For a great explanation of why macroeconomic evidence is so weak and subject to multiple interpretations, read this excellent post by the University of Oregon’s Mark Thoma.
When evidence is sparse or inconclusive, things like sociology and politics often fill the gap. That just means macroeconomists should be a lot more careful, cautious and humble than researchers in other areas. Instead, perhaps intoxicated by the importance of their subject, they are often given to making grand, overconfident pronouncements.
The right way forward for macro isn’t to go all-in on a hot new theory, or to passionately embrace old paradigms either. The best approach is to adopt more public humility and caution about their theories, while working to understand microeconomics better. Someday, when economists have a better handle on the basics of why people consume and businesses invest, macroeconomic models won’t have to be rethought every time a big recession happens.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
This column was provided by Bloomberg News.