Comment of the Day: Lucas and Sargent: "This seems to capture what I recollect as Solow's concerns...:
...he was appalled by the thought that the 'SAGE' (or whatever acronym one wants to put on them) models could legitimately claim that they are general equilibrium models and hence scientifically superior to the older neoclassical synthesis work. Would he disagree that expectations have some rational planning component, and that failure to consider this led to policy mistakes in the 1960s and 1970s? I don't think so.
The 'cavalry tactics at Austerlitz' line is pretty amusing, in part since I don't believe that cavalry played that big a role in that battle. In contrast, a similar chat about Waterloo (where French misuse of cavalry probably was important) with a lunatic Napoleon who was versed in its history might actually provide some insight! So an Austerlitz chat would be an example of a particularly crazed discussion. I wonder if Bob was thinking along those lines in not mentioning the first Napoleonic battle that usually comes to mind?
Part of the problem is the amazing reluctance of many macroeconomists to commit to any statement about sectoral behavior. Let's face it, it's real tough to say something about why consumption or investment is doing what it's doing, and there's a fair chance that:
a. You will be wrong.
b. somebody out there actually knows about some peculiarity of the data that is skewing the latest numbers.
The old Keynesian models pretty well forced the users to get familiar with at least some sectoral detail. Some of the appeal of monetarism was doubtlessly due to its claim that one didn't have to 'open up the black box' to understand macro dynamics, and the later models took that Olympian position even further.