Macroeconomic policy as an epistemic problem

Trantidis, Aris and Boettke, Peter (2023) Macroeconomic policy as an epistemic problem. Journal of Public Finance and Public Choice . ISSN 2515-6918

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Macroeconomic Policy as an Epistemic Problem
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Macroeconomic theories picture the economy as a phenomenon tractable by their analysis and thus manageable by macroeconomic policies guided by this analysis. This approach has withstood recurrent policy failures, competing theories and several changes of policy paradigms, from Keynesianism to monetarism, because the development of economics as a discipline has been entangled with the demand from policymakers to receive clear macroeconomic policy prescriptions from the expert community. The idea that policymakers can steer the economy in a desired direction relies upon the development of theories with prescriptive and predictive claims, which, in turn, rely on a great deal of analytic reductionism. As a result, reductionist theories continue to offer misrepresentations of the macro phenomenon, particularly by overlooking how policy interventions generate diverse and intractable micro-adaptations that develop into undesired, unforeseen and unintended system-level consequences. This trend continues to cause trouble: reductionist macroeconomic theories foster overconfident interventionist policies that contribute to macroeconomic instability.

Keywords:macroeconomic policy, macroeconomic theory, macroeconomics, Hayek, Keynesianism, heterodox economics, expert failure, Economic policy, methodology of economics, macroeconomic crisis
Subjects:L Social studies > L172 Monetarism
L Social studies > L231 Public Administration
L Social studies > L113 Economic Policy
L Social studies > L130 Macroeconomics
L Social studies > L173 Keynesianism
L Social studies > L430 Public Policy
L Social studies > L100 Economics
L Social studies > L150 Political Economics
Divisions:College of Social Science > School of Social & Political Sciences
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ID Code:50576
Deposited On:01 Sep 2022 16:00

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