||The popular image of the scientific revolution usually pits young revolutionaries
against old conservatives. Freeman Dyson (2004, p. 16) observes that, in particle
physics in the mid-20th century, something had to change. But in the revolution of
quantum electrodynamics, Einstein, Dirac, Heisenberg, Born, and Schödinger were old
revolutionaries, while the winners, Feynman, Schwinger, and Tomonaga, were young conservatives.
Post-Walrasian economics is not a doctrine, but a slogan announcing that something
has to change. Most of the self-conscious efforts to forge a post-Walrasian economics
are due to old radicals. Here I want to explore the space of the young conservative:
the future is past, particularly in the methodology of Alfred Marshall’s methodological
essay, “The Present Position of Economics” (1885). The radical approach identifies
the problem as Walrasian theory and seeks to replace it with something better and
altogether different. The conservative approach says that theory is not the problem.
The problem is rather to establish an empirical discipline that connects theory to
the world. Marshall’s methodology places the relationship between theory and empirical
tools on center stage. In North America, if not in Europe, the dominant tools of macroeconometrics
are the vector autoregression (VAR) and calibration techniques. These techniques reached
their current status as the result of two nearly simultaneous reactions to the Cowles-Commission
program, which dominated macroeconometrics during the two decades 1950-1970. These
are the famous Lucas critique, and the practically influential, if less storied, Sims
critique. I will briefly consider the nature of these two critiques and, then, the
competing Walrasian and Marshallian visions of the role of theory in econometrics.
I conclude with some suggestions about how to do Marshallian macroeconometrics.