The New Interventionist Economics

by Roger Koppl

Two recent posts on this blog (here and here) raise the issue of animal spirits and where macro is headed.  I’ve recently completed a draft manuscript saying we are headed for “BRACE” economics.  I say the “New Interventionist Economics” will be characterized by five features:

Bubbles

Radical Uncertainty

Animal Spirits

Complexity Dynamics

Extra-Market Control

(giving the BRACE acronym).

My paper includes a look at two contributions to the recent conference asking “What’s Wrong with Modern Macroeconomics?” namely, those of Kirman and De Grauwe.  The conference has been discussed at Mark Thoma’s Economist’sView.  I think the Kirman and De Grauwe papers represent the likely direction of macroeconomics.  I provide some evidence in my paper that central bankers are in the market for this sort of thing.  I quote Janet Yellen pushing for a scary form of discretion, by the way.  (See page p. 25 of my paper or page 13 of her talk.)

I think there is room to criticize both the analytics and the policy conclusions of the new interventionists.  On the analytical level, I think we should push comparative institutional analysis harder than the new interventionists seem to be doing.  On the policy level, think we have to push hard on epistemics.  On that score, I think K. Vela Velupillai’s “computable economics” could be very helpful, especially this result.  I give a user-friendly reviews of computable economics here and here.  Getting the history of the Great Recession right is also important.  In this regard I would like to see more attention paid to Peart & Levy’s point that the housing bubble was, in part at least, expert induced.