In a world of diverse and changing circumstances, economists and other social scientists can do real harm by applying the wrong model. Unfortunately, they get virtually no training in how to choose among the alternatives.
There’s a good debate going on about the usefulness of macro models, and in particular whether the so-called New Keynesian models let us down or even helped bring on the financial crisis and the Great Recession.
A typical complaint against mainstream economics is that it is too limiting in the conclusions it leads to. Mainstream economists are often seen as ideologues of the market economy. I would concede that most of my economist colleagues tend to view markets as inherently desirable and government intervention as inherently unwelcome. But in reality what we teach our students in the classroom – the advanced students if not the undergraduates –and what we talk about in the seminar room are typically much more about the myriad ways in which markets fail.
"Of course there are a huge number of policy debates in macroeconomics, and you can attach labels to those if you like. Should we use fiscal stimulus at the zero lower bound, for example. Was austerity a good idea? However, anti-Keynesians aside, I don’t think these debates reveal large fault lines in economic thinking"