The Methodology of Modern Macroeconomics and the Descriptive Approach to Discounting

Koen Vermeylen
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Koen Vermeylen: University of Amsterdam

No 13-200/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Critics of modern macroeconomics often raise concerns about unwarranted welfare conclusions and data mining. This paper illustrates these concerns with a thought experiment, based on the debate in environmental economics about the appropriate discount rate in climate change analyses: I set up an economy where a social evaluator wants to determine the optimal time path of emission levels, and seeks advice for this from an old-style neo-classical macroeconomist and a new neo-classical (modern) macroeconomist; I then describe how both economists analyze the economy, their policy advice, and their mistakes. I then use the insights from this thought experiment to point out some pitfalls of the modern macroeconomic methodology.

Keywords: modern macroeconomics; methodology; descriptive; prescriptive; discount rate (search for similar items in EconPapers)
JEL-codes: B22 B41 E13 O44 Q52 Q54 (search for similar items in EconPapers)
Date: 2013-12-16
New Economics Papers: this item is included in nep-ene, nep-hpe and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20130200

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