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Methodology A recent conference of CESIFO on "What is Wrong with Modern Macroeconomics?" See this link for the papers. Alan Kirman speaks out again against modern macro. He confuses and confounds a lot of things: equilibrium, rational expectations, the representative agent, etc. This is funny. A recent issue of the skeptiker, the official magazine of the Gesellschaft zur wissenschaftlichen Untersuchung von Parawissenschaften e.V. (society for the scientific investigation of pseudo-sciences) features a debate about whether Economics is a pseudo-science. The district attorney: Mario Bunge, a philosopher of science; the defense attorney: Ulrich Berger, a game theorist from Vienna. I think Professor Berger did a good job defending Economics, although it was at the end of the day pretty easy: Professor Bunge obviously has not read much Economics since Debreu and he clearly mixes his liberal political agenda with his tirade against mainstream Economics (as if Keynesianism was somehow more scientific than neoclassic economics). His reply is then also pretty lame: he clearly misunderstands the role of the Pareto principle in Economics and has a weird understanding of scientificness as ability to predict. One specific remark about Bunge's critique of microeconomics, reciting an old question that Poincare leveled against Walras - I am very interested in this, because I have written papers in this area. Already Afriat's theorem shows that utility functions can be removed from consumer choice theory, which has been further refined by the work of Hal Varian. And Brown and Matzkin show that the same is true for the Walrasian equilibrium concept. This answers Poincare's criticism, Mr. Bunge! George Soros is now getting involved in the methodology debate. Beware! Akerlof in an interview with the FAZ. To all those anti-formalists and anti-empiricists who see him as the icon of the new heterodoxy, hold your breath. In this interview, he demands more and more complicated math and more data. He also says what I have been saying all along: without the bank micro data, it was impossible to predict the crisis. If you want to listen to some German philosophers talk about the crisis and bash economics in the process, this is quite edifying. Mark your calendars. On 19 February 2010 I will be at a panel discussion on the Methodenstreit in Frankfurt. R. Vaubel and C.C. von Weizsaecker, among others, will join me. The Arch-Keynesians in Germany do not even believe themselves in their resurgence, at least according to the Handelsblatt. The post-autistics are at it again, this time in the Handelsblatt. M. Wohlgemuth, from the Walter Eucken Institute in Freiburg, wants us to become more aware of our autistic rhetoric and does not like how economic journals operate or chairs in Economics are replaced. P. Plickert is happy that institutionalists won the Nobel Economics Prize. This is fascinating stuff: G. Braunberger against a bunch of Austrians. I am throwing in with Braunberger. The econophysics guys speak up again with a pamphlet (and as usual really a caricature) on mainstream economics. Here in the Handelsblatt and here in the (English) original. P. Plickert sends me these two pieces: his own call for a better curriculum in Economics (you can guess what this entails) and a call for more economic history (which I agree is important, as long as it is up to methodological standards, but nobody seriously has an issue with that). Belatedly, the FTD account of the panel discussion in Magdeburg. Three reasons why economists are not well-liked. F. Zimmermann is of course right that we sometimes say inconvenient, but true stuff (he also defends the formalism and empiricism of modern economics in this FAZ interview). Secondly, journalists write falsehoods about academic economics all the time, as the recent reaction by Harald to a Spiegel online article, claiming that economists have nothing useful to say about the Laffer curve, shows. Honestly guys, if you are in the business of translating economic knowledge to a general audience, is it too much to ask that you actually know something about economic research? And finally, it is economists like N. Walter, R. Hickel and B. Raffelhueschen that even today on election Sunday have to clutter the public forum with their political agendas. Dear colleagues, why don't you just shut up once in a while and do some actual research, which is what you are paid for (at least Hickel and Raffelhueschen, who, of course, are signers of the stone age manifesto, which ex post proves our points). Another suggestion, let's agree on the