When I told Tyler I was confused in PhD Macro I, he said, “Good, that means you understand.”
Ahhh macro. I think we can all take a lesson from this and recognise the limits of our knowledge – if the specialists that spend their entire lives and focus on hefty amounts of data appreciate their knowledge is limited, I don’t think the rest of us can just magically “intuit” certain knowledge through our “common sense”. This holds to a lesser degree in all of economics – macro is just especially funktastic.
What does this mean for policy? It doesn’t mean there is no role for government – we can still view government as a form of social insurance between us all, helping us deal with an uncertain world. But, it does imply that government micromanagement and fine tuning have to pass a pretty massive burden of proof. A burden that is hard to pass given that our knowledge is both uncertain and massively conditional. I’ve heard this points before a few time (here, here, here) …