Economists are increasingly behaving a bit more like real scientists — such as biologists — in leaving their computer screens and going into the world doing field research. It’s a giant throwback to the research tradition of non-economist Ronald Coase, Nobel Prize winner.
James Hamilton has a fascinating piece up comparing a dominant formal math technique in macroeconomics with the facts of the actual world — facts about the pricing of peanut butter in the grocery store. Quotable:
A dominant class of economic theories is built on the assumption that prices respond only sluggishly to new economic conditions. It’s an interesting challenge to try to reconcile that premise with what we see in the data.