Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome

Ricardo Caballero ()

No 16429, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper I argue that the current core of macroeconomics--by which I mainly mean the so-called dynamic stochastic general equilibrium approach--has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the precision that it has about the real one. This is dangerous for both methodological and policy reasons. On the methodology front, macroeconomic research has been in "fine-tuning" mode within the local-maximum of the dynamic stochastic general equilibrium world, when we should be in "broad-exploration" mode. We are too far from absolute truth to be so specialized and to make the kind of confident quantitative claims that often emerge from the core. On the policy front, this confused precision creates the illusion that a minor adjustment in the standard policy framework will prevent future crises, and by doing so it leaves us overly exposed to the new and unexpected.

JEL-codes: A1 B4 E01 G01 (search for similar items in EconPapers)
Date: 2010-10
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (255)

Published as Ricardo J. Caballero, 2010. "Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 85-102, Fall.

Downloads: (external link)
http://www.nber.org/papers/w16429.pdf (application/pdf)

Related works:
Journal Article: Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:16429

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w16429

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().