Macroeconomics in Perspective

Reflections of the Université Catholique de Louvain “Macroeconomics in Perspective Workshop”

Last week the “Macroeconomics in Perspective Workshop” was held at the Department of Economics of the Université Catholique de Louvain (UCL), in Louvain-la-neuve, Belgium. The organizers (all but one were UCL’s students), Lionel Artige (Université de Liege, Belgium), Michel De Vroey (UCL), Luca Pensieroso (UCL), and Goulven Rubin (Université de Lille 2, France), were motivated by the latest developments in macroeconomics (of fluctuations, not growth) — the alleged consensus that emerged in the 1990s with DSGE macroeconomics (or the “new neoclassical synthesis”) and the criticisms brought up by the 2008 crisis — and had a stated intention to reassess macroeconomics. In particular, their call for papers clearly put that they wanted assessment papers that could be non-technical but should reflect internally on the modeling practices of macroeconomists. They also wanted to promote somehow a closer interaction between macroeconomists and historians. Besides, the group of historians of modern macroeconomics is not that large, and tend not to have a regular interaction other than at the regular history of economics conferences.

The program had macroeconomics papers, from agent-based modeling to dynamic macroeconomics and to discounting in environmental economics, and historical papers that covered Wicksellian ideas and the new neoclassical synthesis, the building of facts in the emergence of the DSGE macroeconomics, a nice history of coordination failures in macroeconomics (a paper co-authored by our fellow “kid” Beatrice Cherrier), history of econometrics in business cycle, James Tobin and monetary economics, and a history of search models in modern macro. Besides the regular sessions, the Workshop had four invited lectures: the first by Jacques Drèze (UCL), the second by Roger Farmer (UCLA, United States), the third by Jean-Pierre Danthine (Vice-Chairman of the Swiss National Bank), and the last by Frank Smets (European Central Bank and University of Leuven, Belgium). These lectures fitted nicely with the other papers. Drèze wittily reflected on the developments of general equilibrium theory and on the very relationship between micro and macroeconomics. Farmer gave a nice talk on his research agenda and on ways of getting a new monetary and fiscal framework based on search models and other elements. Jean-Pierre Danthine provided a very interesting view on macroeconomics at central banks, with many of the nitty-gritty details of current practice. Finally, Smets, co-author with Raf Wouters of papers that brought new empirical level to DSGE macroeconomics, presented a DSGE model with financial frictions, and took the opportunity also to reflect on the methodology of mainstream macroeconomics.

The question that remains is the possibility of a having a working bridge between macroeconomics and history of (macro)economics — or at least of a particular kind of history, more internal than some historians would like to see. Potential for an interaction exists in principle. But then how able and willing are macroeconomists and historians to engage with each other? We ask different questions and use different tools. How much are we willing (and able) to ask different questions and produce different kinds of knowledge? Those are questions that are even more critical as economics became highly technical and, as a result, practitioners and historians developed quite different aspirations and mindsets. Anyway, it is always good to reflect on such issues that are surely not particular to this event.

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