following rule of professional conduct: only if you have a research paper that you have presented at least twice at a seminar or a conference to back up your policy recommendation, are you allowed to make this recommendation to a general audience. The economic mainstream (broadly defined; I hate that term) strikes back. D. Levine answers in an open letter directly to Krugman. Like Kocherlakota and myself, he demands that somebody know the literature before critique is voiced (it is a sad testimony to the intellectual honesty of the critiques that this has to be pointed out). G. Saint-Paul warns fervently, like Harald and me before, of an unfruitful intellectual mishmash if we took the advice of the other side. See here the letter to the Her Majesty by some British institutional economists. I was definitely wrong about one thing: the Methodenstreit is NOT a German thing alone. An email from Christoph Gran of the Postautistic Economics Network reaches me with this letter that he asked me to publish on this website. N. Kocherlakota weighs in. He makes some very good and decisive points. I have been trying to make these same points for a year now, but hopefully from him it will be more authoritative. H.D. Barbier is at it again. He calls again for more Ordnungspolitik at German universities. Notice how he calls quantitative economists slightly derogatively Rechner. Everything is fine again with German economists, at least according to the Handelsblatt article on the Methodenstreit panel in Magdeburg. R. Gordon also thinks that modern macro is useless. A nice summary by D. Warsh can be found here. Three more: W. Buiter, S. Johnson, L. Spaventa. I thought a Methodenstreit was only possible in Germany. Turns out I was wrong. The U.S. now has it as well. See J. Cochrane, B. Eichengreen, M. Gertler, A. Kling, P. Krugman twice, and R. Lucas. An update to C. Schubert's piece Krise am Finanzmarkt - Krise auch im Elfenbeinturm?(see below): G. Braunberger recently posted an interesting and very balanced comment at the end. I especially like his final paragraph: Den groessten Nutzen koennten Oekonomen stiften, wenn sie die Krise als ein (hoechst spannendes und offenes) Forschungsprogramm verstehen wuerden anstelle der Gelegenheit, einfach alte Weisheiten zu propagieren. Auf das Ergebnis dieser Forschungen werden viele Menschen mit Interesse warten. I am pretty sure this Forschungsprogramm will develop over the next years, in fact, it has already begun. But I also would risk the prediction that progress will be coming from a broadly defined mainstream - macro, IO, finance and, yes, insights from behavioral and experimental. I am pretty sure it will not come from German Ordnungspolitik or Austrian Economics. The canonical articles will be published in the AER, JPE, Econometrica and similar journals and not in Perspektiven der Wirtschaftspolitik. And, yes, they will feature mathematical models and probably lots of econometrics. I am still willing to bet on that and I would like to see somebody from the other side taking this bet. Krugman thinks macro is in a bad state and mathematics is to blame for it. An interesting intellectual alliance: arch-Keynesians and German Ordnungspolitiker. Find here a very interesting article describing how now even the humanities (specifically comparative literature studies) go empirical and use computers and statistical techniques to compare large corpora of texts to find common patterns. And the Ordnungspolitiker tell us to leave our computers. Seems anachronistic to me. Bob Shiller does not like modern macro, either (no surprise there). But he does seem to like the Germans and they like him. An addition to the IFO-Schnelldienst debate by J. Haucap. Bob Lucas in defense of the dismal science in general and of macroeconomics in particular. Also, some letters to the editor of the Economist on their articles on the state of macroeconomics. The recent IFO-Schnelldienst has four contributions by L. Arnold, O. Huebler, P. Oberender, A. Karmann and A. Buehn on the Methodenstreit. All of them very measured, balanced and reasonable. And here is a somewhat older piece by I. Pies who criticizes the lacking willingness of traditional Ordnungspolitik to embrace mathematics. The participants for the Magdeburg Oekonomenstreit are out: Lars-Hendrick Roeller (Berlin), the president himself, chairs, then Thomas Gehrig (Freiburg), Ronnie Schoeb (Berlin) and my friend Roland Vaubel (Mannheim) as panelists. This should be interesting. Mark your calendars: Friday 11 September, 10.15-11.45 am. Thorsten Polleit, an Arch-Miseean, blames empirical economists for attacking freedom. This is strong