This humor piece came into my possession when I was a grad student at Cornell. I recently found it while going through old stuff. Enjoy!

Why are macro guys so grumpy?

by
George R. Neumann
September 10, 1995

It is undoubtedly the case that macroeconomists are grumpier than other economists. In the 60 years of macro's existence this fact has been repeatedly rediscovered and no evidence to the contrary has been found. Ingenious explanations, such as the intertemporal theory of grumpiness and endogenous grumpiness theory, have been used to explain the persistence of macro grumpiness, but with little success.

Essentially the argument comes down to a question of nature versus nurture: Are macro guys born grumpy, or is there something in the environment that makes them grumpy? Hernstein and Murray, in their celebrated popular book —The IS-LM Curve— argue for the hereditary view, but this is not widely accepted among empirical economists as there are no studies of whether the children of macroeconomists are unusually grumpy, or whether they are more likely to be macroeconomists.

The alternative view —that grumpy macroeconomists are made, not born— is intellectually intriguing but as yet suffers from a fatal flaw: No one has found the factor —the g-factor we may call it— that makes macro guys cheerless. Is it something in the water? In the air? Whatever the g-factor is, it is unlikely to be part of the physical environment. After all, in most universities macro guys work alongside micro guys, who plainly do not suffer from a lack of cheer. It seems more likely to us that the source of grumpiness must lie therefore in the intellectual environment in which macro guys labor.

To pursue this point, and in the spirit of early scientists, we read a lot of macro in the hope that we could detect a growing sense of grumpiness within ourself. We started with Keynes, jumped to Patinkin and perused Clower. A little stomach discomfort occurred but no grumpiness. Growth theory, from Solow to Swan to Uzawa, followed and our spirits still did not lag. Giant macro models filled with incredible restrictions were tough on the senses, but they did not fill us with doom or gloom. Tighter, neater models of Lucas and Sargent followed, as did endogenous growth, but still we could not find any grumpiness in our hearts. Finally, while checking some calculations of Prescott, it struck us. Staring at the policymaker's objective function, we at last came to understand why macro guys are grumpy.

It is well known in macro that either technology or preferences, and perhaps both, are described by a Cobb-Douglas function with constant returns to scale. Using tastes as the example, for a two good world, the utility function of the representative agent is:

[ U(X_1, X_2) = X_1^a X_2^(1-a) ]

The Marshallian demand curve for, say, X1, is:

[ X_1 = a Y / P ]

here P is the price of good 1 in good 2 units and Y is money income.

Central planners and competitive markets seek to maximize consumer surplus subject to a resource constraint. In this case, the consumer surplus function is given by:

[ CS = a Y \int_{P_0}^{P_1} \frac{1}{P}dP - P_0(X_0-X_1)
[ CS = aY{[ln P_1 - ln P_0] - (P_1 - P_0)/P_1}

It is a celebrated fact among macroeconomists, starting at least from Cagan's celebrated studies of German and Chinese hyper-inflations, that the percentage change in prices is equal to the difference in the logarithms of prices. This convention ensures, to macroeconomists, that there is never any consumer surplus in the world, which accounts, we claim, for their grumpiness.

While our explanation for the source of macro grumpiness is plainly on the mark, much more work is needed in this newest sub-field of macroeconomics. Clearly, a variety of "neutrality" results can be derived from our understanding of macro conventions. Similarly, although we have not emphasized it here, there are subtle differences between the consumer surplus function with Cobb-Douglas tastes and the producer surplus function with Cobb-Douglas technology. It will be interesting to see if these differences are reflected in differential grumpiness among macro guys. To exploit these possibilities requires more, and better, data about grumpiness among economists, a measurement task we leave for the future.

Footnotes

  1. Intertemporal grumpiness arguments emphasize that macroeconomists are just like you and me, except for accidents of timing. Extensive research on duration models and panel methods has revealed however that macroeconomists are grumpy when they die, when they are promoted, when they are hired, and even at the time they complete their Ph.D. It is currently unknown (although, see Heckman [1998]) whether standard selection effects can explain choice of field.
  2. Endogenous grumpiness arguments emphasize the special role of macro technology in promoting grumpiness (Roemer and Lucas [1999]). Absent strong economies of scale promoting grumpiness, macroeconomists ould converge to the level of grumpiness prevailing among microeconomists within a few semesters.
  3. See Barro and Barro [1997] for a review of the limited evidence on macro begatting models.
  4. The only experimental evidence available suggests that it is not micro guys infecting macro guys with grumpiness. When the University of Rochester changed to an all-macro Economics Department, the incidence of grumpiness was unchanged. No plans have been announced to establish an all micro department, although this would clearly add to the base of knowledge.
  5. But see Neumann [2001]

Copyright © 1995 George R. Neumann. Reproduced with permission. All other rights reserved by the author.