Macro Flame War
There are lots of Great Internet Debates- over operating systems, video game consoles, or politics. This last week, a similar sort of name-calling verbal brawl broke out among prominent macro-economists. But that exchange featured long posts and highly technical arguments. To simplify it for you, I will summarize the debate as the flame war it was at heart.
Nobel Laureate Paul Krugman: Who is to blame for the failure of economists to respond effectively to this crisis? Well, there are two types of economists: freshwater and saltwater. It sure wasn’t us saltwater people, so it must be that the freshwater types are to blame. They are so detached from reality that they think the Great Depression was just a Great Vacation for workers, resurrecting absurd fallacies I thought we had dispatched for good 70 years ago and thinking they must be right because their ideas are gussied up with fancy equations. Saltwater Keynesianism is the only game in town.
John Cochrane: Paul Krugman wants us to ignore the last 40 years of work in economics. In science, he would be the global warming skeptic of the HIV-AIDS denier. Only a paranoid, calumnous, superficial, idea-less schlock would rely on name-calling and personal attack like he did. Us freshwater types do not, in fact, deny the reality of bubbles, recessions, and other such real events. Krugman has no idea what caused the crash, and just advocated fiscal stimulus because he wants the government to be bigger. “So what is Krugman up to? Why become a denier, a skeptic, an apologist for 70 year old ideas, replete with well-known logical fallacies, a pariah… The only explanation that makes sense to me is that Krugman isn’t trying to be an economist, he is trying to be a partisan, political opinion writer…. Krugman wants to be Rush Limbaugh of the Left. I still want to be Milton Friedman, but each is a worthy calling.”
Brad Delong: John Cochrane’s 9-page response had one sentence that was TOTALLY wrong. The rest of what he said? I don’t feel like talking about it.
Paul Krugman: Nobody likes the freshwater people. They have no idea what Keynesians even said. I, by contast, know the literature so well that I finally cited a paper. Maybe next post I will cite two!
Brad Delong: Freshwater types haven’t read Keynesians? Of course, but more than that they haven’t read anyone. They commit fallacies which show they haven’t read Knut Wicksell, Irving Fischer, (fellow Chicago-school monetarist) Milton Friedman, or David Hume’s First Economics Paper Ever. Today’s Chicago school is an intellectual train-wreck.
Narayana Kockerlakota: What are you talking about guys? Macro is fine. If freshwater economists are so clueless why do we dominate the journals and provide most new hires at top universities? Really there isn’t even a freshwater/saltwater divide anymore. Here are links to a bunch of papers that Krugman thinks don’t exist, because they are about things he says we ignore.
Brad DeLong: Richard Posner is Uranus!
Justin Wolfers: All these old dudes are just cranky, Narayana is right that the new hires are moving past these problems and these flame wars. But macro isn’t really ok until the new generation starts paying attention to policy, and policymakers start paying attention to them.
David Levine: Paul Krugman is clueless about economics and just wants to expand government. It makes me feel physically ill that a distinguished economist could be so ignorant of his own profession.
Brad DeLong: David Levine is so clueless he is not in our galaxy. His piece is so bad the Huffington Post [not exactly the newspaper of record! JB] should not have published it.
Bob Murphy: A pox on both their houses! Paul Krugman is a jerk and offers horrible policy advice. But John Cochrane’s response is no friend-of-the-court brief in the Austrian critique of Keynesianism.
Scott Sumner: A pox on all their houses! Old Keynesians, New Keynesians, Monetarists, New Classicals, and Austrians are all wrong, and I am right.
Eric Falkenstein: All macro-economists are wrong! They have tried to fit their business cycle theories to the same ten data points, and the appearance of an eleventh one is not about to solve anything. It may eliminate some theories, but this is not so helpful since there an infinite number of ways to be wrong. Macroeconomics is the triumph of hope over experience, and has been no more successful than sociology [the ultimate insult to economists! JB]. At least private companies have figured out how useless this is and stopped hiring macro-economists.
Tyler Cowen: What the hell guys, you really thought you were going to fix macro with a flame war? I look forward to seeing some peer-reviewed journal articles.
Yoram Bauman: Maybe macro flame wars are a good thing, because the three most terrifying words in the English language are “macro-economists agree that”. The trouble with macro is built in to the definition of the field: micro-economists are wrong about specific things, while macro-economists are wrong about things in general.
Me: It is a bit traumatic for a young economist like myself to see this go down. I wonder, why do Mommy and Daddy have to fight like this? This is weird even by internet standards, because incivility is usually attributed to anonymity, but everyone here uses their real names and goes to the same conferences. What happened to the good old days when Milton Friedman and Paul Samuelson could lead opposing schools but still be friends? Do real sciences ever get this divided- was there ever a string theory flame war? But as economist/comedian Yoram Bauman says, maybe this will turn out for the best. Perhaps Krugman and Cochrane will do a joint show at the AEA humor session this January in which they reveal that this was all a hoax, and ask whether that wasn’t the most epic trolling ever. But it seems more likely that the reconciliation will be slow. Indeed, we may see a repeat of the late 70’s, when the two main factions (Keynesians vs Chicago Monetarists then, New Keynesians vs Chicago Ratex/RBC/New Classicals now) so effectively discredit each other that a third school will seize control of the policy arena.