stuff. Jan Schnellenbach has written a good response. Again, let me point out that most interesting economic questions are empirical in nature and not synthetic apriori, as Polleit believes. That is not to say that there is no such thing as transcendental economics, i.e. a philosophical subdiscipline that asks for Bedingungen der Moeglichkeit oekonomischer Erkenntnis, as Kant would have said it and the way Kant did it for the natural sciences. This may be interesting, but would have to do with real economics as much as Kant's Critique of Pure Reason with physics. Finally, Polleit confuses the philosophy, sociology and pragmatics of science with what philosophers call Letztbegruendungsphilosophie: it is not inconceivable that a physicist is a Popperian and a pragmatic realist in his everyday research, yet epistemologically a Kantian. This time more from the Hayek guys. Karen Horn in the NZZ in lofty words about the vice of ordnungspolitical blindness. Gunnar Sohn and his rant about mainstream economics (talking about arrogance: read the defamatory language he has for us). An older piece by V. Vanberg about the mathematics mania in Economics. What I always wonder about these Hayek guys: is it not a central doctrine for them that cartels are inherently unstable so that no government intervention is necessary. Why is it then that mainstream economics is only alive because it has formed a cartel, as they claim? Before I go on vacation next week, three announcements: 1) I would like to thank all those who sent me articles and comments on the Methodenstreit. In particular, these thanks go to G. Braunberger (FAZ) and O. Storbeck (Handelsblatt). Even in the internet age it is difficult for me to keep up with the debate so far away from Germany. Without them, this site would not have been as comprehensive. 2) I would also like to encourage readers of this site to send me emails with their comments. I do not have the time or the knowledge to set up a fancy and interactive blog system, so emails will have to do. I also like to post comments with names, but anonymity can be guaranteed for students or others with legitimate reasons. 3) The Verein fuer Socialpolitik at his next meeting in Magdeburg this September will have a panel discussion on the Methodenstreit. I am somewhat proud to say that I had something to do with making this happen. As far as I know the discussants have not been announced, but mark your calendars: Friday 11 September, 10.15-11.45 am. I hope the date is not an omen. Check out the webpage of the Verein for updates. Incidentally, based on an admittedly very casual skimming of the meeting's program Ordnungspolitik and similar stuff does not play a role even in German academic Economics (the meeting of the Verein is arguably the largest gathering of German-speaking economists and probably a good representation of German Economics). This vindicates what Harald and I have been saying all along: Ordnungspolitik does not seem to produce anything presentable at a scientific conference. That does not forebode well for its future. Also, as far as I could see only one paper presented had a German title. So, indeed the internationalization of German Economics is probably further and firmer than I might have feared. Very good. Lux and Westerhoff are at it again, claiming that modern macro is all about the representative agent. The methodology debate in the U.S.: "The Financial Crisis and the Systemic Failure of the Economics Profession", an article in the Critical Review by D. Colander and a bunch of others. Christian Schubert is happy with the firm grounding of German economists in Ordnungspolitik, in contrast to their (dumb?) American counterparts. I think Michigan should hire a few German Ordnungspolitiker to save the U.S. Good thing I am on the senior search committee this year, let me see what I can do. Any voluntaries who want to send me their CV? Here is an article in the Tagesspiegel about a panel discussion at Viadrina University in Germany on the Methodenstreit. Here is the full Zeitgespraech about "Do we need a new Ordnungspolitik?" W. Schaefer, J. Kromphardt, W. Otremba, B. Diekman, G. Wagner, K. Bizer, Z. Gubaydullina, H.