d. bank

Scandals have proliferated at Deutsche Bank. Since 2008, it has paid more than nine billion dollars in fines and settlements for such improprieties as conspiring to manipulate the price of gold and silver, defrauding mortgage companies, and violating U.S. sanctions by trading in Iran, Syria, Libya, Myanmar, and Sudan. Last year, Deutsche Bank was ordered to pay regulators in the U.S. and the U.K. two and a half billion dollars, and to dismiss seven employees, for its role in manipulating the London Interbank Offered Rate, or libor, which is the interest rate banks charge one another.

The U.S. Justice Department wants to fine Deutsche Bank fourteen billion dollars for its role in underwriting and issuing risky residential-mortgage-backed securities (or R.M.B.S.) from 2005 to 2007.

---Ed Caesar, The New Yorker.

Apart from the world of finance, think about: the arms trade, oil, the big pharmaceutical companies, illicit trades (drugs, women), the lobbying of governments, the manipulation of data/evidence (tobacco), the sugar industry, the power of the media to influence the markets, all the money ploughed into advertising to convince us that we really do need all that crap after all, the concentration of economic power in the multinationals,..now, what was that story about how markets work again...I've got some wheat, you've got some wine, la de da, la de da. 

Take out power, culture, time, money and uncertainty and you're left with Edgeworth. Brilliant! A natural propensity to barter, said the man, without a jot of supporting evidence. 

First there was Krugman, then there was Buiter but this, my dear, was something special. Romer, one of the true "insiders," turning on his own in a devastating critique of macroeconomics. For thirty years the subject has been going backwards. It's not even been concerned with, you know, that bizarre little fellow, "the Truth" or with science; instead, it's been about creating artificial models. Realistic assumptions? Pfft! Apres moi, le deluge. This, folks, is post-real macro.

Of course, the chump has to wait until he's out of academia before he can muster the courage to take a stab at Lucas and the whole rotten edifice. But still...  

~

Update:

"The one reaction that puzzles me goes something like this: “Romer’s critique of RBC models is dated; we’ve known all along that those models make no sense.”

If we know that the RBC model makes no sense, why was it left as the core of the DSGE model? Those phlogiston shocks are still there. Now they are mixed together with a bunch of other made-up shocks."

--Romer.

Blanchard has also got into the act, writing about the limitations of the models. The response here has been to shrug the shoulders or, at best, rely on Friedman's cop out: the "as if" argument. We know the assumptions aren't "true" (or, more accurately, we don't care if they're true or not) since the model(s) give us predictions. That's what science is about: how things work, not why they work.