President of the Federal Reserve Bank of Minneapolis, Narayana R. Kocherlakota,
writes that
I believe that during the last financial crisis, macroeconomists (and I include myself among them) failed the country, and indeed the world.
He then points to the current debate
According to the media, the defining struggle of macroeconomics is between people: those who like government and those who don’t.
We can see parallels in Australia, in wanting to simplify and make more efficient the tax system the government are met with a barrage of outrage from a multitude of sources. Kocherlakota explains the dilemma
the defining struggle in macroeconomics is between people and technology. Macroeconomists try to determine the answers to questions about entire economies. These questions really concern the outcomes of large-scale experiments, but there is no sensible way to perform such experiments in national or global laboratories. Instead, macroeconomists must conduct their experiments inside economic models that are highly stylized and simplified versions of reality. I will show that macroeconomists always leave many possibly important features of the world out of their models.
Kocherlakota identifies the problem
Macroeconomists have failed to communicate their new discoveries and understanding to policymakers or to the world. Indeed, I often think that macroeconomists have failed to even communicate successfully with fellow economists.
In this regard he is entirely correct, progress and reform should not be hampered by lack of cognition. Clearly governments and policy makers also have a duty to properly sell their policy and not leave the public to the mercy of lobbyists.
