Working Paper: NBER ID: w16416
Authors: Harald Uhlig
Abstract: This paper is a non-technical and somewhat philosophical essay, that seeks to investigate the relationship between economics and reality. More precisely, it asks how reality in the form empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play? What is the current state of affairs, what are the successes and failures, what are the challenges? I shall tackle these questions moving from general to specific. For the general perspective, I examine the following four points of view. First, economics is a science. Second, economics is an art. Third, economics is a competition. Forth, economics politics. I then examine four specific cases for illustration and debate. First, is there a Phillips curve? Second, are prices sticky? Third, does contractionary monetary policy lead to a contraction in output? Forth, what causes business cycles? The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.
Keywords: No keywords provided
JEL Codes: A10; A11; A12; A14; E00; E52; E60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Empirical evidence (C90) | Economic theory (D46) |
| Empirical evidence (C90) | Economic thinking (D46) |
| Economic thinking (A13) | Minimalistic theories (D01) |
| Empirical evidence (C90) | New theories (B52) |
| Old theories (B13) | Persistence in economics (E21) |
| New empirical evidence (C59) | Conservative economic thinking (E65) |