What I find remarkable about the DeLong's comment that Humberto posted
is his implicit view that students should learn MODELS. The real lesson
of recent events, it seems to me, is that in spite of 50 years of
teaching models; there is no model that matches the reality that was
experienced.
What needs to be studied is the effect of government intervention on
what Mises and Hayek called economic calculation -- the effort by
individuals to determine the profitability of alternative courses of
action. It doesn't take a rocket scientist to realize that the major
characteristic of the recent financial crisis is that individuals acting
as entrepreneurs -- from homeowners, to giant financial corporations, to
citizens authorizing their local governments to invest their otherwise
idle funds -- made huge errors. Absent these errors, there would have
been no financial crisis. The questions are: what are the errors, which
are most important, which events led people to make the important
errors, and how did they make the errors?
Some of the intervention in the recent case was similar to that which
occurred in the past -- the increase in the monetary base and money
supply during the early 2000s , for example. But some had never existed
before. Not new models but theorems about how individuals are likely to
act in the presence of various market conditions and market intervention
is needed.
Sadly, teaching such theorems is not rewarding. It cannot easily be
tested so it is not amenable to large classes of students. Just as sad
is the myth that mathematical and statistical economics are "positive"
while the evaluating of intervention arguments is "normative." DeLong's
focus on economists who he interprets as having produced models is
evidence of his acceptance of that say myth. Its not surprising that
DeLong speaks of the road to Damascus instead of the path toward
knowledge of how to deal with the public policy problem of evaluating
arguments favoring or opposing market intervention.
On 4/8/2011 2:41 PM, Humberto Barreto wrote:
> I thought many on this list would find today's blog post by DeLong interesting:
>
> http://delong.typepad.com/sdj/2011/04/thoughts-on-economics-education-in-america.html
>
> DeLong writes:
>
> "I suppose that I am still astonished at the failure of the financial
> crisis and the Great Recession to bring about a sea-change in the
> teaching of graduate macro. I expected people to say: we need to train
> our stunts to know--we need to learn--what Reinhart and Rogoff know.
> There is no point in turning out students who know the models of
> Prescott who do not know the models of Say, Mill, Bagehot, Wicksell,
> Fisher, Hicks, Metzler, Friedman, Tobin--Keynes. There has been only
> one road-to-Damascus conversion among those who previously darkeneth
> counsel without wisdom: Richard Posner--who admits to never having
> read Keynes in the past-- finally did so, and says that he is now a
> Keynesian."
>
>
--
Pat Gunning
Professor of Economics
Melbourne, Florida
http://www.nomadpress.com/gunning/welcome.htm
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