Guest Editor’s Note

Abstract

The COVID-19 pandemic has brought about a shift in the policy discourse and, in many cases, in policy measures, with the reappearance of concepts previously taboo, such as industrial policy, in the legitimate toolkit of “respectable” governments. Economic experts, as well as international organizations, who had for a long-time demonized deficit spending and public debt growth flipped their views suddenly, maintaining that – as long as markets allow it – expansionary fiscal and monetary policies should continue beyond the early signs of economic recovery. But if that about-face was sometimes accompanied by a mea culpa for too quick a return to fiscal consolidation in 2010, these experts never came to question the theoretical framework on which the previous arguments were based. “It’s the ‘facts’ that change, the theory remains correct.” In times of crisis, even economists who normally care for methodological distinctions are tempted to ignore or downplay them to build alliances to support long-sought-for policies. As David Colander (2021, 99) argues in his comments, “strategic considerations” may suggest that this kind of compromising attitude is, in fact, what can lead to progressive/incremental change in the discipline. On the other hand, there are others who may think that it is precisely when contradictions in the dominant narrative emerge more clearly that we should present theories in their “purest form” (Lerner 1943), by highlighting methodological distinctions and their implications for the democratic debate. Failure to do so may produce only a fragile and superficial shift, bound to subside with a change in political winds. Economics would then remain the language of power, rather than be an instrument of knowledge and emancipation. From this latter point of view, Professor Storm’s rebuttal of Dynamic Stochastic General Equilibrium (DSGE) models comes at an appropriate time (Storm 2021a). It provides ten logically impeccable and inescapable reasons why those endemic models simply are not equipped, and irremediably so, to capture and interpret critical features of reality: new, old and future facts included. Even when they allow for ad hoc adjustments that may favor particular policy preferences at specific junctures – something in itself problematic – their fundamental limitations are constraining and detrimental to policy discussion. They should be discarded definitively. And yet, even today, the impact of policy packages defined “historical” and “game-changing” continue to be assessed officially by means of these same old models (DSGE and CGE), as illustrated, with examples, by Jeronim Capaldo (2021, 107–110) in this symposium. As Servaas Storm reminds us, macroeconomics has been in an existential crisis for at least 10 years. Overcoming it requires a radical approach. This does not mean pursuing a paradigmatic “power overturn” in economics, whereby one currently heterodox approach becomes dominant over all others. Truly revolutionary is to establish a more neutral, pluralist setting for economic debate, that is, one where differences in what Storm calls “hard-core theoretical issues (distinct from policy advocacy)” (Storm 2021b, 112) as well as the “values” included in the theoretical frameworks, as Drucilla Barker reminds us (2021, 105), can be dissected and exposed. Then, all