Showing papers by "Robert M. Solow published in 2012"

A few comments on ‘Sustainability and the measurement of wealth’

Abstract: You have to admire the courage exhibited in going out on a limb like this, especially because the acrobats are sophisticated and understand how many chances to go wrong they have. Of course one can stand back and admire courage and dexterity without actually believing in the results, and without any feeling that one could do better.

Introduction: passing the smell test

Abstract: What is the relevance of macroeconomics today? The crisis that has been raging since 2007 has spread to economic theories, and it might seem that it is no longer possible to do macroeconomics as before. But what version of macroeconomics was at fault here? Macroeconomic questions have not really changed: they examine growth and fluctuations of the broad national aggregates (national income, employment, inflation, investment, consumer spending or international trade). How are these fundamental aggregates determined, and how differently should we think about them? The economic world is too complex to be thought about ‘raw’, so the use of a model to answer these questions helps make deductions and justify conclusions. It is easier, then, to perceive what beliefs they have been based on, and to challenge them. Economic concepts are not built to be put on a computer and run.1 It is thus all the more important to point out fragility or recklessness wherever it appears. If intuition does not suffice to reject the hypothesis and reasoning, then experimentation must confirm our instincts: does it pass the smell test? Economists do not directly perceive the concreteness of their w orld, but engage in diverse manoeuvres that seek to prepare that world for investigation. Using various abstractions and omissions, they build models to describe simple imaginary stage sets. Models are constructed rather than discovered; they are socially built because scientific work is an intrinsically social activity. If economic models of human interactions are socially constructed by economists, the social world is not constructed by the modelling practices of economists. It is from this standpoint that the authors of this volume offer to take stock of their discipline, with all its variety, from ancient to modern macro, or vice versa. Since the late 1970s, a majority of macroeconomists have focused on developing what they call the ‘modern macroeconomics of business cycle fluctuations’. Until the world entered a crisis initiated by subprime mortgage defaults, excessive leveraging followed by deleveraging, output and employment meltdowns and destruction of perceived wealth, there was a common belief that macroeconomic truth had been discovered. A

Round table discussion: where is macro going?

Abstract: Global crises are very rare events. After the Great Depression and the Great Stagflation, new macroeconomic paradigms associated with a new policy regime emerged. This book addresses how some macroeconomic ideas have failed, and examines which theories researchers should preserve and develop. It questions how the field of economics – still reeling from the global financial crisis initiated in the summer of 2007 – will respond.