Solow on economics as a science

Robert Solow prepared a statement “Building a Science of Economics for the Real World” for the House Committee on Science and Technology, Subcommittee on Investigations and Oversight. It was presented on July 20, 2010. It is worth reading as a wonderful sample of an absolutely helpless and hopeless piece. The dry residual for science (I mean here the hard sciences) is zero. The outcome for the author criticizing a competitive “school of thought” and real economy model, a DSGE model in this case, is counterproductive.

As a matter of fact, I admire the overall discussion between mainstream economists and terminology they use to demolish rivals. Specifically, Prof. Solow used a 100% scientific term “smell” when characterized the problems and contradictions in the DSGE. It seems like a dog is sniffing around for a specific smell of other dogs …

Scientifically, if a model can not predict observations and does not pass rigorous statistical tests - it is wrong. No more, no less. In this blog, our articles, papers, and monographs, we develop, present and test only models, which do predict observations of macroeconomic variables in developed countries: real GDP, price inflation, unemployment, labor force level, S&P 500 stock market index.

We do not say that our models are 100% correct, despite they are statistically right. The logic says that correlation does not mean causality. But the absence of correlation, as all mainstream models demonstrate, 100% guarantees the absence of causality and true models. The DSGE is not excluded.

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