Robert Waldmann: Economic Theory as a Subbranch of Mathematics
The Peaceable Kingdom

Robert Waldmann: Hope for the Future

Robert Waldmann sees hope for the future of economics.

Hoisted from comments:

Grasping Reality: Fama's Fallacy V: Are There Ever Any Wrong Answers in Economics?: I suspect that the jig is up. Some fresh water economists are feeling compelled to write or say something about the economic crisis. All of them are being pressed for their advice. If they give it, then non-economists will find out how crazy they are. If they don't, non-economists will decide that they have nothing useful to say about economics.

It's an ill wind which blows nobody any good.

I don't think so.

If I were a journalist, I would say that here we have Nobel Prize winner Paul Krugman saying that the stimulus package is too small, and here we have perennial Nobel short-list member Eugene Fama saying that the stimulus package will be completely ineffective, and here we have former chair of the President's Council of Economic Advisors saying that while he thinks the stimulus will not be completely ineffective Fama's position is not wrong--Fama is making a "judgment call."

The journalistic bottom line: Economists disagree (about shape of earth). And the wingnuts cannot be marginalized because they contain past and future Nobel Prize winners like Prescott and Fama.

Now I had thought that I had a chance--the fact that Fama claims to make only one assumption, that savings = investment, to derive his "result" of fiscal policy irrelevance result even under conditions of high unemployment opened up the possibility of attaining some closure because we can show that Fama does not understand what the NIPA identity means. Or perhaps we could have attained consensus that Fama is using a classical model in which (a) fiscal policy is ineffective, and (b) high cyclical unemployment does not exist and is misapplying this model by using it in a situation in which high cyclical unemployment does exist. But we can't do that if Fama's line of reasoning is called not a "mistake" but a "judgment call."

They also serve whose labors merely neutralize the impact of a few wingnuts...