Macroeconomic theories: not even wrong

Flawed and inconsistent mainstream macroeconomic theories such as efficient market hypothesis are dangerous to society, says Alexander Lipton

Quants must try to build better theories explaining market dynamics

Alexander Lipton is a Connection Science Fellow at MIT and an Adjunct Professor of Mathematics at NYU.

Austria-born physicist and Nobel prizewinner Wolfgang Pauli, who was well known for his dry wit and sharp tongue, once described a theory as "not even wrong" – that is, it was so fundamentally flawed that it could not even be used to make meaningful predictions.

Today, the same could be said about mainstream macroeconomic theories – including the dynamic stochastic general equilibrium model (DS