Building a Science of Economics for the Real World

Last week, The Subcommittee on Investigations & Oversight of the House Committee on Science & Technology held one of the coolest hearings of the year, “Building a Science of Economics for the Real World.”

This hearing on macro economic modeling explored the failure of mainstream macroeconomists to foresee the recent financial and economic collapse and the role of macroeconomics in policy making generally. Among the witnesses were Nobel laureate Robert Solow who explored the gap between the real world and the world as assumed in the model most popular today in academic and policy circles alike, the Dynamic Stochastic General Equilibrium (DSGE) model.

The witnesses, prominent economists who, with one exception, have dissented from the reigning orthodoxy, questioned the wisdom of relying for national economic policy on a single, specific model when alternatives are available. Not only may these alternative models, in concert, offer a far richer picture of economic reality than the DSGE can on its own, but some among them may, when employed individually, prove far more appropriate than the DSGE to the policy-making task.

The witnesses were:

Dr. Robert M. SolowProfessor Emeritus, MIT
Dr. Sidney G. WinterDeloitte and Touche Professor Emeritus of Management, The Wharton School
Dr. Scott E. PageLeonid Hurwicz Collegiate Professor of Complex Systems, Political Science, and Economics, University of Michigan
Dr. David C. ColanderChristian A. Johnson Distinguished Professor of Economics, Middlebury College
Dr. V.V. Chari, Paul W. Frenzel  Land Grant Professor of Liberal Arts, University of Minnesota

Last year I interviewed David Colander after he told Congress that economic models are flawed. The video of this interesting and important debate (located here) continues the education of our representatives.