As far as I can tell all significant theoretical discoveries regarding macroeconomic and monetary affairs had already been realized by about 1930. Almost everything since has consisted of pro-interventionist propaganda, or been a matter of replacing good theory with bad psuedoscience so its practitioners can make a name for themselves, secure cushy tenured university positions and NYT op-ed columns, etc. These days the economics profession is bought and paid for by the Fed. The real goal of its output (and also that of the grand viziers at the Fed itself) is to justify the central bank's existence, and more broadly the whole psuedo-scientific edifice that's been constructed over the past fifty-sixty years. Anything else is really just incidental.
Well, I have to respectfully disagree with you... IMHO, everyone has the same inputs into the model. Therefore, I cannot define it as quackery. The weights that different people assign to those inputs can and do vary wildly, but that is the way these largely subjective things work. Moreover, I know that I don't know many things, which means that I am very cautious to completely dismiss things that appear extremely silly to me. The revival of the gold standard discussion, for example. I can't think of an idea that is more wrong-headed and "fuckwitted", to borrow your term, and yet here we are.
Well, with all due respect, I emphatically disagree with this. I think we haven't even begun to scratch the surface. I also believe there's actual interesting work that has been done and continues to be done. While there's a fair bit of funny stuff that goes on in economics (just like it goes on everywhere in academia), I, for one, am not going to dismiss it all out of hand. Well, I have to respectfully disagree with this. There's a lot of stuff happening in the economics profession that is genuinely interesting and has nothing to do with the Fed and macro.
Interesting... could QE cause deflation? http://ftalphaville.ft.com/blog/201...tended-consequences-of-qe-not-what-you-think/
Multinational Blues Thurs Aug 30th - Yesterday's trading confirmed a new and interesting dynamic - accelerated rotation out of multinational blue chips and high quality yield plays, to the mild benefit of small caps. Read more: http://www.mercenarytrader.com/2012/08/multinational-blues/
But the discussion is not whether people come up with very bad theories before reaching better ones. The discussion is whether the government should impose totally unproven quackery on society, at considerable cost and disruption, without providing any evidence that it is true or will achieve its ends.
What matters is not whether they are widely adopted or imperfect, but whether they are useful or harmful compared to the alternatives. One cannot debate the proper role of central banks without asking what they are there for - to stop the financial system collapsing during panics; to stop inflation getting out of hand; and to reduce the extent of financial collapses by restricting credit once a boom becomes too speculative and herd-driven. A rule which ignores 2 of those purposes and focuses solely on one of them, is always going to be a deeply flawed simplification. We have seen the disastrous results of the Taylor rule first-hand - Greenspan keeping credit loose during the biggest bubble for almost a century, the ECB keeping liquidity tight during the biggest financial panic since the Great Depression. This rule should be thrown out and replaced with something that accounts for booms and busts as well as the normal periods in between.
Well, firstly, governments impose unproven quackery on society all the time, so if this is one of these cases you'll have to forgive me if I fail to muster the required outrage. Secondly, no unproven quackery is being imposed (so far), given that the particular people we're discussing represent a minority view on the committee. Thirdly, the problem, everywhere and always, is to provide some objective proof that the unproven experiment is quackery. In the absence of such objective proof (which is almost always the case with complicated issues), I believe that the "wisdom of crowds" is the best way to reach the optimal decision. This is precisely what's going on here, with Evans & Rosengren finding themselves in a minority on the FOMC. This is, generally speaking, the pattern with most central bank committees and I, for one, can't think of a better way to deal with the issue. Agree 100%. To paraphrase, it's not the Taylor rules that kill people, it's people that kill people. It's not fair to blame the models (Taylor Rule, Gaussian Copula, Black-Scholes, etc) for the failures of the people who were supposed to apply them. Ultimately, models provide signals, but it's people who are responsible for making decisions based on these signals. ECB, which you have mentioned yourself, is a good example of this.
To some degree this misses the point: CBs (at least the most important ones: Fed, BoJ, ECB etc) may couch their decisions in math and technical jargon but the essence of their mission is not technical, but rather political. The present overriding goal of the major CBs, aside from enhancing their own power and survival prospects, is to facilitate attaining the political objectives of the governing elite and bureaucratic classes; this can include the Fed's efforts to sustain a perpetual economic boom regardless of cost, facilitating government spending via debt monetization in the USA, and for the ECB both propping up the Euro project as well as providing heavy artillery support to one side or another in intra-Eurozone political struggles. Viewed in this way the history since 2008, and more broadly since Greenspan came on-scene in 1987, becomes entirely comprehensible.