I do not think that the currently popular DSGE models pass the smell test. ... The advocates no doubt believe what they say, but they seem to have stopped sniffing or to have lost their sense of smell altogether.
-- Robert Solow/2010
Of course, DSGE has been the Flavor-of-the-Month within the data driven economic prognostication cabal for some time. Solow's experience notwithstanding.
Which situation leads me to consider another mode of analysis: game theory. There's the famous book, co-written by an economist. If one views non-Mother-Nature-based data driven analysis as on the razor's edge of credibility, as is macro-analysis, then one's analytical method must needs be event based. Thus reliance on the NYT, and history, to guide the way.
All of which led me to a recent (as in, a few years rather than decades) post delving into the problem.
The problem, Boumans explains, is that Morgenstern's benchmark was observations in the natural sciences, which were planned, designed, and guided by theory. Errors were the unsystematic result of human mistake, for nature "doesn't lie deliberately." But economic agents do, Morgenstern lamented, which adds to the lack of designed experiments, errors from questionnaires and instruments, and lack of definition.
Sound a bit familiar? So, yes, mine is not a new or unique observation, just independently arrived at. Why is it that the mainstream pundits remain befuddled by the continuing rush to Treasuries, and the resultant dive in long term interest rates? Apparently, such behavior is not amenable to analysis from existing time series. Who woulda thunk it?
Or, in varying syntax, it is said: 'econometrics has predicted 9 of the last 5 recessions'.
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