Equilibrium Decadence and the Failure of Macroeconomics

Justin Wolfers posts over at Freakonomics about a new study which calls out macroeconomists on their adherence to models which may not be very predictive at all. As a professor of mine noted, sociologists are dealing with the exact same issue, but since economists are held in much higher esteem, they have a lot further to fall.

My feeling is that the financial crisis has inspired a lot of popular rage against macroeconomists, but whether this will contribute to any substantial rethinking of the discipline or simply be dismissed as the raving of an uninformed public remains to be seen. Wolfers seems cautiously optimistic, holding that salvation rests in the refinement of current techniques.

Of course, I’m not an economist, but I’m not convinced that equilibrium models and assumptions of rationality are working so well these days. Perhaps these assumptions will be revised in the wake of this crisis, perhaps not. Sociology does not have a similar “opportunity” to fail, so it will likely be harder to shake out of its sleepwalking.