10-27-2016, 01:57 PM
Amazing stuff, this:
Quote:If we look at the rise of Real Business Cycle (RBC) research a few decades ago, that was only made possible because economists chose to ignore evidence about the nature of unemployment in recessions. There is overwhelming evidence that in a recession employment declines because workers are fired rather than choosing not to work, and that the resulting increase in unemployment is involuntary (those fired would have rather retained their job at their previous wage). Both facts are incompatible with the RBC model. In the RBC model there is no problem with recessions, and no role for policy to attempt to prevent them or bring them to an end. The business cycle fluctuations in employment they generate are entirely voluntary.mainly macro: Being honest about ideological influence in economics
RBC researchers wanted to build models of business cycles that had nothing to do with sticky prices. Yet here again the evidence was quite clear: for example data on real and nominal exchange rates shows that aggregate prices are slow to adjust. It is true that it took the development of New Keynesian theory to establish robust reasons why prices might be sticky enough to generate business cycles, but normally you do not ignore evidence (that prices are sticky) until you have a good explanation for that evidence. Why would researchers try to build models of business cycles where these cycles required no policy intervention, and ignore key evidence in doing so? The obvious explanation is ideological.
David Card is a very well respected labour economist, who was the first to present detailed empirical evidence that imposing a minimum wage might not reduce employment (as the standard supply and demand model would predict). He gave an interview some time ago (2006), where he said this about the reaction to this work: “I've subsequently stayed away from the minimum wage literature for a number of reasons. First, it cost me a lot of friends. People that I had known for many years, for instance, some of the ones I met at my first job at the University of Chicago, became very angry or disappointed. They thought that in publishing our work we were being traitors to the cause of economics as a whole.” As Card points out in the interview his research involved no advocacy, but was simply about examining empirical evidence. So the friends that he lost objected not to the policy position he was taking, but to him uncovering and publishing evidence. Suppressing or distorting evidence because it does not give the answer you want is almost a definition of an illegitimate science.