Noahpinion has an interesting take on the Freshwater – Saltwater divide in macroeconomics. Interestingly, according to a study of citations the divide is evident in macroeconomics, but not finance. Several possible reasons for the divide are examined.
One possible reason is finance’s information-rich environment.
Financial data is high-frequency and very rich, has many clear natural experiments, and is supplemented by things like surveys and even experiments. Thus, it makes sense that in finance, data could win arguments, while in other fields it’s not so easy to tell who’s right.
This aligns with my own snark about Druckenmiller’s background:
Because, um, you know, being a wizard trader and market strategist in a zero sum high-information game prepares you well to understand policy and long-term macroeconomic dynamics.
Noah updates his post with a reader’s insight:
…there are plenty of advisory jobs in governments and in central banks that macro people compete for. If you can convince people that your ideas are the best, then your tribe gets a bigger flow of resources. And convincing the people who hand out the money may not require good science, only a big mouth.
That got me wondering if our two party political system has something to do with it. The U.S. has two main parties with very different visions. They advocate very different policies. They are major “customers” of macroeconomic thought and they would naturally look to cultivate a school of thought that aligns with their political philosophy.
If your political philosophy is centered on the usefulness and fairness of markets, you want folks who talk about efficient markets. If your political philosophy is based on active government economic coordination and redistribution you want a macroeconomics that recognizes widespread market failure and unfair distribution of rewards.