Economics and Society: Have Macroeconomic Models Lost their Connection with Economic Reality?
The recent financial crisis has triggered a debate about the value of macroeconomic models and the development of macroeconomic theories. Why have these developments not led to better predictions of the crisis? Have these models and the policy implications “caused” the financial crisis? Have macroeconomic models lost their connection with economic reality? This lecture addresses these questions and provides a critical overview of the development of macroeconomic theory over the past 40 years. We conclude that “handle with care” holds, in particular, for macroeconomic models.
This lecture is organized in cooperation with the School of Business and Economics (SBE). The Joan Muysken lecture has been named after Joan Muysken, SBE’s first professor in macroeconomics (1984-2014) and who was the founding father of the department of Economics of SBE.