Caballero: Very interesting view of macroeconomics

From Economist's View:

There is absolutely nothing wrong with building stylized structures as just one more tool to understand a piece of the complex problem. My problems with this start when these structures take on a life on their own, and researchers choose to “take the model seriously”—a statement that signals the time to leave a seminar, for it is always followed by a sequence of naïve and surreal claims.

But a big part of my point is that no one really knows with any certainty what we need to do next, and hence we need to allow for much more freedom of exploration. We shouldn’t specialize so much in one particular class of models because we’re not sufficiently close to an absolute truth to do that. That’s the optimal thing to do when you’re very close to the global maximum, which we are not. We should be a lot more tolerant of alternative approaches and never forget our mission, which is to help understand an overwhelmingly complex reality, not to replace it with one that is more convenient to us as researchers.

The advancement of economics is best served when alternatives are developed and issued as challenges to the dominant theoretical framework, and there's no reason to deride those who choose to do this important work.

I do think the tools and techniques macroeconomists use have value, and that the standard macro model in use today represents progress. But I also think the standard macro model used for policy analysis, the New Keynesian model, is unsatisfactory in many ways and I'm not sure it can be fixed. In any case, in my opinion the people who have strong, knee-jerk reactions whenever someone challenges the standard model in use today are the ones standing in the way of progress. It's fine to respond academically, a contest between the old and the new is exactly what we need to have, but the debate needs to be over ideas rather than an attack on the people issuing the challenges.