Controversy_On Modelling the Long Run in Applied Economics

I. OBJECTIVES
Every month or so any developed economy will produce large quantities of
data which attempt to summarise the major features of the macro economy.
The process that generates this data will be called the data generating process
(DGP). The fact that new data keeps appearing will be taken to be sufficient
evidence that the DGP exists and thus can be studied. I will assume that the
objective of theoretical macroeconomics and of macroeconometrics is to
determine the DGP, or at least segments of it. However, the actual economy
appears to be very complicated, because it is the aggregation of millions
of non-identical, non-independent decision-making units, such as households,
corporations, and various financial and government institutions (cross-sectional
aggregation). A further practical problem is that the observation period of the
data does not necessarily match the decision making periods (temporal
aggregation). It can be argued that even though the quantity of data produced
by a macroeconomy is quite large, it is still quite insufficient to capture all of
the complexities of the DGP. The modelling objective has thus to be limited to
providing an adequate or satisfactory approximation to the true DGP.
Hopefully, as modelling technology improves and data increases, better
approximations will be achieved, but actual convergence to the truth is highly
unlikely.