Economist here.<p>The premise misses the "why". Up until the early 80s, macro was seen like an airplane control system where you could inject things here or there and make things work.<p>Then Bob Lucas came out with his critique for rational expectations, and since most economics (sans early Keynesian and MMT) have grounded decision and policy making in microeconomic foundations. Why? Because people make rational decisions across the distribution. This led to Huggett and Aiyigari models, as well as tweaks on computational/agent-based models to account for microeconomic foundations. It was a necessary evolution.<p>The critique in this article connects disparate things and misses much of the bigger picture.
On one hand, overly theoretical economics might not have the predictive power people want, but models tied too closely to past real world events are kind of like over-fitted models to the stock market: they work until something changes and they don't.<p>Economics is hard, there's a million factors. Why doesn't increasing the minimum wage increase unemployment? Because increasing minimum wage has supply and demand-side effects but also because it doesn't happen in a vacuum, we don't know what happens if you increase minimum wage but keep <i>everything else</i> exactly the same because we've only ever increased minimum wage in the real world, where growth has steadily happened over the years, where there's a ton of other factors. Also because companies won't <i>not</i> hire, they'll just raise prices to compensate if the demand is still there for their products.<p>Every supply/demand curve just puts <i>pressure</i> on prices, which way the price moves and how far depends on many supply/demand curves.
@Bumby, you had a thoughtful question. I'm not sure where you're comment went, so replying at top level:<p>>> Why? Because people make rational decisions across the distribution.<p>> Do you mean that the average consensus converges on a rational decision? From an economists perspective, where does that assumption tend to break down and what are the best mechanisms for mitigating it?<p>To clarify, on average people make microeconomics decisions that move a macroeconomic distributions in a measurable (and sometimes predictable) fashion.<p>Connecting microeconomics foundations to macro models also allows for structural estimation of unobservable parameters, but that's really a tangent.<p>Your question is getting more at behavioral economics/mechanism design (e.g bounded rationality), on which topic I am not deeply studied. The aphorism "the market is rational on average" seems related, perhaps?
I was distracted by this passage:<p>> What this argument misses is that the stakes of bad economics are often far higher than bad physics: being wrong about gravitational waves may cost you tenure, but being wrong about the minimum wage might condemn tens of millions to poverty.<p>Which leads me to believe that the author has a seriously myopic view of Physics and how much it permeates everyday life.