During my time at MIT, Robert Solow was harshly critical of the new classical macro models pioneered by Robert Lucas, dismissive in a way that seemed to me to skirt uncomfortably close contempt. I recall hearing the same type of criticism from Frank Hahn, who must have been visiting MIT. Looking back, perhaps I misinterpreted them because I was not familiar with the sarcasm and put-downs that were a part of British intellectual life that Solow had to confront in his exchanges with Joan Robinson. But if it sounded like contempt to me, others may have heard it the same way.
…The alternative to derision would have been for skeptics to embrace and extend. This was what Stan Fischer and Rudi Dornbusch, who were supervising almost all of the Ph.D. students at MIT doing anything related to macro, were quietly doing at this time. Fischer, Dornbusch, and their students absorbed the rebel critique of traditional macro, saw what something was missing in the first generation of rebel models, and set about extending them. As a result, Fischer and Dornbusch trained a cohort of Ph.D. students at MIT who put the tools of modern macro to work and as Krugman has observed, turned out to be unusually influential. If Dornbusch and Fischer had set the tone for the response to Lucas and his followers, things might have turned out differently. But because of the inherent instability of acrimony, grievance, and factionalism, they and their students could not undo the effect of the more hostile response.
Pointer from Mark Thoma.
I disagree with this so much that I can actually feel my anger.
1. Romer’s point is that Solow set a bad tone for macro, and all difficulties in the subject flowed from that. I call baloney sandwich. Solow did not set the tone for discussions in macroeconomics in this period. As Romer points out, by this point Fischer and Dornbusch dominated macro at MIT at this point.
2. Solow’s problem with Lucas was that Solow thought that reality should take precedence over microfoundations. Solow equated Lucas’ approach to macro with deciding that because one’s theory could not explain how a giraffe could pump adequate blood to its head that one had proven that giraffes do not have long necks.
3. I think that one problem in macro is that there are many theories that are consistent with observed reality. Freshwater macro happens to be one of the few that does not reconcile with reality. It deserves Solow’s disdain.
4. Romer thinks of Dornbusch and Fischer as heroes. To me, they are villains. They pushed the representative-agent, rational-expectations nonsense that is good for nothing but mathematical, er, self-abuse.
5. Even though Solow is a Keynesian partisan and I am not, I still feel connected to him because we share a view of what is wrong with the way macro has been pursued since the 1970s.
Someone recently emailed me that I should put my memoirs of a would-be macroeconomist on Amazon. For now, it’s freely available, and I think that Romer and others interested in his posts should read it. In fact, if you want to read it on Kindle, I am pretty sure that this file will work.
What is curious is that Romer seems to consider Fisher and Dornbusch to be very different than Lucas and Prescott. In fact, as you explain, they are methodologically one and the same (despite superficial differences–note Dornbusch was Chicago-trained, too!). Solow’s brand of macro fell by the wayside with few intellectual children and grandchildren, from what I can tell.
Interesting to me is how Ed Prescott refers to macro as “aggregate economics.” This is consistent with his school’s complete dismissal of old-school macro, even including how it is referred to! There is no such thing as macro, scientifically, I paraphrase. There is economics (micro) and aggregate econ (Lucas, Prescott etc).
Interesting that they reject the entire concept of a totalising, taken-as-a-whole, “thing” itself. “There’s no system here to study, just lots of individual actions.”
Where would Physics be with such an attitude? It would have stopped with Bohr, and consisted of nothing beyond particle dynamics. Hmm, I am seeing an intellectual link with global-warming deniers. “There cannot be global warming because ‘global’ is a failed/false/political concept.”
Do paradigms dominate because they are correct or, as in the case of college football, not because they are best but because it is in the nature of the system to select a winner?