Tuesday, February 21, 2012
Noah Smith has an excellent post on the political biases baked into conventional macroeconomic models, especially DSGE. His view that the principal source of bias comes from the assumptions needed to make the models tractable accords with my take on microeconomics, particularly the ideological significance of convenient second-order conditions. I think we agree that these assumptions are not made out of explicit political motivation, but simply because they make life easier. Still, the bottom line is the same: bias is bias. Perhaps where the politics comes in is in the inclination not to worry about it.