Thread by @Noahpinion

1/OK, a quick thread about why I disagree with most of this Krugman post:
nytimes.com/2018/09/16/opi…

2/Most importantly, the whole thing is written with a focus on macroeconomics, and business cycle analysis in particular.

Obviously that's one of Krugman's main interest, but it is far from synonymous with "economics".

3/For example, Krugman criticizes the idea that we should "concentrate on empirical results and skip the models". But then he talks entirely about...macro empirics.

4/Krugman isn't talking about minimum wage, or tax econ, or a bunch of other stuff that isn't macro, but which people debate and think about and that affects people's lives in big important visible ways.

In those other areas, the "credibility revolution" has been a huge deal.

5/Krugman also criticizes micro theory, but again focuses mainly on its application to macro.

6/Krugman's more general criticism of micro theory is that he can't think of any that he thinks is mind-altering.

I mean, I sure can. Groves-Clarke mechanisms! Generalized second-price auctions! Information cascades! "The Market For Lemons"!

KRUGMAN'S ECONOMIC GEOGRAPHY THEORY

7/I also don't like the idea that theory needs to be mind-altering to be good. What if it's just useful? Random-utility discrete choice models won't blog anyone's mind...but they're very useful in the real world.

The purpose of econ isn't just to say "Hey that's cool"...

8/As for Krugman's first point - that macro acquitted itself well in the 2008 recession - I don't think that's as true as he says.

First, he kind of waves away the idea that macro should be about discovering the causal roots of crises and recessions...

9/But I think macro should aspire to being something more than just the clean-up crew. Anticipating things that can cause recessions, and designing policy and institutions to be more robust to these dangers, seems like an important, worthwhile goal...one IS-LM doesn't solve.

10/Finally, Krugman says IS-LM-with-a-ZLB was the most useful model during the crisis. I think that's probably right, but whether it had usefulness beyond "Do some stimulus, DUH" is a question that is too long to deal with here...

11/Anyway, if you have a very macro-centric view of what economics is, then yes, there are few natural experiments, micro theory can sometimes lead you astray, etc. etc.

But econ is about a lot more than macro.

(end)

https://twitter.com/Noahpinion/status/950079662121615361

Oh and in tweet 7 that was supposed to be "blow", not "blog", in case anyone was left scratching their heads.

Also, Krugman's point that macro-theory's whole Lucas-inspired adventure into faux-microfounded-general-equilibrium land was highly unproductive is true...but essentially everyone who doesn't make a living making such models (and some who do) now generally seems to agree...