Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2013-12-16
Number: 13-200/VI
Author-Name: Koen Vermeylen
Author-Workplace-Name: University of Amsterdam
Title: The Methodology of Modern Macroeconomics and the Descriptive Approach to Discounting
Abstract: Critics of modern macroeconomics often raise concerns about unwarranted welfare conclusions and data mining. This paper illustrates these concerns with a thought experiment, based on the debate in environmental economics about the appropriate discount rate in climate change analyses: I set up an economy where a social evaluator wants to determine the optimal time path of emission levels, and seeks advice for this from an old-style neo-classical macroeconomist
and a new neo-classical (modern) macroeconomist; I then describe how both economists analyze the economy, their policy advice, and their mistakes.
I then use the insights from this thought experiment to point out some pitfalls of the modern macroeconomic methodology.
Classification-JEL: B22, B41, E13, O44, Q52, Q54
Keywords: modern macroeconomics, methodology, descriptive, prescriptive, discount rate
File-Url: https://papers.tinbergen.nl/13200.pdf
File-Format: application/pdf
File-Size: 1029271 bytes
Handle: RePEc:tin:wpaper:20130200