Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89248
Authors: 
Vermeylen, Koen
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-200/VI
Abstract: 
Critics of modern macroeconomics often raise concerns about unwarranted welfare conclusions and data mining. This paper illustrates these concerns with a thought experiment, based on the debate in environmental economics about the appropriate discount rate in climate change analyses: I set up an economy where a social evaluator wants to determine the optimal time path of emission levels, and seeks advice for this from an old-style neo-classical macroeconomist and a new neo-classical (modern) macroeconomist; I then describe how both economists analyze the economy, their policy advice, and their mistakes. I then use the insights from this thought experiment to point out some pitfalls of the modern macroeconomic methodology.
Subjects: 
modern macroeconomics
methodology
descriptive
prescriptive
discount rate
JEL: 
B22
B41
E13
O44
Q52
Q54
Document Type: 
Working Paper

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