Macro once again, or "it is history, stupid"

                          The blogosphere experiences another burst of historical/methodological discussions about macroeconomics: was new cla ssical macroeconomics of Lucas and Sargent, among others, an empirical or methodological revolution? The usual suspects took part of this and reverberated it appropriately: Simon Wren-Lewis, Mark Thoma, Paul Krugman, and Noah Smith. At this time, new fellow bloggers joined in: Robert Waldman and Arnold Kling. Wren-Lewis made the point that:

Stagflation did not kill IS-LM. In fact, because empirical validity was so central to the methodology of macroeconomics at the time, it adapted to stagflation very quickly. This gave a boost to the policy of monetarism, but this used the same IS-LM framework. If you want to find the decisive event that led to New Classical economists winning their counterrevolution, it was the theoretical realisation that if expectations were rational, but inflation was described by an accelerationist Phillips curve with expectations about current inflation on the right hand side, then deviations from the natural rate had to be random. The fatal flaw in the Keynesian/Monetarist theory of the 1970s was theoretical rather than empirical.

     Interestingly, this debate led Wren-Lewis to revisit Lucas and Sargent’s 1979 famous manifesto, “After Keynesian Macroeconomics.” He then came back to the issue of the new classical revolution being empirical or theoretical – a blog post “mainly for macroeconomists and those interested in macroeconomic thought” –, now focusing on the criticism raised by Lucas and Sargent from a methodological viewpoint. And a new round of opinions on this very manifesto spread over the blogosphere. In particular, John Cochrane re-read Lucas and Sargent’s “classic” article and took this discussion to use history as a criticism to present-day policy prescriptions, longing a time when macroeconomic discussions were scientifically based on quantitative models and led by technical economic experts. He decreed:    

A complete split occurred. "Equilibrium" models, in which I include new-Keynesian DSGE models, took over academia. The policy world stuck with simple ISLM logic – not "models" in the quantitative scientific tradition Lucas and Sargent praised – despite Lucas and Sargent's devastating criticism. And, as I remarked in the earlier blog posts, the "purely verbal" or literary style of analysis is becoming more and more common now in academia as well as policy.

     We have here a very lively historical debate among practitioners. The canonical history of macroeconomics as composed by rival schools of thought and revolutions and counter-revolutions lives on. The usual titans of the field reemerge: Friedman and Lucas versus Keynes, new Keynesians versus new classicals, etc.

     What is also curious in all this is the need that macroeconomists have had to set a glossary and to discuss what Lucas and Sargent really meant, and what really was at stake in the “new classical revolution.” Why is this curious? Because Keynes seems no longer to be alone as having written a book that Cochrane (echoing widespread opinions) described as “one of those big muddy things that people are still writing ‘what did Keynes really mean’ articles and books about nearly a century later.” Not a century has elapsed since 1979 and no muddy book has been written by Lucas and Sargent, but the “what did X really mean” is a rather thriving industry in the blogosphere.

HES 2014: It made a happy man very old!

This year, the History of Economics Society (HES) meeting was organized at the University of Quebec at Montreal. The meeting was, on the whole, a nice affair, there were plenty of interesting sessions, I reconvened with old friends and was able to present there my latest work and receive constructive comments.

There were, however, a number of features at the meeting that made me think that HET as a disciplinary subfield of economics is not at a turning point anymore. The turn has occurred some time ago and I would argue that we are now past the point of no return. You may see this as either a good or a bad thing, depending on how you situate yourself in the debates that have peppered our field over the past two decades or so, but here are the facts:

There were approximately 100 participants at the conference. One hundred historians of economics is always a good thing, but it is also a decreasing number - I did not attend the past three conferences but my feeling is that we were far more numerous to attend the HES meeting in Denver (2009) or in Toronto (2008). I found it quite surprising in the sense that Montreal is a vibrant city and I expected that the fact it is more cosmopolitan than, say, Syracuse, would draw more European researchers. What happened, I believe, is most that European historians have privileged the European conferences such as the ESHET and the Charles Gides meetings, which had a lot of sessions and participants. It is possible, also, that the current crises makes it more difficult for research institutions to pay for overseas travels. Yet, I think the evolution is even deeper than that.

