Christina Romer offers an interesting take (see above link) on the current debate surrounding Fed policy. In the process, she highlights the fundamental differences amongst two groups of economists:
“The debate is between what I would describe as empiricists and theorists.
Empiricists, as the name suggests, put most weight on the evidence. Empirical analysis shows that the main determinants of inflation are past inflation and unemployment. Inflation rises when unemployment is below normal and falls when it is above normal.
…
Theorists, on the other hand, emphasize economic models that assume people are highly rational in forming expectations of future inflation. In these models, Fed actions that call its commitment to low inflation into question can cause inflation expectations to spike, leading to actual increases in prices and wages.” - Romer
