Macro and the non-economist
After playing tennis with a non-economist friend yesterday, he asked me how can macro have two completely different schools of thought which seem to differ even on the basics. I told him that, at the op-ed level, macro had a lot of ideology and politics in it and there were more than two schools of thought!
He then asked how it could be the case that when people look at the same data, they don't arrive at the anything near the same conclusion. He said that it was irritating and frustrating to see constant disagreement by economists over macro issues
I told him two things.
First, there isn't really that much data! Since world war two we are working on what, our 10th business cycle?
Second, macro is largely a non-experimental science thus causation was a b*&#ch to figure out and counterfactuals were in short supply.
I also told him that op-ed level macro wasn't generally serious academic macro (though some of it is).
And he asked me what serious academic macro had done vis a vis predicting the meltdown.
I told him, "very little".
I then told him macro forecasters are like weatherpeople, the worse we do and the worse things get, the more they are in demand. I don't think he was too impressed.
I don't fault modern macro for not predicting the financial meltdown; to me thats a borderline silly complaint.
I do think though that op-ed level macro is often not doing the profession any favors in its quest to be viewed as a science.