IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v34y2012i1p29-41.html
   My bibliography  Save this article

Economics and reality

Author

Listed:
  • Uhlig, Harald

Abstract

This paper is a non-technical and somewhat philosophical essay, that seeks to investigate the relationship between economics and reality. More precisely, it asks how reality in the form of empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play? What is the current state of affairs, what are the successes and failures, what are the challenges? I shall tackle these questions moving from general to specific. For the general perspective, I examine the following four points of view. First, economics is a science. Second, economics is an art. Third, economics is a competition. Forth, economics is politics. I then examine four specific cases for illustration and debate. First, is there a Phillips curve? Second, are prices sticky? Third, does contractionary monetary policy lead to a contraction in output? Forth, what causes business cycles? The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.

Suggested Citation

  • Uhlig, Harald, 2012. "Economics and reality," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 29-41.
    • Handle: RePEc:eee:jmacro:v:34:y:2012:i:1:p:29-41
    DOI: 10.1016/j.jmacro.2010.09.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016407041000073X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmacro.2010.09.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
    2. Smith, Adam, 1977. "An Inquiry into the Nature and Causes of the Wealth of Nations," University of Chicago Press Economics Books, University of Chicago Press, number 9780226763743 edited by Cannan, Edwin, September.
    3. Rotemberg, Julio J., 2005. "Customer anger at price increases, changes in the frequency of price adjustment and monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 829-852, May.
    4. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
    5. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    6. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June.
    7. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, vol. 21(2), pages 481-517, June.
    8. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
    9. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
    10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    11. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    12. Lars Peter Hansen & Thomas J. Sargent, 2007. "Introduction to Robustness," Introductory Chapters, in: Robustness, Princeton University Press.
    13. Donald F. Cunningham & Patric H. Hendershott, 1984. "Pricing FHA Mortgage Default Insurance," NBER Working Papers 1382, National Bureau of Economic Research, Inc.
    14. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    15. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ramey, V.A., 2016. "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 71-162, Elsevier.
    2. Thorsten Drautzburg & Harald Uhlig, 2015. "Fiscal Stimulus and Distortionary Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 894-920, October.
    3. Marek Rusnak & Tomas Havranek & Roman Horvath, 2013. "How to Solve the Price Puzzle? A Meta‐Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(1), pages 37-70, February.
    4. Maritta Paloviita and Matti Viren, 2012. "Analyzing the relationships between survey forecasts for different variables and countries," Discussion Papers 76, Aboa Centre for Economics.
    5. Dominika Ehrenbergerova & Josef Bajzik & Tomas Havranek, 2023. "When Does Monetary Policy Sway House Prices? A Meta-Analysis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 538-573, June.
    6. Thorsten Drautzburg & Harald Uhlig, 2015. "Fiscal Stimulus and Distortionary Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 894-920, October.
    7. Elminejad, Ali & Havranek, Tomas & Irsova, Zuzana, 2022. "Relative Risk Aversion: A Meta-Analysis," MetaArXiv b8uhe, Center for Open Science.
    8. Antonia López-Villavicencio & Valérie Mignon, 2013. "Nonlinearity of the inflation-output trade-off and time-varying price rigidity," Working Papers 2013-02, CEPII research center.
    9. Dieter Bögenhold, 2014. "Schumpeter’s Idea of a Universal Social Science," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(2), pages 205-215, June.
    10. Gurbachan Singh, 2014. "Overcoming Zero Lower Bound on Interest Rate without any Inflation or Inflationary Expectations," South Asian Journal of Macroeconomics and Public Finance, , vol. 3(1), pages 1-38, June.
    11. Bögenhold, Dieter, 2014. "Schumpeter's Idea of a Universal Science," MPRA Paper 58115, University Library of Munich, Germany.
    12. Russell, Bill, 2013. "Macroeconomics: Science or Faith Based Discipline?," SIRE Discussion Papers 2013-114, Scottish Institute for Research in Economics (SIRE).
    13. Favero, Carlo A. & Karamysheva, Madina, 2015. "What Do We Know About Fiscal Multipliers?," CEPR Discussion Papers 10986, C.E.P.R. Discussion Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uhlig, Harald, 2012. "Economics and reality," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 29-41.
    2. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework," Introductory Chapters, in: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press.
    3. Christopher L. Gilbert & Duo Qin, 2005. "The First Fifty Years of Modern Econometrics," Working Papers 544, Queen Mary University of London, School of Economics and Finance.
    4. Latsos Sophia, 2018. "Real Wage Effects of Japan’s Monetary Policy," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 69(1), pages 177-215, July.
    5. Francis X. Diebold, 1998. "The Past, Present, and Future of Macroeconomic Forecasting," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 175-192, Spring.
    6. Ramey, V.A., 2016. "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 71-162, Elsevier.
    7. Özer Karagedikli & Troy Matheson & Christie Smith & Shaun P. Vahey, 2010. "RBCs AND DSGEs: THE COMPUTATIONAL APPROACH TO BUSINESS CYCLE THEORY AND EVIDENCE," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 113-136, February.
    8. Jordi Galí, 2015. "Introduction," Introductory Chapters, in: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications Second edition, volume 1, Princeton University Press.
    9. Tinsley, P A, 2002. "Rational Error Correction," Computational Economics, Springer;Society for Computational Economics, vol. 19(2), pages 197-225, April.
    10. Consolo, Agostino & Favero, Carlo A. & Paccagnini, Alessia, 2009. "On the statistical identification of DSGE models," Journal of Econometrics, Elsevier, vol. 150(1), pages 99-115, May.
    11. Francesco Sergi, 2020. "The Standard Narrative about DSGE Models in Central Banks’ Technical Reports," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 27(2), pages 163-193, March.
    12. Mai, Nhat Chi, 2016. "Monetary policies and the macroeconomic performance of Vietnam," OSF Preprints akzy4, Center for Open Science.
    13. Duo Qin, 2010. "Modelling of the Inflation-Unemployment Tradeoff from the Perspective of the History of Econometrics," Working Papers 661, Queen Mary University of London, School of Economics and Finance.
    14. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01222798, HAL.
    15. Nalan Basturk & Cem Cakmakli & S. Pinar Ceyhan & Herman K. van Dijk, 2014. "On the Rise of Bayesian Econometrics after Cowles Foundation Monographs 10, 14," Tinbergen Institute Discussion Papers 14-085/III, Tinbergen Institute, revised 04 Sep 2014.
    16. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    17. Carlo A. Favero, 2009. "The Econometrics of Monetary Policy: An Overview," Palgrave Macmillan Books, in: Terence C. Mills & Kerry Patterson (ed.), Palgrave Handbook of Econometrics, chapter 16, pages 821-850, Palgrave Macmillan.
    18. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Documents de travail du Centre d'Economie de la Sorbonne 15066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    19. Duo Qin, 2010. "Modelling of the Inflation-Unemployment Tradeoff from the Perspective of the History of Econometrics," Working Papers 661, Queen Mary University of London, School of Economics and Finance.
    20. Pedro Garcia Duarte & Kevin D. Hoover, 2012. "Observing Shocks," History of Political Economy, Duke University Press, vol. 44(5), pages 226-249, Supplemen.

    More about this item

    Keywords

    Macroeconomics; Reality; Theory; Empirical evidence;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:34:y:2012:i:1:p:29-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.