Arnold Kling writes:
My daughter who is a freshman left a message that she wants me to explain macro to her. I can do that, in the sense that I can teach what is in her textbook. In reality, however, macro is a muddle that no one can explain. The undergraduate textbook, a graduate textbook, and macroeconomics as practiced by policymakers (what Mankiw calls the “engineering approach”) have nothing in common with one another.
Every macroeconomic pronouncement should be accompanied by a disclaimer that says, “This is just my opinion. We don’t really know.”
When I started writing about the economy for Fortune, in the mid-1990s, I got the sense that most everybody–in government, in academia, etc.–knew this about macroeconomics. Fine-tuning the economy was impossible to do well, the thinking went, so the Fed should just stick to keeping inflation low and Congress and the White House should focus on long-term economic incentives (or just stay out of the way).
Now, with the economy in trouble, lots of people suddenly feel like something has to be done. And maybe something does have to be done. But there’s nothing remotely approaching a “scientific” consensus on what that something ought to be. It’s just people making half-informed (or less than half-informed) guesses. Isn’t that reassuring?