readily embraced precisely these concerns about both expectations and empirical macroeconomics?

I see Sargent, Sims, Lucas, etc. as critiquing a naive way of doing formal econometric modeling. Once could use those naive methods to do formal modeling of any theoretical tradition - it just so happens that Keynesianism was ascendant at the time of this early growth in data collection and econometric work. A better lede would have been "A Non-Cowles Nobel". That Keynesianism was flourishing in the midst of all that seems more incidental to me.

That's not to say Sargent is some kind of stealth Keynesian. It's just to say (1.) they killed the old modeling method, not Keynesianism, (2.) Keynesianism has done great under their new methods, and (3.) that Keynesianism is even part of this discussion is something of a historical accident

The "non-Cowles Nobel" is a reference to the Cowles Foundation which was sort of definitive of the simultaneous equation modeling of structural models. The Cowles foundation was established in 1932 - four years before the General Theory was published.

Now, Sims and Sargent seem to agree with me. Here's an excerpt from a New York Times article on them:

"An op-ed piece in The Wall Street Journal on Tuesday carried the headline, “A Nobel for Non-Keynesians,” placing the professors in the camp that opposes the interventionist philosophy of the influential British economist John Maynard Keynes.

It said the two had put “a sizable chink in the Keynesians’ armor.” An editorial said the pair was “ at odds with the recent Keynesian vogue, and in tune instead with the frustration with government fine-tuning that has dominated world economic policy since 2008.”

That’s a compelling narrative. But it’s not the way Professor Sims sees himself, as he told me by phone late last week. (It doesn’t seem to be Professor Sargent’s view, either, but we had only a brief e-mail exchange.)

Professor Sims doesn’t want to be pigeonholed. “I’m not ‘non-Keynesian,’ ” he said, adding that he has been an active “promoter of new Keynesian macroeconomic models,” because they “are the place in our profession where theory and data and policy decision-making are coming together.”

“It doesn’t really make much sense to stand on the sidelines and take potshots at them,” he said. “If you don’t like the way they’re working, you should try to do better.”

He and Professor Sargent have been “trying to do empirical macroeconomics using formal tools of statistics,” he said. “Those tools aren’t in themselves ideological.”

Professor Sims spoke favorably of the Obama administration’s fiscal stimulus programs, which are Keynesian in their countercyclical spending. “An expansionary fiscal policy is probably what we need right now,” he said

1 comment:

  1. "All the world's a stage, And all the men and women merely players. They have their exits and their entrances, And one man in his time plays many parts."


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