Summary of The Trouble With Macroeconomics

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President Harry S. Truman once famously quipped, “Give me a one-handed economist. All my economists say ‘on the one hand…on the other’.” His pithy statement remains true today. Professor Paul Romer adds to the criticism heaped onto the discipline of macroeconomics in this illuminating paper, in which he contends that the field has become a regressive branch of knowledge – more punditry than science. getAbstract recommends this provocative, name-naming, esoteric report to policy officials and experts interested in an insider’s critique of his fellow economists.

About the Author

Paul Romer is a professor at New York University’s Stern School of Business and director of the Marron Institute of Urban Management.



Some macroeconomists question the efficacy of monetary policy, instead favoring modern economic models that “now use incredible identifying assumptions to reach bewildering conclusions.” However, the objective evidence indicates that monetary policy does indeed have an impact. For instance, during Federal Reserve Chairman Paul Volcker’s term in the 1980s, inflation levels and trends changed dramatically as a result of targeted Fed actions.

The assertion that monetary policy is highly irrelevant to economic fundamentals derives from the real business cycle (RBC) model, which incorporates “imaginary shocks...

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