Paul Romer on theory

In a great post defending economist Lisa Cook’s appointment to the Fed Board of Governors, Nobel-winner and famed theorist Paul Romer gets into the role of theory vs. empirics in social science:

There is a role for the type of theory that John [Cochrane, another theorist to whom he is responding…] and I do. Theorists build tools. Some of these tools turn out to be useful because they fit the facts. Many do not. Little harm comes from positing an imaginative new theory that turns out to be wrong provided that empiricists check it against the facts before someone uses it to make an important decision. John is a glider pilot so he understands the importance of this intellectual division of labor. When a passenger plane runs out of fuel – and yes, this can happen – neither John nor I would rely on a theorist skilled in computational aerodynamics to choose between landing at a nearby airport that has a short runway or a more distant one with a longer runway. We’d both want to give the judgment call about where to land to someone who knows the facts about the landing speed and glide ratio of the plane.

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