I do’t want to be rude to anyone in particular, so I will just note that I have the impression that two people who should know better are willing to suggest that logically consistent models populated by rational optimizing agents have policy invariant implications, that is are not vulnerable to the Lucas critique. This is […]
As far as I can could tell, Simon Wren-Lewis has been convinced by Paul Krugman. He now proposes parallel reasearch projects one of which is to be focused on fitting the data. This is exactly what Krugman advocated. Update: clearly I couldn’t tell very far. In fact, as he has repeatedly written, Wren-Lewis always agreed […]
Below Dan pulled a post questioning Jon Chait’s claim that US economist’s generally support a broader tax base and lower rates. I am expert neither on taxes nor economists, but I will write at length on the question after the jump. Before the jump, I must note that Chait made many of the points I […]
Mark Thoma and Simon Wren-Lewis both responded to a complaint about the rational expectations assumption by noting that they had colleagues who study boundedly rational learning. I see a third alternative — giving up. That is, we might conclude that we don’t understand expectations formation and that we won’t for a long while, so we […]
Simon Wren-Lewis gets me going again He wrote Rational expectations do not prevent us understanding sustained periods of deficient demand when an inflation targeting central bank hits a lower bound. Indeed they help, because with rational expectations inflation targeting prevents inflation expectations delivering the real interest rate we need, as I have argued here. and […]
No it is not a guide to proper grammar, and I know perfectly well that a preposition isn’t the sort of thing I’m supposed to end a sentence with. The case for assuming rational expectations rests on two valid arguments. 1) Expectations matter a lot.*2) If you allow people to assume whatever they want about […]
Eminent New Keynesian Economist Susanto Basu commented on a post challenging people to come up with an empirically useful idea in macroeconomics not to be found in “The General Theory of Employment Interest and Money.” Here I will just note again how incredibly polite New Keynesians tend to be. bold numbers added for future reference […]
Modern Macroeconomic Methodology Seems to be quite the topic yesterday. I wrote this about a week ago and maybe it’s time to post it. Modern Macroeconomic Methodology (MMM) rests on two pillars: Milton Friedman’s methodology of positive economics and the Lucas critique. The problem is that an alternative possible title for “Econometric Policy Evaluation: A […]
This might be a mistake, but I am bringing a discussion from my personal blog over here (links after the jump). I have a challenge. Can anyone think of a useful insight in macroeconomic theory which isn’t clearly stated in “The General Theory of Employment Interest and Money” ? By “useful” I mean that it […]
Freddster (noun): Fraudster who profits from conflict of interest at Freddie Mac (the knife). Jesse Eisinger, pf ProPublica and Chris Arnold, of the public sector NPR News have the most interesting article about ruthless greedy uh socialism I guess at public sector Freddie Mac. The idea is that Freddie Went long the interest payments on […]