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Is There A Core of Practical Macroeconomics That We Should All Believe

2016; American Economic Association; Volume: 87; Issue: 2 Linguagem: Inglês

1944-7981

Alan S. Blinder,

Fiscal Policies and Political Economy

With emphasis on the adjective and the normative verb should, my answer to the question of this session is a resounding yes. Indeed, I spent a good deal of time between January 1993 and January 1996 acting on the belief that there is such a macro model; so I certainly hope it exists.' This believable falls well short of perfection, leaves many questions unanswered, and is subject to substantial stochastic errors. Nonetheless, it is both useful and extensively used in policy analysis, where contact with reality is a necessity, and you cannot beat something with nothing. It also closely resembles, but does not quite match, the way macroeconomics is taught to beginning and intermediate (but not to graduate) students. In this short presentation, I will describe briefly the main practical elements that I think we should agree on, without worrying too much about their theoretical underpinnings. Then I will turn to two critical failings of the standard macro which cry out for theoretical and empirical repair. My organizing principle is the textbook exposition that has been standard, though not universal, in teaching intermediate macroeconomics for years. The question is: how does it differ from the core model used in policy analysis?