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assessment

of its prospects.

In the present paper, unfortunately, they do nothing of the sort. Ball and Mankiw introduce their paper in a style that simply denies that there are any hard, unsolved problems of macroeconomic theory. The IS/LM framework is perfectly adequate, as has been recognized by traditionalists since Hume. heretics, who The few economists who do not agree with this are merely They are silly people,

think that money is neutral.

almost pathological.

For Ball and Mankiw, it is not more knowledge that we need, but better ideological choices: A macroeconomist faces no greater decision than whether to be a traditionalist or a heretic. This paper explains why we choose to be traditionalists. Why do I have to read this? The paper contributes nothing - not even an opinion or belief - on any of the substantive questions of macroeconomics. What fraction of U.S. real output variability in the postwar period can be attributed to monetary instability? Cochranes paper addresses this question, as have Barro, Kydland and Prescott, Shapiro and Watson, and many other recent writers. It appears to be a very difficult one. Ball and Mankiw have nothing to offer on this question, beyond saying, trivially, that they believe the answer is a positive number and suggesting, falsely and dishonestly, that others have asserted it is zero. Yet monetary non-neutrality is the intended subject of their paper ! One can speculate about the purposes for which this paper was written-a box in the Economist?-but obviously it is not an attempt to engage other macroeconomic researchers in debate over research strategies. The cost of the ideological approach adopted by Ball and Mankiw is that one loses contact with the progressive, cumulative science aspect of macroeconomics. In order to recognize the existence and possibility of research progress, one needs to recognize deficiencies in traditional views, to acknowledge the existence of unresolved questions on which intelligent people can this acknowledgement is too risky. differ. For the ideological traditionalist, Better to deny the possibility of real progress, to treat new ideas as useful only in refuting new heresies, in getting us back where we were before the heretics threatened to spoil everything. There is a tradition that must be defended against heresy, but within that tradition there is no development, only unchanging truth. Research that was in fact directed at difficult questions becomes trivialized, no matter which side it is on. Hume, Friedman, Schwartz, Keynes, Hicks, Modigliani become merely interchangeable spokesmen for a fixed set of ideas. Why does it matter that Friedman and Schwartz carefully assembled and examined data on U.S. monetary history, if the real effects of changes in money were evident to Hume, who had no systematic data on either money or production? Why does it matter that Hicks and Modigliani showed us 154

how to distill intelligible General

Theory?

equation

systems out of the confusions progress,

of Keyness

Why does it matter that theorists

today are developing new it must be because

models of pricing ? If work like this represents

it contributes to resolving some difficulty or deficiency with earlier theory or evidence or both. If the IS/LM model as passed on to us by Hicks and Modigliani is all we need, why do I need to work through hard papers by Caballero or Caplin and Leahy ? If these papers offer nothing more than debating points against heretics, I would rather do something else! Given their viewpoint, it is no wonder that Ball and Mankiw cannot deal with Kydland and Prescotts demonstration that it is possible to construct operational macroeconomic models by applying Arrow-Debreu-McKenzie level general equilibrium theory. For most macroeconomists, this remarkable accomplishment is seen as a complex mixture of a threat to long-held views and a promise of a new and powerful apparatus that may help us to make some progress on hard questions. (This mixture is exactly what I was trying to deal with, with obvious difficulty, in my 1985 Jahnsson Lectures.) For Ball and Mankiw there can be no real progress, so real business cycle theory is only a threat: It must be defeated, and then we can go back to where we were a generation ago (to quote from the draft given at the conference). The possibility of a synthesis of old and new ideas that might leave us better off cannot be envisioned. A few years ago, one of my sons used the Samuelson-Nordhaus textbook in a college economics course. When I visited him, I looked at the endpaper of the book to see if actual GNP was getting any closer to potential GNP than it had been in the edition I had used many years earlier. But the old chart was gone, and in its place was a kind of genealogy of economic thought, with boxes for Smith and Ricardo at the top, and a complicated picture of boxes connected by lines, descending down to the present day. At the bottom were three boxes: On the left, a box labelled Communist China; in the center, and slightly larger than the rest, a box labelled Mainstream Keynesianism. The last box, on the right, was labelled Chicago monetarism. Times change. Accordingly, to Ball and Mankiw, Chicago monetarism (or at least Milton Friedman) now shares the middle, mainstream box, and there is a new group for the right-hand box, to be paired with the Chinese communists. But the tradition of argument by innuendo, of caricaturing ones unnamed opponents, of using them as foils to dramatize ones own position, continues on. I am sorry to see it perpetuated by Ball and Mankiw, and I hope they will put it behind them and return to the research contributions we know they are capable of making.

155