American Economic Association The Macroeconomist as Scientist and Engineer Author s N Gregory Mankiw Source The Journal of Economic Perspectives Vol 20 No 4 Oct 2006 pp 29 46 Published by American Economic Association Stable URL http www jstor org stable 30033682 Accessed 15 01 2009 16 44 Your use of the JSTOR archive indicates your acceptance of JSTOR s Terms and Conditions of Use available at http www jstor org page info about policies terms jsp JSTOR s Terms and Conditions of Use provides in part that unless you have obtained prior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content in the JSTOR archive only for your personal non commercial use Please contact the publisher regarding any further use of this work Publisher contact information may be obtained at http www jstor org action showPublisher publisherCode aea Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the 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colleagues in the physics department across campus may find it amusing that we view them as close cousins but we are quick to remind anyone who will listen that economists formulate theories with mathematical precision collect huge data sets on individual and aggregate behavior and exploit the most sophisticated statistical techniques to reach empirical judgments that are free of bias and ideology or so we like to think Having recently spent two years in Washington as an economic adviser at a time when the U S economy was struggling to pull out of a recession I am reminded that the subfield of macroeconomics was born not as a science but more as a type of engineering God put macroeconomists on earth not to propose and test elegant theories but to solve practical problems The problems He gave us moreover were not modest in dimension The problem that gave birth to our field the Great Depression of the 1930s was an economic downturn of unprecedented scale including incomes so depressed and unemployment so widespread that it is no exaggeration to say that the viability of the capitalist system was called into question This essay offers a brief history of macroeconomics together with an evaluation of what we have learned My premise is that the field has evolved through the efforts of two types of macroeconomists those who understand the field as a type of engineering and those who would like it to be more of a science Engineers are first and foremost problem solvers By contrast the goal of scientists is to underSN GregoryMankiw is the RobertM BerenProfessorof Economics Harvard University Cambridge Massachusetts 30 Journal of EconomicPerspectives stand how the world works The research emphasis of macroeconomists has varied over time between these two motives While the early macroeconomists were engineers trying to solve practical problems the macroeconomists of the past several decades have been more interested in developing analytic tools and establishing theoretical principles These tools and principles however have been slow to find their way into applications As the field of macroeconomics has evolved one recurrent theme is the interaction sometimes productive and sometimes notbetween the scientists and the engineers The substantial disconnect between the science and engineering of macroeconomics should be a humbling fact for all of us working in the field To avoid any confusion I should say at the outset that the story I tell is not one of good guys and bad guys Neither scientists nor engineers have a claim to greater virtue The story is also not one of deep thinkers and simple minded plumbers Science professors are typically no better at solving engineering problems than engineering professors are at solving scientific problems In both fields cuttingedge problems are hard problems as well as intellectually challenging ones Just as the world needs both scientists and engineers it needs macroeconomists of both mindsets But I believe that the discipline would advance more smoothly and fruitfully if macroeconomists always kept in mind that their field has a dual role The Keynesian Revolution The word macroeconomics first appears in the scholarly literature in the 1940s To be sure the topics of macroeconomics inflation unemployment economic growth the business cycle and monetary and fiscal policy have long intrigued economists In the eighteenth century for example David Hume 1752 wrote about the short run and long run effects of monetary injections at many points his analysis looks remarkably similar to what one might see from a modern monetary economist or central banker In 1927 Arthur Pigou published a book titled IndustrialFluctuationsthat attempted to explain the business cycle Nonetheless the field of macroeconomics as a distinct and active area of inquiry arose in the shadow of the Great Depression There is nothing like a crisis to focus the mind The Great Depression had a profound impact on those who lived through it In 1933 the U S unemployment rate reached 25 percent and real GDP was 31 percent below its 1929 level All subsequent fluctuations in the U S economy have been ripples on a calm sea compared to this tsunami Autobiographical essays by prominent economists of this era such as Lawrence Klein Franco Modigliani Paul Samuelson Robert Solow and James Tobin confirm that the Depression was a key motivating event in their careers Breit and Hirsch 2004 The GeneralTheoryofJohn Maynard Keynes was the focal point in