Post-Crisis Lessons for Macroeconomists:
Noah Smith notes:
“If macroeconomists
heed Blanchard and Summers’ advice, they will have to do harder math, and they
will find better data to test their models. But their challenges won’t end
there. If the economy can linger in a good or bad state for a long time, it’s
almost certainly a chaotic system. Researchers have known for decades that
unstable economies are very hard to work with or predict. In the past,
economists have simply ignored this unsettling possibility and chosen to focus
on models with only one possible long-term outcome. But if Blanchard and
Summers are any indication, the Great Recession might mean that’s no longer an
option.”
Blanchard and Summers on the future of Macroeconomics: