The #ASSA2022 at the past weekend meeting offered great food for thought, cutting edge research ... and the opportunity for a small study on how empirical concurrent so-called empirical macroeconomics actually is.
Turns out it isn't empirical at all.
A 🧵.
The research design was very simple: pose a straightforward question to household-name scholars from @UChicago , @Stanford , @Princeton , @UCLA , @UMNews and the @ecb ... and find yourself carried away by their truly hilarious answers.👍
But first things first.
This was the question to six paper presenters: Do you have any direct, micro-level evidence that actual agents behave like you describe the agents' behaviour in your model? The first thing to observe was that with the exception of the @UChicago guy, nobody got the strange idea
that you could actually look at living humans instead of, say, plotting reaction functions. Two session chairs even went as far as totally mis-plaining my question to lend the presenters a hand. In those cases, clarifying email were sent to verify the respective answers.
In all six cases the answer was an unambiguous NO, thanks, no data, please; or as one senior faculty put it: "Would it be interesting to talk to traders? My guess it's not." Variations of this main theme included:
"I think economics has learned a lot from theory that predates data but you are free to disagree." (I am and do)

"The moon does not think at all about theories of gravity, yet obeys its laws." (happy to learn men are as bright as the moon)
"I'll let you answer that question yourself as you seem interested in epistemological questions." (who cares about philosophy of science anyways)
And, of course, the all-time favourites of all circular proof:
"For the assumptions of household, firm and intermediary's preference, they are all standard in the literature.", or
"So [...] we use a standard [...] specification"
In brief, "empirical macroeconomics" that prides itself in explaining the economy from the bottom of individual human decision making to the top of national statistics for GDP and inflation apparently has no ambitions to be "empirical" about its very "microfoundations" but lives
quite happily with leaving its own underpinning in the mist of ignorance. And that's about the right thing to do. Just imagine we could tell apart empirically sound preferences and objectives from nonsense. Such discrimination would immediately wipe out large parts
of the literature, at least potentially so. To make things even worse, it may well happen that in due course my pet result vanishes, or your sophisticated, lauded and well-received policy advice ends up in the trash. Could we possibly wish for any such rigour? Certainly not!😜
That's why we can take comfort in that after the next crisis (which no "empirical" economist could predict) the food for thought served will be carefully calibrated pre-crises preferences perfectly explaining what happened. That, at least and last, is an empirical fact.👏

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