The Methodology of Modern Macroeconomics and the Descriptive Approach to Discounting

Arbeitspapier

Critics of modern macroeconomics often raise concerns about unwarranted welfare conclusions and data mining. This paper illustrates these concerns with a thought experiment, based on the debate in environmental economics about the appropriate discount rate in climate change analyses: I set up an economy where a social evaluator wants to determine the optimal time path of emission levels, and seeks advice for this from an old-style neo-classical macroeconomist and a new neo-classical (modern) macroeconomist; I then describe how both economists analyze the economy, their policy advice, and their mistakes. I then use the insights from this thought experiment to point out some pitfalls of the modern macroeconomic methodology.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 13-200/VI

Classification and Topics

• Classification: Wirtschaft ; History of Economic Thought: Macroeconomics ; Economic Methodology ; General Aggregative Models: Neoclassical ; Environment and Growth ; Pollution Control Adoption and Costs; Distributional Effects; Employment Effects ; Climate; Natural Disasters and Their Management; Global Warming
• Subject: modern macroeconomics ; methodology ; descriptive ; prescriptive ; discount rate

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Vermeylen, Koen
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/89248
• Last update: 10.03.2025, 11:44 AM CET