Sunday, September 20, 2009

A Defense of Modern Macroeconomics

Last week I blogged about Paul Krugman's article in the NYT. His article caused a great stir in the economics profession, with strong reactions from both sides of the "freshwater/saltwater" camps.

This article by Narayana Kocherlakota (U Minnesota) makes a defense of current macroeconomics models and try to counter some of the criticisms. I agree with most arguments, but I still think that many people over-relied in models that were clear simplifications of reality.

As he mentions in the article that I also agree, one of the consequences of the crisis will be to open new avenues of research to Econ and Finance professors, having showed us the importance of some characteristics (specially institutional) that were overlooked and should be essential parts of models.

No comments:

Post a Comment