Read this wonderful post
Just read this: Houdini’s Straightjacket
That is all.
Relevant and even prescient commentary on news, politics and the economy.
Just read this: Houdini’s Straightjacket
That is all.
Yes already, but representative agents and rational expectations are only part of the problem. The general equilibrium ASSUMPTION is far, far more damaging.
“But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.”
He warned us!
Uncertainty is the key, if you model the level of expectations, but not how uncertain they are, you are totally missing the point.
I’ve long believed that econometricans are able to reach any conclusion they want to.
Well that can be said of any “expert” worth her salt
well, it’s worse than that.
the “long run” argument actually means
“we can add one tenth of one percent to GDP over ten years if half he people live in otherwise unnecessary misery.”
and they know what they are saying.
Robert
my blowser won’t open your link. can you give me a 25 word summary?
Robert, Has this post been approved by anyone on the AB board of directors? Your post has not one mention of HRC or the Donald. Worse yet, the post at Mean Squared actually addresses the field of economics,
albeit in a manner a bit over my IQ.
Another good piece Robert:
https://www.law.yale.edu/system/files/area/workshop/leo/the_trouble_with_macroeconomics.pdf
(The typos are almost Waldmannesque.)
Coberly,
but that should actually read
“IF WE ARE CORRECT (and we probably are not – shhh.) we can add one tenth of one percent to GDP over ten years if half the people live in otherwise unnecessary misery.”
Coberly
the main bit of the relatively short blogpost is:
“Similarly, even defenders of “modern” DSGE models, including those of the New Keynesian (NK) variety, seem to agree that their modelling approach made arriving at sound policy recommendations unnecessarily difficult. For example, George Evans at the University of Oregon writes:
[T]he profession as a whole seemed to many of us slow to appreciate the implications of the NK model for policy during and following the financial crisis … because many macro economists using NK models in 2007-8 did not fully appreciate the Keynesian mechanisms present in the model.
Now, if after thirty years of study economists failed to “fully appreciate the Keynesian mechanisms present in the model,” one might wonder exactly what such models have to recommend themselves. What is the advantage of an intellectually demanding and mathematically complex modelling approach that makes it harder to actually get the job done?
The answer, I suspect, is that “intellectually demanding and mathematically complex” has become an end in itself — that modern macro has become an arena within which to show off technical virtuosity for its own sake. And the harder we make it look, the tighter the straightjacket, the cleverer we appear when (after long, painful struggle) we finally emerge.
Which is fine as long as the goal is entertainment. But if the goal is, you know, looking after the economic welfare of seven billion human beings, the whole enterprise begins to look more than a little bit self-indulgent.”
Reason
thanks. it’s an argument we hear from time to time right here on Angry Bear. to the extent i understand what is going on around me and what the economists have to say about it, i think they would be more effective if they chanted it in Latin.
that is more effective at what they are trying to do, which is not to prevent human misery caused by economic forces that could be mitigated by collective action.
Reason, the article you posted makes an interesting comparison between macro-economic theorists and string theorists. The underlying problem with both (as with other fields, such as Cosmology and Climatology), is that one cannot construct controlled experiments.
By the way the author of the original post quoted above has posted something even better:
https://meansquarederrors.blogspot.de/2016/09/the-microfoundations-hoax.html
For Coberly the punchline is:
“Let that sink in for a moment: of all the macro models that have been floated over the last century or so, only the so-called microfounded models are completely and demonstrably incompatible with classical microfoundations. And this is (or should be) obvious to anyone who didn’t sleep through the first year of graduate microeconomic theory. “
Reason
i guess i slept through graduate micro… reason being that i was doing something entirely else at the time.
i did walk out of freshman economics because it was nonsense. then i found i had to take the class to graduate, so i took it, got my A and , sadly, believed some of the nonsense without thinking about it for years, until i was more or less forced to think about it because the newspapers keep shouting it at me as though it was something that God had told them in his personna as a non-partisan expert.
think about some of it. i don’t pretend to know or care about most of it. on accounta the bits i do think about fall apart when confronted with experience.