IMO:
1) Economics isn't a real science & doesn't really make falsifiable statements
2) Mainstream macro has been built with the goal of internal coherence rather than observation & explanation of reality
So getting theory to accord with facts requires a monumental upheaval
1) Economics isn't a real science & doesn't really make falsifiable statements
2) Mainstream macro has been built with the goal of internal coherence rather than observation & explanation of reality
So getting theory to accord with facts requires a monumental upheaval
On the topic of internal coherence, it was established long ago that the essential ingredients of the mainstream approach (that are purported to give it it's coherence) - microfoundations and the aggregate production function - are not coherent at all. Yet they persist.
Wrt falsifiable statements, what has been the most common mainstream response to the evidence that output is not responsive to interest rates? "Oh the equilibrium interest rate is negative". There's always a get-out.
There's always some rigidity that with enough gymnastics they can provide microfoundations for. It doesn't matter if the causal mechanisms are plausible if it generates the correct results. It's Milton Friedman's crude instrumentalism.