-P. Gruener and U. Thielemann contributed. Now we are not only supposed to be social philosophers, but rather philologists. I am amazed that everybody else seems to know what is good for economists. I have a minor in Spanish philology and I do not think this is what we need right now. Something about ants, spiders and bees by W. Otremba and B. Diekmann. And now the Economist in a battery of articles: one, two, three. However, this is much more measured and reasonable than what the average German journalist was able to come up with. Kudos! Here is an older article by the NZZ, again praising the virtues of Ordnungspolitik and criticizing modern economics, especially against the background of the current crisis. I am frankly befuddled by this widespread one-sided consensus and lack of critical attitude of journalists towards Ordnungspolitik (which is usually very rare for so diverse outlets such as the FAZ, Sueddeutsche and the NZZ). One wonders why that is. Here is a piece by Ulrich Thielemann, Professor in St. Gallen, who thinks that both Ordnungspolitiker and modern economists alike are the same disciples of market ideology. I do not know about the other signers of our manifesto, but I for one refute this very much for myself (I surmise most would join me). It is precisely the difference between Ordnungspolitik and the way I like to do economics that I am open about the outcome of the analysis. What we do not buy into are certain popular myths about the economy, like the existence of a fixed amount labor in the world that only has to be redistributed. Anyway, modern economics has always been about allocations and about mechanisms to achieve these allocations, of which the market is but one, albeit empirically an important one. It is fun to study theoretically and empirically how far the market can go, but at least I am not enamored with him. Also, to compare the signers of the Hamburger Appell with our list is frankly disingenuous. The overlap is far smaller than Thielemann insinuates. At least one student from Cologne disagrees. I just received this email from a Cologne undergraduate (I am withholding his name): Hallo Ruediger, mit grossem Interesse verfolge ich die von dir zusammengestellten Informationen zum Methodenstreit. Ich bin selbst VWL-Student in Koeln und bekomme das alles hautnah mit. Aber mir scheint, dass ein Argument in der Sache bisher ueberhaupt nicht genannt wurde, weil moeglicherweise unter deutschen Professoren es Skrupel gibt dieses zu aeussern. Von daher will ich das mal als provokante Frage formulieren: Kann es sein, dass mathematische Methoden nur von denjenigen abgelehnt werden, deren mentale Kapazitaeten oder deren Wille nicht ausreicht, diese Methoden zu verstehen? Und der Widerstand gegen diese Umstellung ist nichts anderes als der Kampf der Mutter fuer ihren (wissenschaftlichen) Nachwuchs? Jedenfalls ich kann mir das sehr gut vorstellen - zur Untermauerung dieser These auch ein real erlebtes Beispiel aus dem Koelner Lehrbetrieb. In einer Veranstaltung zur Konjunkturtheorie wollte der mittlerweile emeritierte Professor einen Hodrick-Prescott-Filter erklaeren. Dies tat er mit den Worten: "Das ist so eine Formel. Die geben Sie dann in Excel ein und der rechnet Ihnen das dann aus. Auf Einzelheiten will ich nicht eingehen. " Aber auch die andere Seite ist in ihrer Willensbildung durchaus transparent. Koelner VWL-Studenten sind ordnungspolitische Ansaetze gewohnt, die Umstellung auf formales Arbeiten ueberfordert diejenigen, deren Mathematikkenntnisse/(faehigkeiten) gering sind. Es braucht hierzulande wohl noch einige Jahre, bis sich in den Koepfen der Studienanfaenger durchgesetzt hat, dass VWL ein mathematisch orientiertes Fach ist und nur von denjenigen begonnen wird, die es auch leisten koennen. Und diejenigen Studierenden die so vehement artikulieren, dass ihre Veranstaltungen ihnen nichts "praxisrelevantes" vermittelten habe ich kennengelernt als diejenigen, die gar nicht verstehen, was ihnen vermittelt wird. Ich hoffe weiterhin interessante Informationen dazu auf deiner Seite zu finden und wollte meine Sympathie dazu ausdruecken. Viele Gruesse aus Koeln nach Ann Arbor, Clemens Struck, a graduate from Bonn, speaks out in the Handelsblatt. The students do not seem to like modern Economics, either. David, Alex and Martin have their work cut out for them. Dr. Berend Diekmann, head of the department Grundsatzfragen der Wirtschaftspolitik in the Bundeswirtschaftsministerium, weighs in. Harald likes it. Here is an article in the FAS about the three macroeconomists that are starting in Cologne come fall. Congratulations to my almost colleagues David, Alex and Martin. Commentary on Hans-Werner Sinn's FAZ article from 06-22-09, see below. German big shot Werner Hildenbrand agrees with Professor Sinn. An article from the Handelsblatt about a panel discussion at Cologne University on the Methodenstreit. I love what Walther Otremba, deputy secretary in the German ministry of economics, said about Ordnungsoekonomik: "It is not enough to say 'Freiburg school' in the morning and 'Ludwig Erhard' in the evening to be