Worthwhile D.I.Y. Macroeconomics?

The New York Times has just published its 2010 "Year in Ideas" issue. One of the trends it identifies: D.I.Y. Macroeconomics. The financial crisis plus the growing availability of on-line data has given rise to "growing army of knowledgeable 'econo-bloggers'."  

I agree with one of their conclusions: econo-bloggers "offer sophisticated interpretations of economic data and hold passionate debates with their readers over the merits of the data."

Yet I wonder about their other conclusion - that econo-blogging shifts control of the interpretation of economic data away from the economics profession:

Many of the authors of these blogs — the brains behind the Big Picture, Calculated Risk, Mish’s Global Economic Trend Analysis and others — aren’t academic economists but people with real-world experience in financial markets.

But then again, as an academic economist, I would want control to stay within the economics profession, wouldn't I?

Comments

[Stephen Gordon]

Yeah, some of the stuff coming out of the non-academic blogs is extremely valuable: Calculated Risk is an incredibly useful resource. But their strength is sorting through massive amounts of data in real time, which is what finance professionals are trained to do. But the fact that they don't have an economics background becomes pretty clear - sometimes painfully so - when it comes to policy analysis.

(I specifically exclude CR from this last remark, because Bill doesn't venture outside his area of expertise, and Tanta was brilliant.)

[rjs]

it doesnt matter what you want, here's who's in control of the dialog:

The Top Talk Radio Audiences (Updated 9/10)

http://talkers.com/online/?p=71

if you're not familiar with them, boortz & levin are the most conservative ive heard....

[Random Student]

"But the fact that they don't have an economics background becomes pretty clear - sometimes painfully so - when it comes to policy analysis."

Absolutely agreed. I still can't get over Barry Ritholtz's harangue against core CPI back in 2008; it's hard to get much dumber (and poorly timed) than that. Calculated Risk is indeed a terrific resource, but in general I think that the "D.I.Y. Macroeconomics" crowd is mainly distinguished by a strange combination of populist style and fluency in jargon, not any real analytic talent.

[ISLM]

The title "DIY Macroeconomics" is a bit of a misnomer, as sites like The Big Picture are clearly oriented toward financial market analysis and not macroeconomics per se. Having said that, an online presence does affect the ability for particular voices to be heard. Look at the participants of the upcoming AEA panel on "What's Wrong (and Right) with Economics?" Except for Galbraith, all of the participants are prominent bloggers, if less prominent scholars, in particular wrt macroeconomics. I mean, honestly, who had heard of Scott Sumner before he started blogging and being linked to?

[Frances Woolley]

ISLM - "an online presence does affect the ability for particular voices to be heard" Agreed. But that's a democratization - or perhaps just a shaking up of the established order and the establishment of a new hierarchy - within the econ profession, as opposed to an opening of the economics discourse to outsiders.

That the NY Times sees econo-blogging as an important phenomenon may say more about how economic journalists are approaching the gathering of stories and information than anything else. Yet if journalists are saying "Stephen Gordon, noted econo-blogger" as opposed to "Stephen Gordon, professor of economics at Laval" that says something both about the nature of authority and what kinds of stories will get in the media.

Stephen: "fact that they don't have an economics background becomes pretty clear - sometimes painfully so - when it comes to policy analysis." Given my lack of macro background, I'll defer to you on that one!

[merry xmas]

One thing I've learned from crisis is that there is an info dichotomy regarding market forces in a recession. Companies keep their trade secrets private. The costs of retooling a car plant to small cars, hybrids or even maybe other products is secret. But if the government is bailing out these companies, should know if it costs $23M or $1B per plant to retool. Should know fossil fuel reserves too if buying out carbon intensive property (keep for emergency civil order restore lest The Postman). The opposite over government may happen too as USA pays too much for doctors and unions can be porky...

Now that Obama cut a deal with the rich, does that mean our enviro/NRG policy is further along or have we been ripped off; selling ourselves for USA rich for nothing in return? Does coal = tar in our govs mind or our we still enabling 21st century holocaust and delaying indefinitely? Boomers have no right to be Christians.

[ISLM]

@ Francis Woolley

Without doubt it is a form of democratization, and I'm intrigued to see the ways in which prominent scholars are attempting to affect the debate, both within the discipline and the engaged public. Wrt macroeconomics, for example, I was pleased to see (and to read) that Roger Farmer has published a popular monograph to accompany his more technical book on encorporating search and self-fulfilling prophesies into business cycle macro. As an applied mirco guy, I find his arguments regarding the incomplete labor markets and the role of confidence in financial markets to be the most promising (and the most obvious) ways to preserve and extend dynamic general equilibrium macro.

Not to shill for the competition on this site, which I greatly enjoy, but Farmer needs to get a blog, if he doesn't already have one.

[Frances Woolley]

ISLM (strange handle for an applied micro guy?):

Interesting. The thing is, policy debates happen in real time, academic life happens on academic time.

I'm currently talked to a publisher about doing a monograph based on various stuff - if that happens, probably blog posts from 2010 will end up being recycled into a monograph published 2013.

Or to take another example: I have a chapter on a recent book published by the John Deutsch Institute: http://jdi.econ.queensu.ca/content/new-jdi-publication. It's a great book - but its on the 2009 budget, and it's coming out 18 months after that budget happened, in the fall of 2010.

No wonder journalists read econo-blogs rather than academic publications.

[ISLM]

@ Francis Woolley

On the handle, I agree, but Mincerian wage function takes too long to write.

In the preface to the technical book, Roger Farmer acknowledges that the academic timescale was what prompted him to do the book rather than a series of papers. I find that admirable and hope the UCLA faculty will reward it a similar manner.

[Too Much Fed]

"Many of the authors of these blogs — the brains behind the Big Picture, Calculated Risk, Mish’s Global Economic Trend Analysis and others — aren’t academic economists but people with real-world experience in financial markets."

Put Yves Smith at nakedcapitalism.com and Eric J. at itulip.com on the list too. Those are some of the people who have helped me understand what I suspected, that too much currency denominated debt is the problem, not the solution.

"Yet I wonder about their other conclusion - that econo-blogging shifts control of the interpretation of economic data away from the economics profession:"

I can only hope that shift occurs. The only economists I know of that saw a consumer debt bubble and a housing bubble in the USA were unorthodox (or not economics professors) in that they focused on currency denominated debt and budgets. It made greenscam and bernanke look like fools when they said there was no housing bubble and subprime was contained. As Tanta would say, we're all (nearly all) subprime now.

[Impoverished Engineer]

I have the impression that too much macroeconomics is closely tied to political ideology and too little is being tested against it's predictive ability. This stuff (fiscal and monetary policy, tax structure etc.) has a huge impact on people's lives - something we see every time we read an article about the debacle in Ireland or gaze at the price of housing in Toronto. Increasing DIY macro will no doubt lead to a lot of half-baked ideas but might it also lead to some pretty exciting stuff and generate the interest and funding for developing tools like experimental economics?

[Robert Dudek]

Hi, I was wondering what the resident economists here think of the work of Australian economist Bill Mitchell and other MMT theorists.

He is a prolific blog writer who is able to communicate his ideas to a lay audience.

http://bilbo.economicoutlook.net/blog/

[Nick Rowe]

Robert: check out some of the comments towards the end of my "Expectational Wicksell" post.