The use of macroeconomic models in economic policy making : The Norwegian experience
Abstract Planning in Norway has a long tradition. The use of models is an integral part of short- and medium-term economic policy administration. A large-scale input-output model, MODIS IV, is used as the short- and medium-term forecasting and planning model. The use of the model secures consistency when analysing the economy. The model is very open in the sense that important interrelations in the economy are left out. The model contains only ‘good’ relations in the Leif Johansen sense of the word. Smaller aggregate and more closed versions of the model are used for analysing policy alternatives. These models contain both ‘good’ and ‘bad’ relations. The use of macroeconomic models is an important aid for proposals regarding economic policy in the Ministry of Finance. Because the whole ministry (with expert help from other ministries) takes an active part in the model work, MODIS IV serves as the centralizing mechanism. It helps to make economists from many ministries go around the same centre, speak the same ‘language’ and organize all relevant information and judgements in a consistent way. Experience shows that ‘numbers discipline’ and force the different arguments on to a higher level of precision.
Macroeconomic Modelling for Economic Policy
Publisher Summary This chapter discusses macroeconomic modeling for economic policy. The essential advantage of the use of any interpretable formalized and quantified system is that the assumptions underlying the conclusions are specified. This enables their control, and also variation and communication. Both for the attribution of responsibilities and for the promotion of learning-by-doing in economic policy making, this renders the application of models far superior to non-formalized and non-quantified alternatives. The Dutch experience suggests that macroeconomic modeling can be important for economic policy in different ways: by providing a quantitative framework for projections, by providing an explicit, controllable and in several respects consistent framework for the discussion of macroeconomic policy issues for the past as well as for the future, and by providing a constant confrontation between macroeconomic thinking and the facts. All of these functions of macroeconomic modeling contribute to a collective learning process. They have a number of intrinsic limitations for which a cure is hardly conceivable. Therefore, macro econometric models should be supplemented with other formal devices in the preparation of economic policy.
Time and Heritage
As a historian studying what can be considered a form of intellectual history, I have slowly come to adopt Michel de Certeau’s observation made at the end of the 1980s that ‘objectifying the past, for the last three centuries, has undoubtedly left unconsidered time within a discipline that has continued to use it as a taxonomic instrument’. To a certain degree, time has become commonplace for the historian who has preserved or instrumentalized it. It is not considered because it is inconceivable, but because we do not think of it or, more simply, we do not think about it. As a historian attempting to pay attention to the time I’m living in, I have thus, like many others, noticed the swift development of the category of the present until it has become obvious that the present is omnipresent. This is what I refer to here as ‘presentism’.