internationally competitive." Here is the FAZ article on the same event. Indeed, doubts about mainstream economics gain momentum in the U.S. as well: here and here. Wolf Schaefer perpetuates the view that most leading journals publish only formally elegant yet irrelevant stuff, without any corroboration. And Mr. Braunberger, FAZ, in a comment claims that most young US-trained economists think they have a natural claim to German professorships. Did I miss something? Wasn't the problem thus far that they declined most of these offers and were not eager to grab them? The Catholic establishment in Germany does not like us, either. Vaubel and me: the second round. I try to promise not to do it again. This is getting boring, especially since the other side has nothing new to say. The claims of formalization=removedness from the real world has been refuted convincingly. I did not even bother to write about it, but rather talked about the much more interesting articles by the four young ordos, Professor Sinn and Professor Haucap, respectively (see below).To put a few claims of his and his alleged expertise on U.S. Economics somewhat in perspective, here are two facts from his C.V.: in 1972 he apparently received a Master of Arts from Columbia in Economics, and in 1981 he was a visiting professor at then Chicago Business School. Nothing else to find. Also, notice how the press is biased against the reformers: the title reads Berater oder Rechenkuenstler? The first word, referring to the other side, is positively connotated and means basically advisor. The second word, referring to the modernizers, in German is slightly pejorative, there is no good translation into English, literally it means computing artist, but it definitely has a bad undertone. In these past few months, I learned a lot about how journalists manipulate people. Interestingly, Spiegel online reported about a similar situation at Freie Universitaet Berlin and their two psychology departments, where they now have dissolved the Marxist one (the other one takes a mainstream empirical approach). It is nice to see that ideology vanishes from universities and scientificness triumphs. I am afraid the same will happen to the Ordnungsoekonomik and its followers. Josef Ackerman, CEO of Deutsche Bank, and his advisor, Hans Christoph Binswanger, have also something to say about economic methodology (within a much longer interview on Goethe's Faust and the crisis). They are critical of models. They also think that modern economics does not think carefully enough about time. Thomas Fricke, chief economist of Gruner+Jahr Media, says the current Methodenstreit reminds him of a jungle camp. He asks whether economists have nothing better to do. I am frankly tired of outsiders telling us what to do. This only happens to economists or have we heard people ask from professors of Islamic studies to give us tools to solve the terrorism crisis? The truth is not every economist is an expert on financial markets nor should be. I am dreading already the flood of mediocre papers on the financial crisis on the next junior job market. Besides - scientific research is by its very nature methodical, and therefore, once in a while, methodology debates are necessary, whether there is a financial crisis or not. It turns out that we were wrong after all. Ordnungsoekonomik is not provincial and heterodoxy is having a stellar comeback in the U.S. Did I miss something? Also, Germans just seem to love Methodenstreits (I do - we are such deep thinkers and the world admires us for that), see a blog in the ZEIT from August 2007 that I just recently stumbled across. Today (06-22-09) is the day for the big shots of German Economics to weigh in. Volker Nocke sent me this article by Justus Haucap, a "fellow wolverine" and the chairman of the Monopolkommission in Germany. Volker comments (and I could not agree more): Schon gefaehrlich, was da vorgeschlagen wird. Mit dem gleichen Argument koennte Deutschland ja auf Grundlagenforschung in der Physik verzichten... Bizarr. Herzliche Gruesse. Volker. Hans Werner Sinn weighs in (06-22-09). He believes neither party is right or, rather, both parties have right elements. He thinks the right trio in Economics should be theory, institutional knowledge and econometrics. I just don't see why public finance is dying in the U.S. Or why institutional knowledge is not valued. I think the opposite is the case. The debate goes on, belying Harald's prediction (see below). Four young Ordnungsoekonomen explain what they understand today under Ordnungsoekonomik. A much more interesting read than what their older counterparts and academic teachers so far have come up with. Today (06-17-09) reached me the following email from Mu-Jeung Yang, currently a PhD student at Berkeley. I think his point about the textbook market is excellent. Hey Rudi, danke fuer deine Beitraege zusammen mit Uhlig zum "Methodenstreit". [...]