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description= 15 posts published by Lars Syll during March 2012;
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and, macroeconomics, the, krugman, reading, list, det, uncertainty, modern, economics, recent, comments, lars, syll, suggestion, for, är, dags, att, skrota, stabiliseringspolitiska, ramverket, ergodicity, important, difference, between, keynes, knight, has, delivered, keen, answers, neoclassical, visionless, escaping, responsibility, centerpartiet, och, lärarlönerna, sänkta, löner, löser, ingenting, austerity, in, depressed, economies, new, keynesian, involuntary, unemployment, reality, dansklektion, ii, state, of, microfoundations, robert, solow, says, it, all, ask, mountains, posts, policy, categories, archives,
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alysis of which i am fully aware for it is a weakness which it shares with general theory itself it is well known that in later developments of keynesian theory the long term rate of interest which does figure excessively in keynes own presentation and is presumably represented by the r of the diagram has been taken down a peg from the position it appeared to occupy in keynes we now know that it is not enough to think of the rate of interest as the single link between the financial and industrial sectors of the economy for that really implies that a borrower can borrow as much as he likes at the rate of interest charged no attention being paid to the security offered as soon as one attends to questions of security and to the financial intermediation that arises out of them it becomes apparent that the dichotomy between the two curves of the is lm diagram must not be pressed too hard back in 1937 john hicks said that he was building a model of john maynard keynes general theory he wasn t what hicks acknowledges in 1980 is basically that his original review totally ignored the very core of keynes theory uncertainty in doing this he actually turned the train of macroeconomics on the wrong tracks for decades it s about time that neoclassical economists as krugman mankiw or what have you set the record straight and stop promoting something that the creator himself admits was a total failure why not study the real thing itself general theory in full and without looking the other way when it comes to non ergodicity and uncertainty share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky det är dags att skrota det stabiliseringspolitiska ramverket 31 mar 2012 at 10 47 posted in economics 5 comments hur ska den ekonomiska politiken bäst föras i en extrem situation som den vi har idag många nationalekonomer tycker att vi ska hålla fast vid det rådande stabiliseringspolitiska ramverket men inte ens den mest utrerade normpolitiken klarar sig utan en betydande grad av flexibilitet penning och finanspolitik måste bedrivas på annorlunda sätt när vi befinner oss i en situation nära zero lower bound och likviditetsfällor gör det svårt att föra en nödig expansiv penningpolitik här är det oftast optimalt att göra avvikelser från uppställda inflationsmål och tillämpa undantagsklausuler som ger centralbanker flexibilitet nog att avvika från den normpolitiskt styrda låginflationspolitiken som flera forskare kunnat visa t ex här kan multiplikatoreffekterna mycket väl vara 1 i dylika likviditetsfällor att i det läget som i sverige avstå från att bedriva en expansiv finanspolitik och mestadels nöja sig med att genomföra skattesänkningar är oftast kontraproduktivt eftersom effekterna i stor utsträckning inskränker sig till att höja realräntan och öka det privata sparandet i likviditetsfällor ger helt enkelt offentliga utgifter regelmässigt större bang for the buck än skattesänkningar att det i mer normala lägen inte skulle finns någon anledning att överge det normala finanspolitiska regelverket är en klen tröst när det visat sig att likviditetsfällor och skulddeflation är återkommande inslag i vår samhällsekonomi vi lever i en ekonomiskt brydsam och omtumlande tid då räcker det inte med halvmessyrer och harhjärtade förslag som bara på marginalen ändrar på det stabiliseringspolitiska ramverket eftersom det rådande ramverket med stor sannolikhet bidrar till att omöjliggöra en adekvat krisbekämpning i en extrem situation som den vi lever i idag riksbankens inflationsmål på 2 uppfattas av etablissemangsekonomerna i det här landet som nästintill heligt och gudasänt andra av oss ekonomer är mer tveksamma paul krugman och imf delar med rätta inte detta smått religiösa vidhållande av målet på just 2 but why is the inflation target only 2 percent actually i understand why the inflation hawks are still a powerful force that must be appeased but the truth is that recent experience has made an overwhelming case for the proposition that the 2 percent or so implicit target prior to the great recession was too low that 4 or 5 percent would be much better even the chief economist at the imf says so the thing is if we re going to lock in a formal inflation target now would be a good time to get it right instead of waiting until the memory of the crisis fades and everyone gets complacent again oxfordprofessorn simon wren lewis har idag på sin blog ett läsvärt inlägg som ytterligare förstärker bilden av att det börjar bli dags för ekonomkåren att att ta sig ur sin smått religiösa fixering vid i grunden ganska godtyckliga ekonomisk politiska mål good policy takes account of risks and what you can do about them being at the zero lower bound means that you do not do things that deflate demand unless you believe growth will be strong anyway if that is what the government believed in 2010 they were foolish indeed as i continue to be surprised at the number of very good and sensible economists who seem reluctant to acknowledge that fiscal policy matters for demand when monetary policy is constrained i fear they might have been led astray in part by selective advice received however i am still not sure as the recession hit osborne consistently argued against fiscal stimulus in april 2009 george osborne skuggfinansminister 2005 2010 sedan dess finansminister i camerons koalitionsregering gave a speech which included a short history of macroeconomic thought even including references to the lucas critique it ended up with new keynesian models and he then said