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description= 15 posts published by Lars Syll during September 2017;
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d are trying to implement programmes based on the ideas that have come to be called market fundamentalism good science recognises its limitations but the prophets of rational expectations have usually shown no such modesty joseph stiglitz those who want to build macroeconomics on microfoundations usually maintain that the only robust policies and institutions are those based on rational expectations and representative actors as yours truly has tried to show in on the use and misuse of theories and models in economics there is really no support for this conviction at all on the contrary if we want to have anything of interest to say on real economies financial crisis and the decisions and choices real people make it is high time to place macroeconomic models building on representative actors and rational expectations microfoundations in the dustbin of pseudo science for if this microfounded macroeconomics has nothing to say about the real world and the economic problems out there why should we care about it the final court of appeal for macroeconomic models is the real world and as long as no convincing justification is put forward for how the inferential bridging de facto is made macroeconomic modelbuilding is little more than hand waving that give us a rather little warrant for making inductive inferences from models to real world target systems if substantive questions about the real world are being posed it is the formalistic mathematical representations utilized to analyze them that have to match reality not the other way around the real macroeconomic challenge is to accept uncertainty and still try to explain why economic transactions take place instead of simply conjuring the problem away by assuming rational expectations and treating uncertainty as if it was possible to reduce it to stochastic risk that is scientific cheating and it has been going on for too long now share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky hicks on neoclassical uncertainty laundering 28 sep 2017 at 09 56 posted in economics comments off on hicks on neoclassical uncertainty laundering to understand real world non routine decisions and unforeseeable changes in behaviour ergodic probability distributions are of no avail in a world full of genuine uncertainty where real historical time rules the roost the probabilities that ruled the past are not necessarily those that will rule the future when we cannot accept that the observations along the time series available to us are independent we have in strict logic no more than one observation all of the separate items having to be taken together for the analysis of that the probability calculus is useless it does not apply i am bold enough to conclude from these considerations that the usefulness of statistical or stochastic methods in economics is a good deal less than is now conventionally supposed we should always ask ourselves before we apply them whether they are appropriate to the problem in hand very often they are not the probability calculus is no excuse for forgetfulness john hicks causality in economics 1979 121 time to abandon statistical significance 27 sep 2017 at 10 55 posted in statistics econometrics 6 comments we recommend dropping the nhst null hypothesis significance testing paradigm and the p value thresholds associated with it as the default statistical paradigm for research publication and discovery in the biomedical and social sciences specifically rather than allowing statistical signicance as determined by p 0 05 or some other statistical threshold to serve as a lexicographic decision rule in scientic publication and statistical decision making more broadly as per the status quo we propose that the p value be demoted from its threshold screening role and instead treated continuously be considered along with the neglected factors such factors as prior and related evidence plausibility of mechanism study design and data quality real world costs and benefits novelty of finding and other factors that vary by research domain as just one among many pieces of evidence we make this recommendation for three broad reasons first in the biomedical and social sciences the sharp point null hypothesis of zero effect and zero systematic error used in the overwhelming majority of applications is generally not of interest because it is generally implausible second the standard use of nhst to take the rejection of this straw man sharp point null hypothesis as positive or even definitive evidence in favor of some preferredalternative hypothesis is a logical fallacy that routinely results in erroneous scientic reasoning even by experienced scientists and statisticians third p value and other statistical thresholds encourage researchers to study and report single comparisons rather than focusing on the totality of their data and results andrew gelman et al as shown over and over again when significance tests are applied people have a tendency to read not disconfirmed as probably confirmed standard scientific methodology tells us that when there is only say a 10 probability that pure sampling error could account for the observed difference between the data and the null hypothesis it would be more reasonable to conclude that we have a case of disconfirmation especially if we perform many independent tests of our hypothesis and they all give about the same 10 result as our reported one i guess most researchers would count the hypothesis as even more disconfirmed we should never forget that the underlying parameters we use when performing significance tests are model constructions our p values mean nothing if the model is wrong and most importantly statistical significance tests do not validate models in journal articles a typical regression equation will have an intercept and several explanatory variables the regression output will usually include an f test with p 1 degrees of freedom in the numerator and n p in the denominator the null hypothesis will not be stated the missing null hypothesis is that all the coefficients vanish except the intercept if f is significant that is often thought to validate the model mistake the f test takes the model as given significance only means this if the model is right and the coefficients are 0 it is very unlikely to get such a big f statistic logically there are three possibilities on the table i an unlikely event occurred ii or the model is right and some of the coefficients differ from 0 iii or the model is wrong so neoliberal ethics 26 sep 2017 at 13 20 posted in politics society 3 comments as we all know neoliberalism is nothing but a self serving con endorsing pernicious moral cynicism but it s still sickening to read its gobsmacking trash maintaining that unregulated capitalism is a superlatively moral system the rich man may feast on caviar and champagne while the poor woman starves at his gate and she may not even take the crumbs from his table if that would deprive him of his pleasure in feeding them to his birds david gauthier morals by agreement now compare that unashamed neoliberal apologetics with what two truly great economists and liberals john maynard keynes and robert solow have to say the outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes i believe that there is