Thursday, March 25, 2021

Why Observational Equivalence Means You Should Read Mason, But Could Also Mean He's Wrong (or Right)

 

My personal view on all of this is that I don't agree with Mason's arguments, but I might agree with some of his conclusions. I'm part of the neo-classical hegemony after all.

BUT, macroeconomics is a field with a lot of flux, and there's a lot of stuff we don't know. I'm definitely willing to entertain his position. And I'd like to think I'd shift mine if in 10 years he's proved right. Macro is weird enough that this is sensible (and FWIW, I shifted in the direction of being more neo-classical through the 90's because the results in the literature seemed stronger in that direction).

Also, there's a phenomenon in macroeconomics that is hugely important and often forgotten. It's called observational equivalence. Macroeconomics is mostly a non-experimental science, and observational equivalence means that after the fact, the data we see is often consistent with more than one explanation. So it's possible that the neo-classicals and progressives can co-exist because the data just isn't that sharp.

And, I'm very much willing to give other people a shot at being in charge. It's easy not to be a control freak when you're a macroeconomist because there's so much variability in routine economic events ... that seem so important in the short-run, and so unimportant after the passage of several years. (In some sense, this is why I'm suspicious of economic data about China: it's quite possible the CCP is right about how to run an economy, but this would come out of variability in the data, which China just does not have since it seems to be run by control freaks).

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