Friday, 28 March 2008

Dull macroeconomics

The neo-classical synthesis of Keynesian and classical economics sounds jazzy. Then you look at the main arguments in it, and find that the really important ones are about how long shop owners take to adjust their prices and whether people guess correctly how quickly prices will increase next year. Really, sticky prices and rational expectations underpin modern macrotheory.

To check whether these are true, you can look at macroeconomic models consisting of several equations and then watch as these equations are substituted into each other, then simplified, then substituted and simplified again. A graph might be drawn with a couple of lines and a point indicating an intersection. The empirical testing will use linear algebra, which is like primary school adding up except in matrix notation which can make things just opaque enough to lead to constant head slapping about how an elementary mistake has been made which a seven year old could understand.

Black hole theory it isn't, and no-one would mistake it for genetic engineering. In much of mathematical science there is constant aesthetic excitement which dulls the sense of hard work or frustration, but economics feels like work much of the time, although the flip side is that the analysis is generally more direct.

Having said that, there are occasional papers which catch the eye, and writers who can be interesting whatever the topic. One of the first papers I read on my specialism growth theory (as a Masters' student) was entitled "Fable for growthmen", from a celebrated author whose presentation was entertaining, topic important, and apparently contained an important original result (though I don't recall noting it at the time, to be honest). Colourful presentations may not be suitable generally for journals - professional academics are anaesthetised to the topic and can fly through results so that the colour might be a distraction - but in some textbooks they can be worthwhile, and occasionally in journals can ease the entry for bored Masters' and PhD students.

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