I don’t understand all the hand-wringing about the lack of consensus among macroeconomists. In my view, there isn’t a consensus and there shouldn’t be.
All kinds of folks are worried about the absence of general agreement within the field of macroeconomics. Mark Thoma, Kevin Drum, Simon Wren-Lewis, John Quiggin, and Noah Smith, among many others, have expressed their concern that there’s no single agreed-upon guide to theory, analysis, and policy among contemporary macroeconomists.
The biggest mistake they make is to assert that the consensus that once existed has fallen apart. Here’s Quiggin:
Clearly there was a consensus as of early 2008. The differences between “saltwater” (former New Keynesian) and “freshwater” (former New Classical/Real Business Cycle) economists had blurred to the point of invisibility. Everyone agreed that the core business of macroeconomic management should be handled by central banks using interest rate adjustments to meet inflation targets. In the background, central banks were assumed to use a Taylor rule to keep both inflation rates and the growth rate of output near their target levels. . .There was no role for active fiscal policy such as stimulus to counter recessions, but it was generally assumed that, with stable policy settings, fiscal policy would have some automatic stabilizing effects (for example, by paying out more in unemployment insurance, and taking less in taxes, during recessions). It was generally agreed that this approach to macroeconomic policy, combined with financial deregulation had produced a ‘Great Moderation’ in the volatility of economic activity, as well as sustainably low and stable inflation. In the academic macro literature, this convergence was represented by Dynamic Stochastic General Equilibrium models, constructed with all the rigor and elegance of a haiku as Olivier Blanchard observed at the time – This broad consensus was destroyed by the Global Financial Crisis and the Great Recession, but it wasn’t replaced by anything resembling a real debate. Rather, different groups have gone off in different directions.
The fact is, there never was such a consensus. Perhaps, yes, among mainstream macroeconomists—among so-called New Classical and New Keynesian economists, for example—but not among macroeconomists as a whole. Because then you have to leave out all the other practicing economists working on macroeconomic issues, from Marxists and Post Keynesians to radicals and feminists. We never entered into that supposed consensus—not before 2008 and not now.
What these commentators fail to understand is that macroeconomics, like every other area of economics, comprises different theories (or, if you prefer, discourses or paradigms)—with different entry points and methods, and thus different conclusions and consequences.
To argue that there either was or should be a consensus is therefore an argument that, among these contending theories, one or a few dominate the discussion in certain universities, textbooks, journals, funding agencies, and policymaking bodies. It’s an argument, in other words, for hegemony not consensus.
There’s no doubt that the hegemony in and of mainstream macroeconomics before 2008 failed miserably. And mainstream macroeconomists are still trying to pick up the pieces.
But we shouldn’t mistake that failed hegemony for a consensus that existed, much less that it should be put back in place again. Because the rest of us never consented to that set of ideas, and we’re certainly not going to start now.