Tuesday, October 16, 2007

Economists should improve data not models

So says Prof. Mankiw (http://gregmankiw.blogspot.com/2007/10/greenspan-on-data-and-models.html). This from his reaction to a review on Alan Greenspan's new book:

"Modern macroeconomists have spent a lot of effort trying to develop better models of the economy for forecasting and policy analysis. Just look at any issue of the Journal of Monetary Economics or the Journal of Money, Credit, and Banking. Alan seems to be saying that our efforts have, to some degree, been misdirected. Better monetary policy, he suggests, is more likely to follow from better data than from better models. Relatively little modern macro has been directed at improving data sources. Perhaps that is a mistake."

Unfortunately, there is little incentive for economists to "improve data". Certainly, not for tenure purposes.

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