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Academics are in their ivory tower and have little real world or policy impact. That is the view that is often conveyed by those who do not know what those academics are up to. It is also a common justification by policymakers for ignoring any advice coming from academia. I have lamented many times that politicians routinely disregard advice from scientists (including economists), particularly by focusing law-making on the means instead of on the goals. That said, I recently mentioned work that argued that Keynesian policies will always appeal more to policymakers than Hayekian ones, because it gives them a reason to do something in times of crisis.
Michel De Vroey compares rather Lucas to Keynes. Lucasian macroeconomics relies a lot on internal consistency. This disciplines the theory a lot, but this acts also a straitjacket that in unappealing to policy makers. Keynesian theory has a lot more hand-waving regarding consistency but seems to have an answer for everything because it can cut corners (even if answers may turn out to be wrong). The fact that it appears to be so flexible and know-it-all (like those "economists" that are willing to answer any question journalists may have, I would add) makes Keynesian theory a magnet for policymakers, especially in terms of crisis. And this is why, with the last recession, macroeconomics has been declared to be in crisis, because it listened to Lucas and not Keynes for three decades and did not always immediately have answers.
This is an argument written by someone in the ivory tower. Contrast this with someone involved in policymaking. The very recent interview of James Bullard seems to say the exact opposite. Policymakers, at least monetary policymakers, are very much looking at Lucasian theory for help. In his words, "there is still no substitute for heavy technical analysis to get to the bottom of these issues" (speaking of the financial crisis) and that is happening with structural, internally consistent modeling. Hand-waving does not cut it. And I agree.
Michel De Vroey compares rather Lucas to Keynes. Lucasian macroeconomics relies a lot on internal consistency. This disciplines the theory a lot, but this acts also a straitjacket that in unappealing to policy makers. Keynesian theory has a lot more hand-waving regarding consistency but seems to have an answer for everything because it can cut corners (even if answers may turn out to be wrong). The fact that it appears to be so flexible and know-it-all (like those "economists" that are willing to answer any question journalists may have, I would add) makes Keynesian theory a magnet for policymakers, especially in terms of crisis. And this is why, with the last recession, macroeconomics has been declared to be in crisis, because it listened to Lucas and not Keynes for three decades and did not always immediately have answers.
This is an argument written by someone in the ivory tower. Contrast this with someone involved in policymaking. The very recent interview of James Bullard seems to say the exact opposite. Policymakers, at least monetary policymakers, are very much looking at Lucasian theory for help. In his words, "there is still no substitute for heavy technical analysis to get to the bottom of these issues" (speaking of the financial crisis) and that is happening with structural, internally consistent modeling. Hand-waving does not cut it. And I agree.
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