Austrian Facts Bring the Death of ‘Normal Science’ in Macroeconomics
A brief period of Kuhnian “normal science” is now over in macroeconomics — the news comes directly from the top guns in the field (see also here, here, here, and here.) What killed it? A series of empirical and conceptual anomalies — Austrian facts — facts too immense to ignore. Austrian facts like the reality of genuine uncertainty, heterogeneous and non-commensurable expectations, money and credit generated malinvestment bubbles, and post-bubble malinvestment and labor discoordinations. Facts that were looming and poised to crack open and remake the science of macroeconomics into something sturdier, something sounder.
For some, none of this comes as a surprise. If you had been paying attention to research scientists like former BIS chief economist William White you were well aware of what was about to unfold.
Make no mistake, the collapse of “normal science” is taking place on multiple levels. The profession is catching on to the fact of the general bewitchment of the macroeconomics profession by a series of non-explanatory, causally empty math constructs. And the fashion for sterile, non-explanatory math constructs is now being challenged by a whole host of rival conception in finance, macroeconomics, and behavioral economics. What we now have are the necessary conditions for a period of re-assessment, novel thought, hard work — i.e. a period of what Kuhn called “revolutionary science” where genuine scientific advance is possible — where scientific progress can take place beyond the old conceptual cul de sac of the failed macroeconomics of the past. (For more on Kuhn and scientific advance, see my paper “Thomas Kuhn and the Differential Selection of Desiderata for Theory Choice Through the Differential Selection of Community Members Acting Upon Alternative Implicit Criteria for Theory Choice.”)