Oh Mr. Lucas, you silly goose
by Benjamin on August 7, 2009
The Economist is pitching in on the debate about whether economics, and macro in particular, has gone to the dogs. This week Robert Lucas himself contributed a “Defense of the Dismal Science“, in response to an article a few weeks back, arguing that the macro-models were fine, and the simulations we run are still useful even if they failed to predict the crisis, as
the simulations were not presented as assurance that no crisis would occur, but as a forecast of what could be expected conditional on a crisis not occurring.
Let’s have that again, from the Nobel receipient: The economic models which failed to predict the crisis are fine, not because they came close, but because they don’t even consider crisis as a possible outcome… Tell me that isn’t beautiful!?
A whole roundtable discussion of Lucas’s article and the state of economics is on-going at The Economists website. Thus far written by Mark Thoma (U. of Oregon), Tyler Cowen (GMU), Marcus Brunnermeier (Princeton) and Brad DeLong (Berkeley) with more contributors to be added this week. Bard DeLong’s piece even emphasised that “Mr Lucas said he ‘didn’t really get it’ ” when the bank bail-out was being discussed back in March. It makes for interesting reading, if a bit ‘Wonky’ as Steve Kinsella noted… I’m still chuckling quietly at Mr. Lucas’s ‘defense’ though.
