CRF Blog

The Major Blind Spots in Macroeconomics

by Bill Hayes

Writing in the New York Times Magazine,  John Lanchester discusses what he thinks are The Major Blind Spots in Macroeconomics.

Economic forecasts on the eve of the credit crunch and the Great Recession were, he [ Andy Haldane, the chief economist for the Bank of England] says, “not just wrong but spectacularly so.” The overall trajectory of precrisis forecasts was upward; the reality was a brutally deep capital V.

The reason this poses a deep intellectual crisis for macroeconomics is that the entire point of the field, as it has developed since the work of John Maynard Keynes in the 1930s, is to prevent just this sort of severe downturn. Keynes once spoke of a future in which economists would be “humble, competent people on a level with dentists,” while the brilliant up-and-coming French economist Esther Duflo recently gave an admired I.M.F. lecture called “The Economist as Plumber.” It seems to me, though, that what macroeconomists do is really most like bomb disposal. Uniquely in the social sciences and humanities, macroeconomics was developed with a specific, real-world purpose, and a negative purpose to boot: to stop anything like the Great Depression from ever happening again. Given this goal — to avert systemic crises and downturns — the credit crunch and the Great Recession were, for macroeconomics, an intellectual disaster. [more]

For a free classroom lesson on economist John Maynard Keynes, see John Maynard Keynes and the Revolution in Economic Thought from  CRF’s Bill of Rights in Action Archive.