The three researchers that were distinguished by the HES awards (best paper, best thesis and best book) are all located outside of economics departments. Dotan Leshem, who received the best paper award for his work on the origins of oikos nomos,is at the Instititute of Comparative Literature and Society at Columbia; Catherine Herfeld, who received the Dorfman Prize for her dissertation on rational choice theory studies philosophy at the  University of Munich; and Jeremy Adelman, who received the Spengler award for his intellectual biography of Albert O. Hirschmann, is a historian at Princeton University. All in all, the best history of economics, according to three subcommittees of one of the two main scientific societies in the field, is now done by people who are not subdiciplinary historians of economics. And these people are just the trees hiding the rest of the forest. At the last HISRECO meeting in Sienna, I met Tim Shenk and we talked a lot about this: there is definitely a world out there! Tim is doing some very nice work on the history of economics, the article he presented there on Maurice Dobb is very promising and I am sure that we will hear a lot about the PhD dissertation he is completing in the history department at Columbia. At the HES meeting, the invited lecturer was the historian of science David Engerman. His current work on economic expertise in India is brilliant. I could cite many more: Verena Halsmayer, a historian of science in Vienna, is completing her PhD dissertation on economic modeling, Michele Alecevich at Columbia is writing a groundbreaking history of development economics. There are many scholars who are studying the history of economics in the history, philosophy or sociology departments of major research institutions in the US and in Europe.

Meanwhile, at the HES meeting, Steve Kates complained that economics is not interested in the history of economics anymore. He is right, economists, in their vast majority, do not want to hear about historians of economics. Personally, I am honoured to be part of a mainstrean economics department in France, but I know I am in a minority position. My colleagues are sometimes interested in my work but as a whole HET is not very appealing to them. It might be a good or a bad thing but it is so. On several occasions at the HES meeting, Thomas Piketty has been mentioned as someone who is reviving some historical tradition but I believe that his otherwise excellent work does not have anything to do with the history of economics as a subfield. Piketty's historical understanding is grounded in the French tradition à la Braudel, not in the kind of works historians of economics do. On the whole, although economists have argued that we should study history more following the 2008 crisis, it did not affect the content in top economics journals and we are 6 years away from the beginning of the crisis. Look at the top 5 journals and you will simply not find any material related to what we see as the history of economics as a subfield. History of economics as we used to know it is now an almost defunct enterprise but, outside of economics departments, history of economics is thriving. It is, I think, more encouraging than worrisome, we have a whole new community to address and the only depresssing thing about this situation, in truth, is that most of our colleagues fail to recognize it (but that, also, is changing).

On a more personal note, this HES meeting made me realize I am not so much a young scholar anymore. I chaired the young scholar session and I believe that is a sign I should ackowledge. For this reason, this post will be my last contribution to this blog. I would like to thank my fellow bloggers for all the fun during those past six years.

We Can Blog it!

  The more reflexive mode brought by the financial crisis to macroeconomics made economists more outspoken about methodological, historical and sociological issues: how have we come to the DSGE dogma? What are its limitations? How can we produce alternative knowledge? Do publishing practices favor a "monolithic" thinking, and if so, how can we change it? What about the graduate training in economics?

  It is interesting that blogs became a more popular way of reflecting on these kinds of issues. I'm not saying that macroeconomists blog mostly about these issues: like several microeconomists, in their blogs we find a lot of "applied" discussions, here on economic policy, taxes, inequality, growth, etc.  But in contrast to microeconomists, macroeconomists seem more willing to blog about the history of their field, as our fellow blogger Beatrice Cherrier recently wrote about. I have argued elsewhere that contrary to a well established cannonical history of microeconomics, macroeconomics is often seen as made of disagreements between rival "schools of thought," with a few consensus periods (as the "neoclassical synthesis" and the "new neoclassical synthesis"). As a result, macroeconomists seem relatively more open to engage in "historical arguments." 

