Economist’s View: Can Econometricians Tell Us which Macroeconomic Model is Best?
by Gilbert Keith
This post by Dr. Thoma raises good questions about what model (or set of models?) would best describe the evolution of the current economic crisis and the policies that were set up to mitigate it.
In Econ 101, we’re pretty much introduced to this fact that some economic models work well in one environment, while others work in a different environment. I suppose that having all the possible data of the world would enable us to make better models. However, it still seems that we humans might come up with some newer idea which might make a given model useless. We may have to come up with some dynamic model which accounts for what’s going on in everyone’s head to come up with a good description of the economy!