SOOTHSAYING OR SCIENCE - FALSIFICATION, UNCERTAINTY AND SOCIAL-CHANGEIN MACROECONOMIC MODELING

Macroeconomic models play an increasingly important role in economic p olicy-making and evaluation. They cost large sums of money, yet appear unable to forecast the ups and downs of economic activity with any ac curacy. Drawing on material gathered during interviews with leading UK economists, I draw a distinction between 'strong' and 'weak' claims i n econometrics, and discuss how these relate to the falsification of e conomic models and theories. Empirical work in econometrics is shown t o be chronically ambiguous, and it is argued that the stochastic prope rties of macroeconomic models swamp any trends identified. Furthermore , although macroeconomic models can support economic forecasts, they c annot produce them unaided - forecasters must use their skill and judg ement to anticipate future events and render forecasts plausible. The conclusion drawn is that although their pedagogic value is undisputed, the case for using macroeconomic models to guide, frame and evaluate economic policy has not yet been made.