  While historical (and methodological) questions have been more popular recently, in blogs by Paul Krugman, Simon Wren-Lewis, Noah Smith, and Chris House, for example (all mentioned by Cherrier), historians (and methodologists) have had little participation in this debate. And important issues come up with the practice of blogging about the history of macroeconomics at the same time that very limited space in economics journals is allowed to historical analyses (and there is a quite selected group of economists who are called upon to present the history of the field in the few articles published in economics journals and volumes edited by practicing economists). Blog is a short-attention-span technology, where giving opinions without a careful and detailed analysis is not uncommon. Would blogging impoverish the quality of historical discussion, becoming more and more an expression of one’s own ideas and prejudices? On the other hand, it reached out the youngsters in an important way.

  These and other related topics motivated the proposal of a round table to take place in the coming meeting of the History of Economics Society (HES), in Montreal (June 20-22). There, a groups of historians and a macroeconomist will discuss some of these issues: Steve Ambler (Université du Québec à Montréal), Kevin Hoover (Duke University), Marcel Boumans (Erasmus Universiteit Rotterdam), and myself. A promise of a great discussion!

 

 

Piketty and thinking about economics

There is a new economics rock-star touring the US by all accounts, and his name is Thomas Piketty. More precisely, the star of the show is Picketty's Capital in the Twenty-First century which is a 700-page volume on wealth distribution in 30 countries over decades and centuries of data.

I have not yet read it, but I wanted to note that the last time a piece of economic research got this sort of attention, it was also a long book, it was also a historical study, and it was all about data and looking at the world through the historical lens. That time it was Rogoff and Reinharts book on national debt:This time is different.

Could it be that books are the way to impact the discussion on economics and not papers - is the academic/economics grind counter-productive? I like this sort of scholarship, or let me qualify that, I like how Piketty describes his form of scholarship and his vision for economics:

Capital in the Twenty-first Century, Piketty makes clear, is his notion of what economics scholarship should look like: combining analyses of macro (growth) and micro (income distribution) issues; grounded in abundant empirical data; larded with references to sociology, history, and literature; and sparing on the math. In its scale and scope, the book evokes the foundational works of classical economics by Ricardo, Malthus, and Marx—to whose treatise on capitalism Piketty’s title alludes. (The Chronicle, 17 April 2014)

On that note I'm off to order my copy.

Thomas Scheiding: A history of scholarly communication in economics

We invited Thomas Scheiding from Cardinal Stritch University to review what we know about the scholarly communication process in economics. Tom has written forcefully on the history and economics of economic literature (see for instance, his 2009 JEM article). His latest is a study of the scholarly communication process in physics (an article in Studies).

Macroeconomics in Perspective

In which MIT decided to teach micro first so as to make economics more relevant

I've already blogged on how undergraduate education evolved at MIT in the postwar era here and here, but since Mike Konczal and Paul Krugman make the case that, to bring introductory economics closer to the real world, macro should be taught before micro as Samuelson did in the first 13 editions of his Economi Read more

Mature history of economics

In the past decade, the volume of literature in the history of economics has been of 500 articles and just under 50 books a year. The graph below traces the count in two year intervals (articles left axis, books right axis). The absolute volume is stable but given the growth of economic literature in the period, stable might be rebranded as static.

Read more

In the thick of it (labels and research)

Historians like labels. X history. History of y. The labels carve out subjects, set boundaries in time and space, at times even suggest methodological commitments. Read more

Do social movements create new ideas?

The short answer is yes. For the long answer I will make you sit through seven paragraphs. Read more

Economic theory declassified?

So, most Nobel Prize exegetes went a long way, this week, toward explaining that asset pricing is not primarily born out of theoretical reflection but out of prize-deserving empirical work.John Cochrane, for instance, writes about efficient markets that: Read more

The Political Economy of the Nobel Prize, 45th edition

This morning, when I woke up a few hours before the Nobel announcement, I felt seriously dissatisfied. I had meant to write a post on Thomson Reuters's prediction that Card, Angrist and Krueger may win the Nobel for their work on empirical microeconomics. I thought that such prediction would come true, sooner or later, because of the irresistible development of empirical economics in the past 50 years, one illustrated by the list of John Bates Clark medalists. Such expansion, fostered by the increasing availability of data and computing resources, could itself be recast as part of an even larger move toward making economics an applied science. Read more