It’s fashionable now to get out there what you’ve changed your mind on. The calculation being, perhaps, that unless you do, you will get nowhere arguing hard for your other, unalterable priors.
In that spirit, here are a few thing I changed my mind on.
- The importance of financial ‘plumbing’. I, like most macro people I talked to, used to think banking in macro was cluttering up models for the sake of it.
- The lack of any effect of minimum wages on employment.
- The minor effects on wages of immigration.
- How sticky price DSGE models are not, clearly, realistic enough to take seriously as devices on which to perform quantitatively relevant optimal control exercises. For example, I used to admire what the Norges Bank and Riksbank did and thought we at the BoE were well behind the curve.
- The usefulness of atheoretical empirical macro. I used to think we were surely beyond just fact generation and sharpening. But, the crisis having shaken my faith in the models, fact generation now seems attractively humble.
- The efficacy of macro prudential, counter cyclical tools. It’s early days. But when I first read about these in 2009 or so, I thought [extrapolating from the ‘life is just a New Keynesian optimal control exercise] ‘here are some great taxes we can tweak about, problem solved’. Now I am not so sure.
- The effects of technology on the wage distribution. The ‘hollowing out’ stuff is fascinating and I would not have guessed at that. I came into those papers thinking that those at the bottom always lost.
- How far authoritarian capitalism could get before imploding. I would not have guessed China could have increased income per head this much without imploding first. Maybe it will, yet, proving Acemoglu and co-authors right.
- The likelihood of a zero bound episode, and the optimal rate of inflation. I was signed up for 2 per cent. But look!
- The efficacy of quantitative easing. There are lots of question marks still over what it did, and how durably. But the initial impacts, and the unanimity, were a big surprise to me.
It’s probably not wise to get too excited about the moral grandeur of me declaring mind changes on 2 and 3, which revolve around the labour market, as I’m one of those macro people who have definitely not read enough labour economics. A bit like me writing ‘I changed my mind about how quantum physics worked.’ [Incidentally, on that, I have, several times.] Note that I ommitted a socialism-capitalism mind change, on the grounds that that occurred before the end of adolescence.