Thread by @Noahpinion

1/Here's a @bopinion post where I take on David Graeber and his most recent broadside against the field of economics:

bloomberg.com/opinion/articl…

2/Here's Graeber, writing in the New York Review of Books.

Graeber: "Economists still teach their students that the primary economic role of government—many would insist, its only really proper economic role—is to guarantee price stability.

WHAT?!!

nybooks.com/articles/2019/…

3/Graeber's statement that economists think the "primary role of government" is "to guarantee price stability" is among themore absurd things I have ever seen someone write.

It erases most of the entire field of economics. Poof. Gone. Doesn't exist.

4/But OK, let's be generous to Graeber and assume that when he says "economics", he's only talking about business cycle theory.

Sigh.

Even then, he's completely wrong. Mainstream macro models care about stabilizing output/employment, not just inflation.

columbia.edu/~mw2230/OMP_Hb…

5/Graeber thinks that macro models kept central bankers from fighting the financial crisis with monetary expansion.

What universe was he living in?

Here's the Bank of England's balance sheet during the Great Recession.

6/The hard-money people were screaming their heads off. Warning that quantitative easing would lead to hyperinflation and "Zimbabwe".

And central bankers basically told them to go stuff it.

bradford-delong.com/2018/11/monday…

7/Graeber spills a lot of ink attacking the quantity theory of money, which he thinks rules the minds of central bankers.

Does he not know that the Fed tried money supply targeting in 1979-1982 and abandoned it??

frbsf.org/education/publ…

8/OK, OK. *pant, pant*

So, I don't want to seem like I'm giving macroeconomists a free pass here, or letting them off the hook.

It's true that macroeconomists DON'T understand how inflation works. Not at all, really. No one does.

9/And it's true that macro models *are* basically a "shed full of broken tools", as Graeber says.

Most of the "microfoundations" in any macro model will be either empirically false or untestable-but-ridiculous.

noahpinionblog.blogspot.com/2013/05/what-c…

10/When central bankers did all that QE, they didn't rely on macro theory. It was a seat-of-the-pants, ad-hoc invention in response to a crisis. And when they modeled the economy in their minds, they tended to use simple, reduced-form models instead of DSGE monstrosities.

11/But macroeconomists realize that their tools are broken. Smart young macroeconomists are going back to the drawing board, carefully studying the real-world behavior of consumers and companies, in the hopes of one day making models that actually work.

12/Meanwhile, bomb-throwing intellectuals like Graeber - who don't even seem to know that economics is more than the study of recessions and inflation, much less know what's currently going on in macroeconomics - are not helping economics improve.

13/This is only one of a long string of goofy econ critiques that misunderstand what economists do.

Every year I write a post debunking some of these. Here's my post from 2017:
bloomberg.com/opinion/articl…

14/And here's my econ-critic-debunking post from 2018.

I expect I'll have to write one in 2020 too.

bloomberg.com/opinion/articl…

15/Fortunately, with the rise of Econ Twitter, more regular people are getting a realistic idea of what economists actually do.

As this knowledge diffuses, caricatures like Graeber's will (hopefully) appeal to fewer and fewer people.

(end)

bloomberg.com/opinion/articl…