The macroeconomics many of us learn in school -- and that the most prominent professors rely on to inform not just students but also policymakers -- isn't working.
The "dynamic stochastic general equilibrium" models that missed the financial crisis assume a world in equilibrium in which people are rational and have perfect foresight. Everything we do is based on reasoning deductively to maximize utility. Billionaires don't exist, companies don't hoard cash, and price is the measure of everything. There is no cultural or institutional evolution, no explanation for how innovation happens, and no human interaction ... everything is deathly perfect.
The focus of this blog, however, won't be to argue that the mainstream general equilibrium macroeconomic models are based on a fantasy world and therefore are not useful for ours. Nobel laureates including Paul Romer and Joseph Stiglitz explain it convincingly.
Instead, most posts will be summaries of the theories and people that explain the economy of the world we actually live in. The blog will cover topics such as evolutionary economics, complexity science, innovation processes, increasing returns / lock-in, and agent-based computational economics.
The political economist Mark Blyth "got annoyed enough to write a book" about the harmful effects of implementing austerity programs during recessions such as the eurozone crisis. If you write about "something that annoys the crap out of you [...] you'll never get fed up" with researching the topic.
I've had too many conversations with brilliant students at
top PhD programs who have not heard of the reality-based economics that could help us develop better policies. The universities that give students a PhD based on mastery of a
sliver of quantitative economics (one that even the professors know is
wrong!) without teaching or even mentioning other areas that might be more useful avenues
of research are doing their students a disservice (and maybe being socially negligent). Good economics is important for all of us.
I got annoyed enough to start a blog.