. Eine kleine Randbemerkung. Ein Mass fuer den "Erfolg" des modernen Ordoliberalismus sind sicher die Lehrbuchmarktanteile in Deutschland fuer Grundstudiumsbuecher. Die Frage ist, wenn Ordoliberalismus wirklich so "applied" ist, warum sieht man nur den Varian oder den Mankiw in deutschen Hoersaelen? Koennte es sein, dass selbst in "Verbaler Oekonomik" und Verstaendlichkeit der mainstream dem Ordoliberalismus voraus ist? Viele Gruesse aus Chicago, Mu-Jeung L.-H. Roeller speaks out in a Handelsblatt interview. The interview is kind a lame, which also has to do with the somewhat lame questions that are being asked (what is that about the homogeneity at German departments?). I guess, Professor Roeller ex officio has to try to be neutral, he, after all, has to continue to work with Professor Ohr and the like in the VfS. Be that as it may - Mr. Roeller's pedigree (a Penn PhD), publication record (tons of papers in top international journals) and kind of work show where he would be in this debate, if he could speak the way he wanted to. I would bet on that. Thanks to the FAZ for two very well written articles on the Methodenstreit. The first simply summarizes for the general public what is going on, and does so in a very concise and matter-of-fact way. The second one is a commentary by G. Kirchgaessner, warning the Germans and German economics to seek a national Sonderweg (special path). See here for an RWI position paper by C. Schmidt and N. aus dem Moore, a shorter version of which appeared in the FAZ last month. This is by far the best and most comprehensive rebuttal of the other side I have read so far. This should also caution those who claim that the members of the Sachverstaendigenrat (the German analogue of the Council of Economic Advisors) and the heads of the leading German economic research institutes - C. Schmidt is both - are somehow supporting the 83, just because they did not sign our manifest. Our friends from the BWL have a similar discussion. As you can see in this article, some there want to count writing a textbook or an (unrefereed) monograph as equivalent to research output in refereed journals, when making tenure offers. The Regensburg economics reading group features a special session on the current Methodenstreit and they use this little website as source material. Thanks! I think students should know about this debate, it is after all about whether they want to be educated for an international (academic) labor market or a German idiosyncracy. At last - our counter-manifest is out in the Handelsblatt. 188 signatures, I think that is a very impressive number. But it is more the composition rather than the number I am most proud of. A careful reading of the names will show that we have a good mixture between economists abroad and in German-speaking countries. Also, all generations, from the just starting rookie assistant professors to distinguished emeriti are represented. I do not think that the 83 can boast such variety. So, this debate, fortunately, is not a matter of U.S.-based versus Germany-based economists, not a matter of young versus old. It is a matter of productive research versus economic feuilleton. Finally: so many thanks to all of you who made this possible! Harald thinks the Methodenstreit is over with our counter-manifest to be published in the Handelsblatt on 06-08-09. Thanks, Harald, for citing my FAZ interview and my little website here. See the commentary for the usual clowns that besmirch Harald and me, quite funny. FAZ from 06-06-09: two interviews with me and Professor Vaubel (Mannheim). I thank Professor Vaubel for a good and measured interview. I believe we are not that far apart. FAZ from 06-04-09: we have mole (just kidding). P. Plickert thinks that our counter-manifest - to be published in the Handelsblatt on 06-08-09 - escalates the debate. F. Schneider, W. Franz and L.