He thinks that when it’s pointed out to Munchau who says ‘their [mainstream macro economists’] system of equations is linear’ that it is very often not, that this is a ‘smokescreen to justify a copout.’ Steve. Read some of the few thousand papers now on nonlinear models in the mainstream. What kind of ‘copout’ is that?
This is standard fare from Steve. He makes his living out of ‘debunking’ a discipline he doesn’t read or know much about. Either that, or, if he does read it, he calculates that no-one will call him out. We know this must be true because, at various points, he has said that modern macro ignores money, ignores banks; that you can’t publish in top journals unless you use rational expectations. [See my post on his ridiculous contribution to a recent radio program in the UK].
I also don’t get why you have to read anything into the different messages coming from Blanchard, DeLong, Krugman or myself. The mainstream does not speak with one voice. Why should it? There are fights all the time.
DeLong and Krugman think you can and should get along fine without nonlinearities. Krugman’s latest offers an argument that is a version of occam’s razor.
I don’t agree, but, since I know that they are extremely clever, and both have lots of prior experience, I’m inclined to lodge their advice somewhere on a post it in case one day I find myself completely lost in nonlinear Matlab code.
Blanchard makes the following point. We should aspire to stabilising the economy. [Surely one can’t argue with that.] And if we succeed [we might not, but if], and assuming it’s not done perfectly, but just quite well, then the small movements left over will be described well enough with a linear model. He’s not saying we definitely will be able to bring this about. Just that we might be able to. And, if we can, he states a result in words from function approximation, which again is unarguable. [With the caveat that this small range should not cross over some crucial point of inflection/attraction/repulsion… ]
My advice to Steve is to stop writing, and start reading. It’s never too late.