UPDATE: INFORMATION TRANSFER ECONOMICS In the right frame, economies radically simplify
I was reading Simon Wren-Lewis on productivity, this out of NECSI, as well as this from David Andolfatto on monetary policy. It sent me down memory lane with some of my posts (linked below) where I've talked about various ways to frame macro data. The thing is that certain ways of looking at the data can cause you to make either more complicated or less complicated models. And more complicated models don't always seem to be better at forecasting. Because we tend to think of the Earth at rest, we have to add Coriolis and centrifugal "pseudo forces" to Newton's law because it is a non-inertial frame. In an inertial frame, Newton's laws simplify. Because ancient astronomers thought not only that they were seeing circles in the sky, but that the Earth was at rest (in the center) they had to add epicycle upon epicycle to the motions of planets. In Copernicus's frame (with a bit of help from Kepler and Newton), the solar system is much simpler (on the time scale of human civilization). Now let me stress that this is just a possibility, but maybe macroeconomic models are complex because people are looking at the data using the wrong frame and seeing a complex data series? As I mentioned above, I have written several posts on how different ways of framing the data — different models — can affect how you view incoming data. Here is a selection:
https://informationtransfereconomics.blogspot.com/2017/03/the-recovery-and-using-models-to-fr ame.html