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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?

  • David Colander

    ()

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: Aug 2009
Date of revision:
Handle: RePEc:mdl:mdlpap:0911
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  1. David Colander, 2007. "What Was “It” that Robbins Was Defining?," Middlebury College Working Paper Series 0706, Middlebury College, Department of Economics.
  2. Thomas J. Sargent, 2008. "Evolution and Intelligent Design," American Economic Review, American Economic Association, vol. 98(1), pages 5-37, March.
  3. 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.
  4. Patrick Kehoe & Varadarajan V. Chari, 2006. "Modern Macroeconomics in Practice: How Theory is Shaping Policy," NBER Working Papers 12476, National Bureau of Economic Research, Inc.
  5. David Colander, 2009. "Moving Beyond the Rhetoric of Pluralism: Suggestions for an “Inside-the-Mainstream” Heterodoxy," Middlebury College Working Paper Series 0915, Middlebury College, Department of Economics.
  6. Dave Colander & Peter Howitt & Alan Kirman & Axel Leijonhufvud & Perry Mehrling, 2008. "Beyond DSGE Models: Toward an Empirically Based Macroeconomics," Middlebury College Working Paper Series 0808, Middlebury College, Department of Economics.
  7. David Colander, 2004. "Economics as an Ideologically Challenged Science," Middlebury College Working Paper Series 0422, Middlebury College, Department of Economics.
  8. Masanao Aoki, . "Reconstructing Macroeconomics: A Perspective from Statistical Physics and Combinatorial Stochastic Processes," UCLA Economics Online Papers 390, UCLA Department of Economics.
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