-H. Roeller speak out in this article. An email conversation between Peter Bernholz, who signed the Ohr/Vaubel manifest, Carl-Christian von Weizsaecker and I, which shows that despite the vitriol that has been around in this debate, reasonable economists can have reasonable conversations. It also shows that German economists are far from "tearing each other apart" (Handelsblatt) and that this debate has not "escalated" (FAZ). I highly recommend reading it. UPDATE: an answer to Barbier's article Schnelle Rechner by C.C. von Weizsaecker. He asks: What is a good economist? Believe it or not, this article Es geht nicht ohne Logik appeared in the ZEIT from 07-26-1963. Florian Kuhn, a graduate student at the University of Texas at Austin, sent it to me, remarking: it could have been from last Thursday. Indeed! Sad that we have not managed to move on 46 years after. And thanks to Florian! FAZ from 05-24-09: a very annoying, offending and distorting Sonntagsoekonom. The FAZ wants to be the crown jewel of German journalism? I think some former Ordnungspolitiker (the author) is frustrated that it was not enough to go into academia. I wrote a letter to the editor. I will hold off posting it here, until I have a decision by the FAZ. But eventually, it can be read here. Harald does not like this Sonntagsoekonom, either. UPDATE: here is my letter to the editor (almost complete). FAZ from 05-21-09: C. Schmidt and N. aus dem Moore with a very eloquent and detailed rebuttal of the Ordnungspolitiker movement: Quo vadis, Oekonomik? At last - the Welt also bashes Economics. An older debate about Ordnungspolitik in Wirtschaftsdienst (January 2006). B. Lucke, C. Fuest, N. Goldschmidt, G. Wagner and B. Priddat weigh in. The current German Methodenstreit starts showing up in internet forums for prospective PhD students. The Ordnungspolitiker should start thinking about how their manifest will impact the international attractiveness of German PhD programs. In the FAZ from 05-11-09 T. Gehrig asks whether it is harmful when economists know how to compute stuff. Here is the FAZ article, here the somewhat longer original that Professor Gehrig graciously allowed me to post here. The Sueddeutsche Zeitung (05-09-09) takes sides with the FAZ with two articles in the same edition. A.-W. Scheer thinks that economists are lost in the world of models. J. Zweynert and N. Goldschmidt jump to the defense of Ordnungspolitik in response to our piece Die Welt ist weder schwarz noch weiss. The latter make a more measured and reasoned point for Ordnungspolitik. The FAZ (05-05-09) takes sides for economic theology: P. Plickert and H.D. Barbier weigh in. Notice that the latter in his last paragraph calls for an unconstitutional meddling of politicians in universities' offer decisions. I think this is outrageous. The next round: there is backlash to the Ohr/Vaubel open letter. Handelsblatt online from 05-04-2009 has an overview article with sound bites from H. Uhlig, D. Krueger and M. Piazzesi. Plus: three featured articles from C. Dustmann, B. Fitzenberger and me. Finally an interview with H.-P. Gruener, J. Haucap, M. Hellwig and K. Zimmermann. Reaction by Professor Vaubel. A summary of the debate from a leftist blog. Read this Spiegel online interview with Florian Holsboer to learn that other fields have a similar debate between a philosophical-ideological approach and a fact-based empirical approach: psychology. Schaeuble redet Unsinn - Handelsblatt online from 04-24-2009; now even politicians think they can be economic methodologists. Nice. If you want to see me get offended by some Evariste Galois dude, and Dirk from Bonn, two financial/applied mathematicians. It is funny, though. I think somebody is envious of economists. Plus: see how Joe the Plumber is offended and I jump to his defense. Update: Ohr's and Vaubel's open letter, signed by 83 professors of Economics, as published on FAZ online (they have nice pictures of the somewhat older gentlemen there). Professors Watrin and Willgerodt respond to Professor von Weizsaecker I have recently started to read up on heterodox economics as bedtime reading, specifically the Austrian school that the FAZ so nicely juxtaposed to Harald's and my article as the savior of Economics. I checked on the website of an eminent scholar of this so-called heterodoxy, Professor Jesus Huerta de Soto, and here are his comments about mainstream macroeconomics together with my remarks (in red). Boy, I have to say: if that's the level of discourse in the heterodoxies in general - you guys are toast. Is it too much to ask to actually read before you criticize? Volkswirtschaftslehre: Gar nicht weltfremd - Handelsblatt online from 04-02-2009: commentary by O. Storbeck in defense of mathematical-empirical economics. Von Steigbuegelhaltern und Sachwaltern - Interview with M. Huether in the Manager Magazin from 04-01-2009: Huether is at it again. No April Fool's day joke, he means it! Die Welt ist weder schwarz noch weiss - FAZ from 03-30-2009 (joint with H. Uhlig) Reactions: Die Oekonomik ist keine zweite Physik - FAZ from 04-14-2009, V. Vanberg. Here is a second, slightly different version from a