My editor suggested that I might want to write about an article in New Scientist, After the crash, can biologists fix economics?, so I did:
Macroeconomics: The Roads Not Yet Taken: Anyone who is even vaguely familiar with economics knows that modern macroeconomic models did not fare well before and during the Great Recession. For example, when the recession hit many of us reached into the policy response toolkit provided by modern macro models and came up mostly empty.
The problem was that modern models were built to explain periods of mild economic fluctuations, a period known as the Great Moderation, and while the models provided very good policy advice in that setting they had little to offer in response to major economic downturns. That changed to some extent as the recession dragged on and modern models were quickly amended to incorporate important missing elements, but even then the policy advice was far from satisfactory and mostly echoed what we already knew from the “old-fashioned” Keynesian model. (The Keynesian model was built to answer the important policy questions that come with major economic downturns, so it is not surprising that amended modern models reached many of the same conclusions.)
How can we fix modern models? ...