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Is the Fundamental Science of Macroeconomics Sound?

Author

Listed:
  • David Colander

    (Middlebury College, VT, USA)

Abstract

Recently, Ben Bernanke has argued that in the events leading up to the financial crisis, mistakes were made, but they were primarily engineering or management mistakes, not mistakes in the fundamental science of macroeconomics, which he sees as sound. This paper argues that Bernanke is wrong and that standard macroeconomics has not recognized, and still does not recognize, the limits of science and of formal modeling when studying something as complex as the macro economy. This failure to recognize, and adequately convey to policy makers, the limits of our scientific understanding of the macro economy, has led standard macroeconomics to combine fundamental science and policy applications in ways that undermine both. This paper advocates a classical methodological approach, which Keynes followed as well, that strictly separates fundamental science from policy analysis. Policy does not directly follow from models; it follows from reasoned analysis which uses models, but which combines models with institutional knowledge, intuition, and common sense.JEL classification: A11, B22, E0, E60

Suggested Citation

  • David Colander, 2011. "Is the Fundamental Science of Macroeconomics Sound?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 43(3), pages 302-309, September.
  • Handle: RePEc:sae:reorpe:v:43:y:2011:i:3:p:302-309
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    File URL: http://rrp.sagepub.com/content/43/3/302.abstract
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    Citations

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    Cited by:

    1. Eltahir Yassin, 2019. "Accommodation Versus Control Suggested Model to Macro-Economics," Economics, Sciendo, vol. 7(1), pages 95-110, June.
    2. Sovilj Siniša & Tkalec Marina & Pripužić Dominik & Kostanjčar Zvonko, 2023. "Modelling National Economic System: A Case of the Croatian Economy," South East European Journal of Economics and Business, Sciendo, vol. 18(1), pages 115-144, June.
    3. Florentin GLOETZL & Ernest AIGNER, 2017. "Six Dimensions of Concentration in Economics: Scientometric Evidence from a Large-Scale Data Set," Ecological Economics Papers ieep15, Institute of Ecological Economics.
    4. Røpke, Inge, 2016. "Complementary system perspectives in ecological macroeconomics — The example of transition investments during the crisis," Ecological Economics, Elsevier, vol. 121(C), pages 237-245.
    5. Μαρία Μαρκάκη & Αθηνά Μπελεγρή-Ρομπόλη, 2018. "Στόχος Της Παρούσας Μελέτης Είναι Η Αναλυτική Διερεύνηση Της Παραγωγικής Διάρθρωσης Της Περιφέρειας Κρήτης. Ειδικότερα, Αναλύεται Ο Βαθμός Αλληλεξάρτησης Των Κλάδων Οικονομικής Δραστηριότητας, Όπως Πρ," Working Papers 2002, Greek Scientific Association of Political Economy - GAPE, revised Mar 2019.
    6. repec:abe:wpaper:0001 is not listed on IDEAS
    7. Ahti Salo, 2021. "Developing the needed scientific theory will not be easy: A commentary on Fergnani and Chermack 2021," Futures & Foresight Science, John Wiley & Sons, vol. 3(3-4), September.
    8. Vassilis Droucopoulos, 2018. "Economic Theory ten years after the crisis: Just tweaking around the edges? and/or A bit of repair at the seams?," Working Papers 2001, Greek Scientific Association of Political Economy - GAPE, revised Dec 2018.

    More about this item

    Keywords

    macroeconomics; DSGE model; methodology; financial crisis; Keynes; classical;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E0 - Macroeconomics and Monetary Economics - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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