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DeLong Smackdown Watch: Mark Thoma on Why the Macroeconomic Playbook Wasn't Consulted

Mark:

Economist's View: "A Missing Macroeconomic Playbook?": It's interesting that as we add the appropriate tweaks to modern models and then ask them these questions, in most cases the old wisdom emerges as the answer. I'm not sure that, in general, people were as unaware of this work as Brad implies. In some cases that was true, certainly.... But [many of] those who did know about this work discounted it. They found a way to argue that we had moved on from old models for good reason, that taking such advice from the past would be a step backwards. It was the arrogance that the present had nothing to learn from the past as much as ignorance of what the past had to say that caused policymakers to respond to the crisis with a deer in the headlights, "oh no my models have nothing to say about this," manner. After all, if the proponents of modern macro had thought there was something to be learned from the Kindlebergers and Bagehots of the past, then those who were ignorant of what they had to say would have already read and absorbed this work. The fact that they didn't gives an indication of the value they thought it had. Hopefully that assessment has changed.

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