Via Mark Thoma, a post over at Twenty-Cent Paradigms has saved me some time, rounding up some discussion at The Economist and FT about the state of macroeconomics. Go read it. I want to bump up one specific point that was discussed there, which Mark Thoma made in his contribution at The Economist. Thoma wrote,
But we have to ask the right questions before we can build the right models. The problem wasn’t the tools that macroeconomists use, it was the questions that we asked.
I assume by tools he is referring to empirical regression analysis, etc., as opposed to assumptions like utility maximization (or representative agents), in which case this point is right on. Speaking of representative agents, Thoma also posted a speech given by Robert Solow in 2003 (who I am coming to realize is much more prescient than Robert Lucas). Solow said, in part,
What is needed for a better macroeconomics? My crude caricature of the Ramsey-based model suggests some of the gross implausibilities that need to be eliminated. The clearest candidate is the representative agent. Heterogeneity is the essence of a modern economy.
Indeed. The problem, of course, is that makes it much harder to model.