Krugman exhibits great confidence in his own brainpower. But I doubt he would bet even 1 percent of his $1.4 million Nobel Prize award on his ability to predict the date this recession will end.
So why should we listen to what macroeconomists say? Some economists think that often we shouldn't. Russell Roberts, a scholar at George Mason University and the Hoover Institution, told me, "I think some of macro is useful -- what causes inflation, for example. I just don't believe we're very good at testing theories at the macro level in a convincing way." Many times, he says, all macroeconomists can do is concoct stories that explain events after the fact.
Microeconomists, by contrast, make predictions about the effect of policies on individual markets, and those predictions are easier to confirm or refute. They virtually all agree, for example, that price controls lead to shortages, and governments occasionally take the trouble to prove them right.
But macroeconomists can almost always claim to be right, no matter what happens. If they recommend Policy X and the economy weakens, they can say it prevented a complete disaster. If they say Policy X will hurt and things improve, they can say without it, we'd be even better off. Being a macroeconomist means never having to say you're sorry.
That doesn't mean we should disregard what they say. As University of Chicago economist John Cochrane says, "If you want to know if you have cancer, you talk to a doctor, not a psychiatrist. If you're interested in macroeconomics, why would you not talk to people who spend their lives thinking about it, and writing about it, subject to the harsh discipline of peer-reviewed journals?" But he thinks they should admit the limits of their knowledge.
Right now, though, the limits loom large. The knowledge? Not so much.
|