Are macroeconomists just a bunch of astrologers?
In a recent bloggingheads.tv episode, Mark Thoma made an interesting observation about modern macroeconometrics: We have one set of [U.S.] data. . . . We know what that data says. . . . It’s hard to build a model that doesn’t fit. That got me thinking about my skepticism regarding macroeconomists who try to build structural models of the economy. Let me say right up front that I don’t know a lot about these models, and it’s really dangerous to summarily dismiss a whole line of research that one isn’t very well-informed about, but . . . you know what’s coming next. It seems to me that structural models of the economy probably have some ability to extrapolate into the future, but don’t seem to be able to predict the things that we’d really like them to be able to predict—sharp changes in AS or AD. I think about that failure in terms of efficient markets theory. Almost all the really interesting macro events that I have lived through or studied have been accompanied by dramatic swings in
