Macroeconomics Quote of the Day
22 April 2009 at 8:36 am Peter G. Klein
| Peter Klein |
From Kenneth Boulding’s review essay on Samuelson’s Foundations, published in the JPE in 1948:
[I]t is a question of acute importance for economics as to why the macroeconomics predictions of the mathematical economists have been on the whole less successful than the hunches of the mathematically unwashed. The answer seems to be that when we write, for instance, “let i, Y, and I stand, respectively, for the interest rate, income, and investment,” we stand committed to the assumption that the internal structures of these aggregates or averages are not important for the problem in hand. In fact, of course, they may be very important, and no amount of subsequent mathematical analysis of the variables can overcome the fatal defect of their heterogeneity.
More on heterogeneity in macroeconomics here.
Entry filed under: - Klein -, Bailout / Financial Crisis, Methods/Methodology/Theory of Science.
Organizations and Markets 
1.
Per Bylund | 22 April 2009 at 9:15 am
What?! Capital isn’t homogeneous? Labor isn’t homogeneous? Investment isn’t homogeneous? Seriously, Peter, how are we supposed to plan and manage the economy if we cannot trust the variables in our equations? Is it perhaps time for a new economics?