Tuesday, February 21, 2012

Noah Smith asks whether macroeconomic methods politically biased


But I contend that in the case of DSGE models, conservative policy recommendations don't emerge because they come from the best models, but only because they come from the easiest models. Thus, the conservative slant of modern macro comes not from the weight of evidence, but from the combination of publication bias and the inherent unwieldiness of the DSGE framework.
Now here's something else that might be worth mentioning. The DSGE framework was invented in large part by Ed Prescott, a man with deeply conservative political beliefs. The insistence that microfounded models with individual optimization were the only believable "structural" models - i.e., the only models that could answer the Lucas critique - came mostly from people with deeply conservative political beliefs (including Robert Lucas himself). And the criticism of alternative modeling approaches - in particular, of SVARs - seems to be much louder from economists with deeply conservative political beliefs.
That by itself proves nothing. (Maybe they're conservative because they believe the results of their models! Maybe conservatives are more scientifically honest!) But it seems like circumstantial evidence against the alleged political neutrality of modern macro methods.
Read it at Noahpinion
Are macroeconomic methods politically biased?
by Noah Smith

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