Public Intellectualism: Wednesday Economic History

Comment of the Day: Charles Steindel: John Muellbauer: Why Central Bank Models Failed. How to Repair Them: "As somebody who spent years mucking around consumer spending and saving issues, it has long been frustrating to see that Euler equation in those models...

...It just does not categorize any important or interesting aspect of consumer behavior. Another matter, noted correctly here, is that nominal aggregates (not growth rates) matter for real activity: the dollar amount of debt, etc. Also, market conditions change: what is low debt one minute can become excessive the next. With all due respect to Olivier's polite comments, I just don't see how a research program based on simplistic micro behavior and arbitrary assumptions about markets, boiling its empirics down to estimation of real growth rate models, can ever yield anything of particular use to forecasters and policymakers. This has been going on for close to a generation: when will an alternative emerge?

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