Blogging on my side interest in macro and growth theory has been crowded out by my day job, which has me in Colombia this week. This translation of a Q&A explains why I’m here. Your academic contributions to the economy are recognized globally, but when did you start your interest in working on urbanization issues? I started thinking about urbanization in the mid-1990s when I shifted from thinking about growth for countries at the technological frontier and toward thinking about the process of catch-up growth in the developing world.

Below, my reactions to comments on my post Solow’s Choice: 1. Brad DeLong notes that work on the large simulation models continued outside of academia, so when I wrote that work on these models collapsed, I should have been sure to qualify this by saying that academic work on these models collapsed. I bet that even the private forecasters have moved away from large structural models along the lines of the 1978 Fair model, with its 97 equations, but no matter.

Several economists, including Brad DeLong and Paul Krugman, have commented on how macroeconomics developed in the late 1970s. There are many points on which we agree, and a few that merit some additional attention. Lucas and Sargent were right in 1978 when they said that there was something wrong, fatally wrong, with large macro simulation models. Academic work on these models collapsed. Lucas and Sargent were wrong when they claimed that the new type of model that they offered as an alternative already offered advice to policy makers.

Warning: What follows is inside baseball, and oldster inside baseball at that. Unless you received a Ph.D. degree before 1990, you may find it hard to keep track of the players. Before delving into the details here, it might help to read a previous post that gives an overview. My sense of what went wrong in macro is based partly on what I observed as a Ph.D. student in the economics department at MIT during the 1977-78 and 1978-79 academic years.

Paul Krugman and I agree that something went very wrong in macroeconomics. This post (and a separate one that gives more of the historical details) continues a discussion (see here and here) about how things went so far off track and what we should learn from this episode. My claim is that the problems cannot be attributed solely to obstinacy on the part of Lucas and his supporters. They were making two points: (i) The existing multi-equation Keynesian models were fatally flawed.