Where Have All the Macroeconomists Gone?

A reporter friend of mine recently asked me for a short list of academic economists he should call to better understand the current financial and economic mess. I found it a more difficult question than it should be.

It really has been quite striking how silent most economists have been in this hour of need. There are, of course, a few notable exceptions. Paul Krugman’s blog has been an interesting source of insight, and his recent column provides the clearest explanation of our current difficulties I have seen. Doug Elmendorf at Brookings has provided some very insightful commentary on the mortgage mess, and Marty Feldstein has offered a very well-thought-out plan.

Economists like Karl Case and Robert Shiller can quite rightly tell us that they saw this coming years ago. I’m sure I’ve missed others, but it remains striking that academic economists are barely visible during one of the most interesting economic disruptions in decades.

Yes, there is an enormous ocean of economic commentary out there, but a lot of it is either the self-interested blather of Wall Street economists, or political rhetoric parading as analysis. (Yes: Republicans are worried that regulation may stifle innovation, while Democrats believe that regulation can help … Oh, and what issue are we talking about? Does it matter?)

Meanwhile our presidential candidates call for action, but ultimately only suggest that we should consider many proposals, and find some experts to ask about them.

Why have the best and the brightest barely dipped their toes in the water?

1. Incentives: Krugman, citing Keynes, has argued that there is no incentive for a public intellectual to challenge the conventional wisdom. Better to be conventionally wrong, than unconventionally right.

2. Career ladders: Interestingly, some of the best analysis is coming from economic journalists, who are unencumbered by either the fight for tenure or post-tenure lethargy.

3. Crowding out: The wisdom of crowds is at its heyday and experts have lost market share in the public square. Everyone with a blog and ten minutes to spare is offering a view (including yours truly), and this is crowding out thoughtful discussion.

4. Reputational market failure: Just as it is tough to identify a good mechanic, it is difficult to identify a good economist. There are thousands of economics PhD’s, but perhaps only a few dozen with the penetrating insight the economy needs. Unfortunately these folks are struggling to be heard.

5. Labor supply: The success of economics over recent decades means that we simply have many more exciting (and important?) issues to focus on.

6. I’m wrong: Academic economists have produced excellent policy-relevant analyses that are providing Bernanke with the ammunition he needs.

I would love to be convinced that this is true. If you have written (or read) first-rate analyses — for a technical, policy, or popular audience — please add a link in the comments.

I suspect that #4 may explain the absence of younger economists from the debate; #1 and #5 seem too strong, but in the right direction; and the problem with #2 is that there is no clear alternative.


Eyeworksmusic

They carefully test their headlines on Friday Night to see if they can run the next part of the story on Saturday... the editors praying that by using the term 'SWAT'- associated with stock markets and investment trading- won't push the right combination of little buttons that trips the meltdown the banks have cranked up for us/themselves. In a spaceship of instant money, collapse is impossible... but outside, at electronic speed, your corrections need 29 miles of previsualization and a firm knowledge of where the hell you are going. As the 'Mommas and the Poppas' put it... "Monday, Monday... can't trust that day"

Clyde Kahrl

The causes of our present situation are preposterously obvious. But if you are looking for someone to talk to, someone with insight and a different point of view, why not call up Bob Frank?

Bill Conerly

It's pretty silly to go looking for an academic to ask about current economic issues. There are a few exceptions, but most of the academics can describe a macroeconomic model, but cannot tell you what last quarter's GDP was.

Mike

I believe economics among the social sciences is split between the intention to serve the public good and scientific knowledge and the pursuit of private gain. This is not clearly delineated as a problem within economics but tends to operate as an inner political split between liberal/progressive and free market economists: the general structure of the discourse is unregulated market plus how much regulations/state intervention. Those who are liberal/progressive tend to favor more of the latter.

Macroeconomics tends towards the "liberal/progressive" side though not exclusively as free market believers tend to have a very simple bromide for every problem, micro and macro. There has been little political will towards regulation as government has been portrayed in the last 2 and half decades as a hindrance to the economy. Even Democrats in the US have not come up with a positive theory of why government adds to preserves wealth.

So I believe economics as a profession needs to internally separate the question of "who do we serve?" from economic theory. If economists serve private wealth that is OK but don't pretend that it is the other way around. If we were able to disentangle the two issues better, we might see a renaissance of economic thought.

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john hutson

The "hour of need" was six years ago when the seeds of this mess were sown. While some may say that it would have been impossible to predict the current situation, I did see it coming as did many others. To me, it was just a matter of when. The opinions of academic economists would have greatly benefited the country and would not have had the conflict of interest that economists from the National Association of Realtors brought to the discussion. Economic journalists could have picked up on this story, but there's the risk that their opinion doesn't match the editorial objectives of the day, and besides. What it boils down to is, who wanted to be the party pooper?

peter morgan

I work as a macroeconomist in england. My work surrounds controlling inflation in other ways to interest rates and is orientated around pensions and flat rate taxation models. I have had some success I am only twenty five just and have regular correspondence with top politicians and the Czech Republic reviewed a taxation model that I wrote you can see it on my website. morganisteconomics.org.uk you can review the main body of my work the 'pension problem' paper a the bottom of the pension section of my website and you can download the taxation model that I wrote in the new work section of my website. please have a look a started my work because of the problems that I can see in society and have been working on ways to stop people from losing their homes.

James Brown

We need new ideas, methods of spreading them widely, methods of evaluation, and of implementation and monitoring.

The policy makers and economists who have been advocating hands off approach to economic matters have little experience of actually pulling the levers and recognising the intended and unintended consequences.

One idea to get the banks lending is for the government to guarantee a proportion of the risk which the banks presently perceive as insurmountable. A modest charge could be made by the government, it could even be profitable.

The banks have not lost as a result of the traditional loans they made to business or home owners but by the transactions they entered into with their peers via uncontrolled agents.. Normal supply of credit is vital. While the government seems to be standing behind the banks capital requirements would seem to be just another ineffective restriction which requires adjustment in the present environment..

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