Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Wednesday, September 22, 2010

Hydrodynamic Macroeconomics

In a recent series of posts, Karl Smith allows himself the conceit of comparing macroeconomics to hydrodynamics.  I am deeply skeptical of any attempt to model economics along the lines of physics - that's where the dismal science started around the time of Adam Smith, and got off on seriously the wrong foot, IMHO.

But Karl goes on to look at direct empirical comparisons, and not be driven or constrained by his analogy. His correlation of job growth to change in the rate of inflation is quite compelling.

The text and other accompanying graphs are fascinating.  Check it out.

For me, the missing piece is how to get from monetary policy to Karl's inflation target of 4%.   He's promised to fill in the blanks, some time soon.

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