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How Did Macro Theory Get So Far off Track, and what Can Heterodox Macroeconomists Do to Get it Back On Track?

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David Colander ()
Abstract

This paper argues that the ideas that win out in economics are not necessarily those that a representative researcher would choose, but are rather the emergent result of the competition of ideas in which system replicator dynamics dominate. This means that those ideas that fit the analytic technology available to researchers at the time dominate, while “better” ideas that do not offer advancement to researchers lose out. This paper spells out that view. It differentiates a consumer’s understanding of theory from a producer’s understanding of theory, and argues that a consumer’s understanding of theory is often better suited to applied policy than is a producer’s understanding of theory. Because the replicator dynamics of the economics profession does not reward people for acquiring a consumer’s understanding of theory, that understanding is often neglected. Heterodox economists often have a better consumer’s understanding of theory than do mainstream economists but because they do not prepare students to be successful in economic institutional environment, their views do not receive the hearing they should in the profession. The paper offers a number of suggestions for heterodox European macro economists for competing and shaping the economic institutional environment.

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File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0911.pdf
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Paper provided by Middlebury College, Department of Economics in its series Middlebury College Working Paper Series with number 0911.

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Length: 21 pages
Date of creation: Nov 2009
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Handle: RePEc:mdl:mdlpap:0911

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  1. V. V. Chari & Patrick J. Kehoe, 2006. "Modern Macroeconomics in Practice: How Theory Is Shaping Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 3-28, Fall.
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  2. David Colander, 2003. "Post Walrasian Macroeconomics and Heterodoxy : Thinking Outside the Heterodox Box," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 33(2), pages 68-81, June. [Downloadable!] (restricted)
  3. Thomas J Sargent, 2007. "Evolution and Intelligent Design," Levine's Bibliography 122247000000001821, UCLA Department of Economics. [Downloadable!]
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This page was last updated on 2009-11-16.


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