The Agenda

A Question for Paul Krugman

Paul Krugman writes on “epistemic closure in macroeconomics“:

Here’s what I mean: ask a grad student at Princeton or MIT, “How would a new classical macro guy answer this?”, and the student can do it; classes at saltwater departments teach real business cycle theory, and good students can tell you what it says even if their professors have a different view.

But students at freshwater schools — or, alas, many of their professors — can’t return the favor. It’s been painfully obvious since the crisis broke that people at Minnesota, or even many people at Chicago, have no idea what New Keynesian economics is all about. I don’t mean they disagree, or think it’s garbage, they literally have no idea what the concepts are. And that’s why they reinvent 80-year-old fallacies when they try to discuss the subject.

It’s interesting to ask why this sort of cocooning is a feature of the right but not the left. But it’s very real, and has a dire impact on economic as well as political discourse.

Let’s accept, for the sake of argument, that Krugman is right to suggest that students at freshwater schools are not as familiar with saltwater ideas as their counterparts at saltwater schools are with freshwater ideas. Does he accept that the turn towards micro-founded approaches was a response to the failures and limitations to the approaches that Krugman prefers? And if so, is this worth acknowledging, if only in passing? 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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