Macroeconomics in 1977 vs. Macroeconomics in 2009

A terrific piece by Nick Rowe: Dark Age in Macroeconomics? A History of Taught approach. Prof. Rowe examines his graduate level notes in economics from the University of Western Ontario (the same school I received my BA in economics and currently teach in the business school). He looks at the courses he took from Laidler, Parkin, Howitt and Fried and concludes:

I have a sample of one: my own lecture notes from grad school. I began my MA at UWO in 1977, and continued into the PhD. I took everything in macro/money that was offered. At the time, UWO was arguably the top Canadian department in macro/money (OK, Western grads would argue for; Queens grads would argue against), and would hold up well against anywhere in the world...

I make the following observations:

1. The Phelps volume was clearly very influential in the late 1970's. This supports Paul Krugman's memory, and my own.

2. The beginnings of the split between New Classical and New Keynesian approaches was already apparent in the late 1970's. I saw several references to the distinction between Fisher and Phelps on the interpretation of the Phillips Curve. (Fisherian market-clearing with misperceptions vs Phelpsian disequilibrium price adjustment). This too supports Paul Krugman's memory.

3. We received a very broad education in short run macroeconomics and monetary theory. Probably much broader than today's students. That tends to support the Dark Age hypothesis.

4. But there is one glaring omission from our education: we did lots of short run business cycle theory but almost no long run growth theory. We briefly covered the Solow growth model, but only as a prelude to money and growth. There was no interest in growth theory per se! If growth theory is important, and it is, that directly contradicts the Dark Age hypothesis. We barely touched on half of macro! The late 1970's were the Dark Age, for growth theory.

One thing in particular has been bothering me about this whole debate - nobody seems to be addressing why macroeconomics (or a subset of) went 'off the rails' (if you buy the hypothesis that it did) sometime in the late 1970s. If you agree that macro entered a 'dark age', then why did a group of researchers follow a research program that was so utterly useless? The Krugman explanation seems to be that all the freshwater guys were ignorant jerks; I do not find that particularly compelling. If we can understand the institutional factors that are at play, perhaps we can change our institutions to lead to better macroeconomic research. My own belief is macro went 'off the rails' much earlier than the mid 1970's, when academics went from largely publishing in books to publishing in peer-reviewed journal articles. We have a system that rewards complex, but irrelevant mathematical models over realistic assumptions and finding the truth. So why would we expect macroeconomic models to be useful in the real world?

Dr. Rowe's post also reminded me how much I miss Joel Fried.