blog with lots of commentary. Ein Verlust an Weisheit - FAZ from 04-14-2009, R. Vaubel (see also another letter to the editor in defense of modern Economics above it: Der unbegruendete Vorwurf mangelnder Praxisnaehe) Oekonomen, Rechner und Techniker - FAZ from 04-03-2009, J. Starbatty I emailed Professor Starbatty with the following suggestion: Sehr geehrter Herr Starbatty - Vielen Dank fuer Ihren Leserbrief in der FAZ auf unseren Artikel "Die Welt ist nicht schwarz oder weiss". Sie machen da ja eine interessante und falsifizierbare Prognose, naemlich dass die mathematisch-quantitativ-empirische Oekonomie in der Bedeutungslosigkeit verschwinden wird. Waeren Sie bereit, da einen Zeithorizont anzusetzen, und eine (oeffentliche) Wette - kann man ueber unsere jeweiligen websites regeln - einzugehen, sagen wir ueber 100 Euro? Ob mathematisch oder nicht, wir sind beide Oekonomen und sollten bereit sein, unsere Voraussagen in Zahlungsbereitschaftsaequivalenten zu messen; das sollte also passen! Wir muessen uns nur noch auf eine Operationalisierung des Begriffs "Bedeutungslosigkeit" einigen. Mit einem herzlichen Gruss nach Tuebingen Ruediger Bachmann His answer was: Sehr geehrter Herr Bachmann, danke fuer Ihre erfrischende Reaktion auf meinen Leserbrief. Wenn ich auf Ihr verlockendes Angebot nicht eingehe, dann aus folgendem Grund. Wenn ich prognostische Aussagen auf theoretischer Basis treffe, fuege ich immer hinzu: Das Problem ist nicht die Treffsicherheit der Prognose selbst, sondern die Prognose des richtigen Zeitpunkts. So moechte ich es auch dieses Mal halten. Mich interessieren an Ihrem Wettvorschlag andere Fragen: Wird es den Euro in seiner jetzigen Form in absehbarer Zeit ueberhaupt noch geben? Welche Voraussetzungen muessen erfuellt sein, um seine Nachhaltigkeit zu sichern? Was sind 100 Euro oder Dollar in x- Jahren noch wert, wenn Regierungen, wie insbesondere die US-Administration, glauben, ueber Schuldenmachen und Anwerfen der Notenpresse Probleme loesen zu koennen? Warum bleiben da die US-Oekonomen einschliesslich der Nobelpreistraeger fuer Oekonomie stumm? Und wenn ich mir die halbgaren Sprueche von Paul Krugman anschaue, denke ich immer an John Maynard Keynes' Feststellung aus seinem letzten Aufsatz: "It shows how much modernist stuff, gone wrong and turned sour and silly, is circulating in our system." (Fundstelle: The Balance of Payments of the United States, in: The Economic Journal, Vol. 56, 1946, S. 185f.) Ich werde jetzt auf meiner "homepage" (http://www.asm-ev.de/) eine Rubrik "Zukunft der Oekonomie/Methodenstreit" einrichten und werde dort auch ihr Wettangebot, wenn Sie einverstanden sind, und meine Antwort dokumentieren. Mit einem freundlichen Gruss aus dem derzeit sonnigen Tuebingen nach Michigan Ihr Joachim Starbatty Will Renate Ohr zurueck in die Steinzeit? - Handelsblatt online from 03-25-2009: Harald Uhlig publishes Ohr's and Vaubel's open letter against mathematical-empirical economics. Die Krise als Waterloo der Oekonomik (M. Huether) and Am Ende eines Sonderweges (A. Ritschl) - FAZ from 03-16-2009: a defense and a critique of Ordnungspolitik. Reactions: Letters to the editor Von der Wertfreiheit zur Wertlosigkeit - FAZ from 02-27-2009, H. Willgerodt: Professor Willgerodt defames young academic economists as pure carrierists. Reactions: Letters to the editor Der Koelner Emeriti Aufstand - Handelsblatt online from 02-18-2009: Professors Watrin and Willgerodt criticize Cologne's hiring strategy. For full disclosure: I was one of the six that received an offer (Ruf), which I have since turned down. The original pamphlet by Watrin and Willgerodt Reactions: Die Weltfinanzkrise und die Koelner Makrooekonomen - Handelsblatt online from 02-20-2009: Harald Uhlig weighs in. Letter by C. von Weizsaecker - 02-24-2009 Von Weizsaecker stuetzt Koelner VWL-Kurs - Handelsblatt online from 02-25-2009 Wirtschaftspolitik an den Rand gedraengt - FAZ from 03-02-2009: the FAZ sides with the verbal crowd. Vom Sockel gestossen - Rheinischer Merkur Die Verantwortung der Oekonomen - Handelsblatt online from 02-13-2009: Michael Huether, head of the Institut der deutschen Wirtschaft, opines on what he considers the decline of academic economics towards mathematical-empirical stuff. Reactions: Einspruch, Herr Huether - Handelsblatt online from 02-13-2009: Hans Peter Gruener, Mannheim University, reacts. Spinnen die Makrooekonomen? - Handelsblatt online from 02-03-2009: a defense of so-called "mainstream macro" against so-called heterodox approaches. Gefangen in der Formelwelt - FAZ from 01-20-2009: the FAZ loves verbal economics. Wirtschaftswissenschaften - Abkehr von der Ordnungspolitik?