economics as faith (10)

I have long wondered why a brilliant economist like Arnold Kling, who has a PhD from prestigious MIT, never worked in academia. Now I understand. He was a heretic who lacked faith in the doctrine of rational expectations.

 

I remember reading once that it is still not understood how the giraffe manages to pump an adequate blood supply all the way up to its head; but it is hard to imagine that anyone would therefore conclude that giraffes do not have long necks. At least not anyone who had ever been to a zoo.

Robert M. Solow

Think of the task of macroeconomics as completing a mineshaft between the “outside” (what we observe in the world) and the “inside” (a mathematical model that is “pure” in its microfoundations). The Old Keynesians, including Solow, took an outside-in approach: let’s work from what we observe, build a crude model to handle that, and maybe eventually we can dig deeper and find the microfoundations. Start from the fact that there is a giraffe, and try to figure out how it maintains its blood supply. Do not start from a model of blood supply that precludes the existence of giraffes. ….

The New Keynesians … [adopted] an inside-out approach. Stan Fischer’s course at MIT was 100 percent inside-out theory, and I viscerally hated it. …. [emphasis added]

I chose Solow as my dissertation adviser, and I wrote an outside-in thesis, working backwards from what we observe to a theory of price rigidity. Not having a thesis that focused on rational expectations and not having Fischer plugging for me were career-altering. I was doomed to failure if I tried academia, and so I wound up on a different track. I don’t think I was the one who lost out on that deal. …. [emphasis added]

I still despise inside-out macro, and I still prefer the outside-in approach. ….

I still respect the Old Keynesian approach of starting with observations about the world rather than starting at the bottom of the mine with a “pure” model. However, I am willing to entertain theories that differ considerably from the Old Keynesian one.

Arnold Kling, “The Macro Wars: Inside-out vs. Outside-in“, askblog, 18 February 2014.

It could have been worse. Mr Kling was at least able to complete his PhD at MIT. With PhD in hand, he could easily have landed a tenured position at a second- or third-tier teaching university. For whatever reason – perhaps desire for independence or love of research – he did not choose that path.

Arnold Kling (born 1954) graduated from Swarthmore College in 1975 and received a Ph.D. in economics from MIT in 1980. He now teaches statistics and economics in the Upper School of the Berman Hebrew Academy in Rockville, Maryland.

Stanley Fischer (born 1943) is Vice-Chairman of the US Federal Reserve System. Previously (2005-2013) he served as governor of the Bank of Israel. He was a professor at the MIT Department of Economics from 1977 to 1988.

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  1. […] to my earlier post (19 February) on Arnold Kling, here is a message that Kling’s PhD thesis adviser – […]