What’s Right with Macroeconomics?

What’s Right with Macroeconomics?

The Cournot Centre series

Edited by Robert M. Solow and Jean-Philippe Touffut

Global crises are very rare events. After the Great Depression and the Great Stagflation, new macroeconomic paradigms associated with a new policy regime emerged. This book addresses how some macroeconomic ideas have failed, and examines which theories researchers should preserve and develop. It questions how the field of economics – still reeling from the global financial crisis initiated in the summer of 2007 – will respond.

Chapter 3: The ‘hoc’ of international macroeconomics after the crisis

Giancarlo Corsetti

Subjects: economics and finance, methodology of economics


Robert Solow once said that we economists should be concerned not about our models being ‘ad hoc’, but about the ‘hoc’ our models are ‘ad’. By no means should this observation be interpreted as an expression of sympathy for conceptual and analytical short-cuts to difficult theoretical problems, obviously misrepresenting the view of a Nobel laureate in economics. Rather, it is an incisive, healthy reminder that, despite our efforts to develop models with good theoretical foundations, the end product will always include some elements or areas that simply mirror our ignorance. By focusing on the appropriate ‘hoc’, however, theory and models may help us to approximate the root of the problem at hand – from a policy perspective, the root of the market failures that may motivate government interventions and define the relevant trade-offs for policy design. There are of course times in which some ‘hoc’ forcefully makes its way into our discipline – the global crisis and recession that began in the summer of 2007 being a case in point. In many respects, ‘this time is not different’.

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