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Economics and Reality

Harald Uhlig

University of Chicago - Department of Economics

July 12, 2011

Journal of Macroeconomics, Forthcoming
MFI Working Paper No. 2011-006

This paper is a non-technical and somewhat philosophical essay, that seeks to investigate the relationship between economics and reality. More precisely, it asks how reality in the form of empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play? What is the current state of affairs, what are the successes and failures, what are the challenges? I shall tackle these questions moving from general to specific. For the general perspective, I examine the following four points of view. First, economics is a science. Second, economics is an art. Third, economics is a competition. Forth, economics is politics. I then examine four specific cases for illustration and debate. First, is there a Phillips curve? Second, are prices sticky? Third, does contractionary monetary policy lead to a contraction in output? Forth, what causes business cycles? The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.

Number of Pages in PDF File: 31

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Date posted: August 28, 2011  

Suggested Citation

Uhlig, Harald, Economics and Reality (July 12, 2011). Journal of Macroeconomics, Forthcoming; MFI Working Paper No. 2011-006. Available at SSRN: http://ssrn.com/abstract=1917679

Contact Information

Harald Uhlig (Contact Author)
University of Chicago - Department of Economics ( email )
1101 East 58th Street
Chicago, IL 60637
United States
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