I am writing this from a summer house situated in beautiful sand dunes and beach on the Eastern Shore of Lake Michigan. It is a fitting venue for musing about freshwater macroeconomics. This week’s blog has been stimulated by my reading the recent Paul de Man biography. de Man was the charismatic Yale literary scholar who was a leader of the (in)famous deconstructionist movement. The parallels between that challenge to the established order in the study of literature and the freshwater revolution in study of macroeconomics are instructive.
It seems to me that the anti-Keynesian insurgents are best understood as deconstructionists, differentiated from their literary counterparts largely by their greater success in eventually dominating their branch of the academy. My working definition of deconstructionism is paying more attention to how meaning is conveyed than the meaning itself. More than apparently existed in university literature departments, gatekeeping standards on the sort of macro modeling acceptable in today’s academy are unapologetically deconstructionist.
In early literary deconstruction, zealots interpreted their mission to moving the focus of scholarly work to modeling the conveyance of meaning. With increasing prominence and a degree of gatekeeping authority, the young Turks had some success in hindering access of traditional research to scholarly debate and publication. I have not, however, read any report of young faculty members, steeped in semiotics, giggling at old-fashioned professors presenting seminar papers on the meaning of some work of fiction. Indeed, literary theorists who attempted to assert the primacy of the deconstructionist approach badly overplayed their hand. Deconstructionism, especially in North America, fell into discredit and only recently experienced something of a comeback, this time as a less ambitious approach that does not attempt to crowd out the significance of understanding a text’s meaning.
Economics and literature scholars share a concern for the importance of motivation. A key element in the deconstructionist dynamic, little discussed but present in both disciplines, is the substantial human-capital investment in the difficult techniques used in associated exercises. Two points are especially relevant. First, young, ambitious adherents to the new thinking can use the more technical approach to challenge and perhaps prematurely displace their betters. If so, incentives to identify and learn difficult techniques are at least partly rooted in the urge to rid oneself of the dominance of elders. Second, the insurgents themselves inevitably grow older. If having successfully become gatekeepers for what is acceptable in academic research, they will encounter accumulating problems rooted in their ultimately problematic deemphasis of meaning. In such circumstances, it must be greatly tempting to use gatekeeping authority to suppress the various inevitable challenges to their specialized human capital.
A typical problem is that, after the first wave, serious students with their usual attachment to meaning increasingly fail to appreciate the exercise of deconstructionist human capital. Indeed, that is the reason why graduate students have been increasingly rejecting macroeconomics. Macro used to be a most attractive specialty field, largely because of the exceptional practical and policy relevance provided by Early Keynesians. But modern macro theory has been deconstructed, firmly establishing the primacy of how the message is conveyed rather than its meaning. Models must be first and foremost coherent; correspondence to available evidence is a secondary concern. Broad rejection of that priority is apparent in Colander’s (2005, p.180) survey of and interviews with graduate students at seven top-ranked economics programs in North America: “In the interviews, macro received highly negative marks across schools. A typical comment was the following: ‘The general perspective of the micro students is that the macro courses are pretty worthless, and we do not see why we have to do it, because we don’t see what is taught as a plausible description of the economy. It’s not that macroeconomic questions are inherently uninteresting; it is just that the models presented in the courses are not up to the job of explaining what is happening. There’s just a lot of math, and we can’t see the purpose of it.’” Another student was more succinct: “Macro sucks.” (Colander, 2007, p.174).
Mainstream New-Neoclassical-Synthesis (aka market-centric DSGE) scholars are usefully understood as deconstructionists, frequently pernicious in their pursuit of purity in how macro meaning is conveyed. To the great misfortune of economics profession, stabilization authorities, and the general population, consensus NNS theorists have seized substantial academic gatekeeping authority, which they have been using (consciously or not) to protect their specialized human capital. It is time for the responsible subset of academic gatekeepers to open up what is acceptable in macro debate/dissemination to modeling that pays primary attention to meaning (i.e., stabilization relevancy). A crucial message of the 2007-09 Great Recession is that macro theory is important, that it has become dysfunctional, and that the profession has a profound obligation to restore its practical role in public policymaking.
I saved the good news for last. The GEM Project demonstrates that it is not necessary to scrap attention to how macro meaning is conveyed. Even Paul Krugman would agree that model coherence embodies important advantages that, if stabilization-relevance is not damaged, should be preserved. Fortunately, generalized-exchange theory combines coherence and stabilization relevancy. Responsible gatekeepers will surely permit full consideration of the promising GEM approach, even at the cost of some human-capital depreciation.
Blog Type: Policy/Topical Saint Joseph, Michigan