The Ordinary Business of Macroeconometric Modeling: Working on the Fed-MIT-Penn Model, 1964–74

The FMP model exemplifies the Keynesian models later criticized by Lucas, Sargent, and others as conceptually flawed. For economists in the 1960s such models were “big science”, posing organizational as well as theoretical and empirical problems. It was part of an even larger industry in which the messiness for which such models were later criticized was endorsed as enabling modelers to be guided by data while offering the flexibility needed to undertake policy analysis and to analyze the consequences of events. Practices that critics considered fatal weaknesses, such as intercept adjustments or fudging, were what clients paid for as the macro-econometric modeling industry went private.