I agree with the harsh judgment that Lucas and Sargent (1979) made about the macromodels of their day– that they relied on identifying assumptions that were not credible. The situation now is worse. Models make assumptions that are no more credible and far more opaque.
I also agree with the harsh judgment that Lucas and Sargent made about the predictions of those Keynesian models, the prediction that an increase in the inﬂation rate would cause a reduction in the unemployment rate.
…one of the greatest truths in psychology is that the mind is divided into parts that sometimes conflict. To be human is to feel pulled in different directions, and to marvel—sometimes in horror—at your inability to control your own actions. The Roman poet Ovid lived at a time when people thought diseases were caused by imbalances of bile, but he knew enough psychology to have one of his characters lament: “I am dragged along by a strange new force. Desire and reason are pulling in different directions. I see the right way and approve it, but follow the wrong”.
“Shocked as we may be today by drastic contrasts between the standards of living in modern industrial nations and the standards of living in Third World countries, such disparities have been common for thousands of years of recorded history. These disparities have extended beyond wealth to the things that create wealth— including the knowledge, skills, habits and discipline that have developed unequally in different geographic, cultural and political settings.”