Excerpt from, "The Undercover Economist Strikes Back: How to Run—or Ruin—an Economy"

by Tim Harford

CHAPTER 15 – THE FUTURE OF MACROECONOMICS

Ultimately macro is an empirical subject. [It cannot indefinitely remain] impervious to the facts.

HYUN SONG SHIN¹

It feels like a sad end.

At a time when macroeconomics was becoming ever more abstract, describing the evolution of an idealized economy at no particular time and in no particular place, Bill was still fascinated by the challenge of a vast, underdeveloped economy with a rich culture. He could solve differential equations, but he never lost sight of the fact that economics is about people.

And Phillips was also, right to the end, fascinated by the endless complexities of system dynamics—the way economies could oscillate, and how they might be stabilized. Curiously, the task facing macroeconomics in incorporating the lessons of the crisis has a recent parallel in engineering, in the shape of London’s famous Millennium Bridge.

When it opened, it was the first new crossing of the Thames to be built in more than a century, and it provided a beautiful walkway between the Tate Modern gallery and St. Paul’s Cathedral. But a problem very quickly developed. The bridge, packed with people eager to try it out, began to wobble alarmingly from side to side. Imagine laying a Slinky on the ground and gently moving one end from side to side to send a horizontal ripple along the Slinky’s length, and you’ll get a sense of how the bridge was moving. It was disconcerting; the bridge was closed down after two days until the problem could be diagnosed and fixed.

It turned out that the bridge and the pedestrians were synchronizing with each other in an unexpected way. When the bridge wobbled very slightly, the pedestrians adjusted their gait. People walking on the bridge started to walk like ice skaters, pushing their feet out to either side as they tried to keep their balance. And of course, they did so in sync with one another, responding to the bridge’s movement. This synchronized ice-skating motion was enough to increase the wobble of the bridge. The bridge might be fine for a while, but as soon as the slightest movement began to occur, the crowd would respond to the wobble and the wobble would respond to the crowd.

The wobbly bridge is interesting for two reasons. The first is that it shows how difficult it is to solve real-world problems using pure theory. Many people have a sense that engineering is founded on the rock-solid laws of physics, while economics is a castle built on sand. The truth is that while engineers do have the laws of physics to rely on, they are often caught out once reality intervenes. Sometimes the results are tragic: when the innovative Malpasset Dam in the south of France cracked in 1959 thanks to inadequate geological modeling, more than four hundred people died. Sometimes they are delicious: the roof of the award-winning Kemper Arena in Kansas City, Missouri, collapsed in 1979, with no loss of life, just twenty-four hours after hosting the American Institute of Architects Convention.⁵

The trouble is not the fact that engineers don’t understand the laws of physics—it’s that actually modeling them in a world full of snowdrifts, geological clay seams and self-synchronizing pedestrians is a difficult affair. And if structural engineers can sometimes be caught out like this, we should not entirely blame macroeconomists if the economy remains an unruly subject of study.