More Macroeconomic Battles: Kling vs. Mihalache

Arnold Kling brings out the fighting words when he calls (some) macroeconomics junk science. Kling raises five major points:

1. Financial markets and investment depend on subjective perceptions of risks and opportunities.


2. Labor markets adjust slowly to sudden shifts in demand.


3. "Fiscal policy" is an unfortunate excuse for vote-buying.


4. The central bank matters more as a lender of last resort than as a monetary authority.


5. Remember that much of macroeconomics is anti-economics.

I did not wholly disagree with all the points being made, which says at least something positive since I am not known for agreeing with Arnold Kling. By GMU standards my standard political views would be considered somewhere in Hugo Chávez territory. Admittedly I have not read the Jordi Gali book that Kling references, but I do not see where Kling is coming from with these five points.

Regarding points 1 and 2: Do they invalidate anything in modern macroeconomics? I find both points rather plausible.

As far as point 3 goes, I suspect a lot of people (including some economists) would agree with this view, so I don't think it is particularly controversial.

But points 4 and 5? I cannot make heads or tails of them. I do not know of any evidence to back up these assertions and Kling has provided us with none. I hope there is something more behind these points than there was for "Dogs cause more pollution than SUVs".

I found the post confusing but fairly benign. Macro wizard and facebook friend Gabriel Mihalache, on the other hand, had a much stronger reaction, though based more on the tone of Kling's argument than the substance. In a post amusingly titled Ironically, Hand Waving = Junk Science he writes:

OK, this is the last straw: Junk Macroeconomic Science by Arnold Kling....

...I saw Gali’s monograph when it was a free-to-download PDF on his site and, assuming that it didn’t change a lot, I honestly find it uninspiring and dull. That being said, Prof. Kling’s post is several degrees of wrong worse. (I don’t necessarily disagree or agree with any of his claims—or I won’t dispute them here—just with his rhetoric.)...

It’s obvious that you can have valid and productive criticism of both old macro and new macro and that’s one thing. This “all graduate macro is crap, I shall now utter my superior views” stuff is another thing...

I hope other economics blogs pick up on Mihalache's criticism, for entertainment value if nothing else.