social and psychological justification for significant inequalities of income and wealth but not for such large disparities as exist to day john maynard keynes general theory 1936 who could be against allowing people their just deserts but there is that matter of what is just most serious ethical thinkers distinguish between deservingness and happenstance deservingness has to be rigorously earned you do not deserve that part of your income that comes from your parents wealth or connections or for that matter their dna you may be born just plain gorgeous or smart or tall and those characteristics add to the market value of your marginal product but not to your deserts it may be impractical to separate effort from happenstance numerically but that is no reason to confound them especially when you are thinking about taxation and redistribution that is why we want to temper the wind to the shorn lamb and let it blow on the sable coat robert solow journal of economic perspectives 2014 public debt an economic necessity 26 sep 2017 at 09 06 posted in economics 6 comments we are not going to get out of the economic doldrums as long as we continue to be obsessed with the unreasoned ideological goal of reducing the so called deficit the deficit is not an economic sin but an economic necessity the administration is trying to bring the titanic into harbor with a canoe paddle while congress is arguing over whether to use an oar or a paddle and the perot s and budget balancers seem eager to lash the helm hard a starboard towards the iceberg some of the argument seems to be over which foot is the better one to shoot ourselves in we have the resources in terms of idle manpower and idle plants to do so much while the preachers of austerity most of whom are in little danger of themselves suffering any serious consequences keep telling us to tighten our belts and refrain from using the resources that lay idle all around us alexander hamilton once wrote a national debt if it be not excessive would be for us a national treasure william jennings bryan used to declaim you shall not crucify mankind upon a cross of gold today s cross is not made of gold but is concocted of a web of obfuscatory financial rectitude from which human values have been expunged william vickrey share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky right wing extremist party in german parliament for the first time since wwii 25 sep 2017 at 13 57 posted in politics society comments off on right wing extremist party in german parliament for the first time since wwii trump s alternative facts exported to german politics seven sins of economics 23 sep 2017 at 11 44 posted in economics 4 comments there has always been some level of scepticism about the ability of economists to offer meaningful predictions and prognosis about economic and social phenomenon that scepticism has heightened in the wake of the global financial crisis leading to what is arguably the biggest credibility crisis the discipline has faced in the modern era some of the criticisms against economists are misdirected but the major thrust of the criticisms does have bite there are seven key failings or the seven sins as i am going to call them that have led economists to their current predicament these include sins of commission as well as sins of omission sin 1 alice in wonderland assumptions the problem with economists is not that they make assumptions after all any theory or model will have to rely on simplifying assumptions but when critical assumptions are made just to circumvent well identified complexities in the quest to build elegant theories such theories will simply end up being elegant fantasies sin 2 abuse of modelling what compounds the sin of wild assumptions is the sin of careless modelling and then selling that model as if it were a true depiction of an economy or society sin 3 intellectual capture several post crisis assessments of the economy and of economics have pointed to intellectual capture as a key reason the profession as a whole failed to sound alarm bells about problems in the global economy and failed to highlight flaws in the modern economic architecture sin 4 the science obsession the excessive obsession in the discipline to identify itself as science has been costly this has led to a dangerous quest for standardization in the profession leading many economists to mistake a model of the economy for the model of the economy the science obsession has diminished the diversity of the profession and arguably allowed complacency to take root in the run up to the global financial crisis sin 5 perpetuating the myth of the textbook and econ 101 the quest for standardization has also led to an astonishing level of uniformity in the manner in which economists are trained and in the manner in which economists train others central to this exercise are textbooks that help teach the lessons of econ 101 lessons disconnected from reality as they are from the frontiers of economic research sin 6 ignoring society what makes econ 101 and a lot of mainstream economics particularly limiting is its neglect of the role of culture and social norms in determining economic outcomes even though classical economists such as adam smith and karl marx took care to emphasize how social norms and social interactions shape economic outcomes economists typically don t engage with other social sciences even though insights from those disciplines have a direct bearing on the subjects of economic enquiry sin 7 ignoring history one way in which economists could have compensated for the lack of engagement with other social sciences is by studying economic history after all studying economic history carefully can help us understand the social and institutional contexts in which particular economic models worked or did not work but economic history has been relegated to the margins over the past several years and many graduate students remain unacquainted with the subject still pramit bhattacharya game theory and the shaping of neoliberal capitalism 21 sep 2017 at 17 00 posted in economics 9 comments neoliberal subjectivity arises from the intricate pedagogy of game theory that comes to the fore in the prisoner s dilemma game and is interchangeable with contemporary paradigmatic instrumental rationality rational choice is promoted as an exhaustive science of decision making but only by smuggling in a characteristic confusion suggesting that everything of value to agents can be reflected in their appraisal of existential worth even though this is patently not the case in life viewed as a fixed game without a critical and scrupulous pedagogy that carefully identifies as optional the assumptions necessary to operationalize strategic rationality a new neoliberal understanding of capitalism will dominate the worldview of the student of game theory and inhabitant of neoliberal institutions when criticising game theory you often get the rather uninformative and vacuous answer that we all have to remember that game theory as is mainstream neoclassical theory at large is nothing but as if theory built on as if rationality as ariel rubinstein has it however this only shows that the phrase as if is a way to avoid taking responsibility for the strong assumptions upon which economic models are founded missing the point the quantitative ambitions of dsge models 19 sep 2017 at 17 00 posted in 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