this new keynesian models of this kind underpin our whole macroeconomic policy framework in particular the idea that by using monetary policy to manage demand and control inflation you can keep unemployment low and stable and they underpinned the argument david cameron and i advanced last autumn that monetary policy should bear the strain of stimulating demand an argument echoed by the governor of the bank of england last month when he said that monetary policy should bear the brunt of dealing with the ups and downs of the economy we now appear to be winning that argument hands down the previous month the bank of england reduced interest rates to 0 5 where they have remained ever since so a month after interest rates hit the zero lower bound osborne gives a speech which included a perfectly sensible account of macroeconomic policy except when you hit a zero lower bound so perhaps they were after all very foolish indeed att bedriva ekonomisk politik när vi har solsken och vackert väder är en sak att bedriva samma typ av ekonomisk normpolitik när väderleksrapporterna talar om stormbyar och mörka moln är verkligen very foolish indeed share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky uncertainty and ergodicity the important difference between keynes and knight 30 mar 2012 at 14 34 posted in economics statistics econometrics theory of science methodology 8 comments in the week i ve had an interesting discussion with paul davidson founder and editor of the journal of post keynesian economics on uncertainty and ergodicity on the real world economics review blog it all started with me commenting on davidson s article is economics a science should economics be rigorous lps davidson s article is a nice piece but ergodicity is a difficult concept that many students of economics have problems with understanding 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 those that will rule the future time is what prevents everything from happening at once to simply assume that economic processes are ergodic and concentrate on ensemble averages and a fortiori in any relevant sense timeless is not a sensible way for dealing with the kind of genuine uncertainty that permeates open systems such as economies when you assume the economic processes to be ergodic ensemble and time averages are identical let me give an example assume we have a market with an asset priced at 100 then imagine the price first goes up by 50 and then later falls by 50 the ensemble average for this asset would be 100 because we here envision two parallel universes markets where the asset price falls in one universe market with 50 to 50 and in another universe market it goes up with 50 to 150 giving an average of 100 150 50 2 the time average for this asset would be 75 because we here envision one universe market where the asset price first rises by 50 to 150 and then falls by 50 to 75 0 5 150 from the ensemble perspective nothing really on average happens from the time perspective lots of things really on average happen assuming ergodicity there would have been no difference at all just in case you think this is just an academic quibble without repercussion to our real lives let me quote from an article of physicist and mathematician ole peters in the santa fe institute bulletin from 2009 on time and risk that makes it perfectly clear that the flaw in thinking about uncertainty in terms of rational expectations and ensemble averages has had real repercussions on the functioning of the financial system in an investment context the difference between ensemble averages and time averages is often small it becomes important however when risks increase when correlation hinders diversification when leverage pumps up fluctuations when money is made cheap when capital requirements are relaxed if reward structures such as bonuses that reward gains but don t punish losses and also certain commission schemes provide incentives for excessive risk problems arise this is especially true if the only limits to risk taking derive from utility functions that express risk preference instead of the objective argument of time irreversibility in other words using the ensemble average without sufficiently restrictive utility functions will lead to excessive risk taking and eventual collapse sound familiar pd lars if the stochastic process is ergodic then for for an infinite realizations the time and space ensemble averages will coincide an ensemble a is samples drawn at a fixed point of time drawn from a universe of realizations for finite realizations the time and space statistical averages tend to converge with a probability of one the more data one has even in physics there are some processes that physicists recognize are governed by nonergodic stochastic processes see a m yaglom an introduction to stationary random functions 1962 prentice hall i do object to ole peters exposition quote where he talks about when risks increase nonergodic systems are not about increasing or decreasing risk in the sense of the probability distribution variances differing it is about indicating that any probability distribution based on past data cannot be reliably used to indicate the probability distribution governing any future outcome in other words even if we could know that the future probability distribution will have a smaller variance lower risks than the past calculated probability distribution then the past distribution is not is not a reliable guide to future statistical means and other moments around the means lps paul re nonergodic processes in physics i would even say that most processes definitely are nonergodic re ole peters i totally agree that what is important with the fact that real social and economic processes are nonergodic is the fact that uncertainty not risk rules the roost that was something both keynes and knight basically said in their 1921 books but i still think that peters discussion is a good example of how thinking about uncertainty in terms of rational expectations and ensemble averages has had seriously bad repercussions on the financial system pd lars there is a difference between the uncertainty concept developed by keynes and the one developed by knight as i have pointed out keynes s concept of uncertainty involves a nonergodic stochastic process on the other hand knight s uncertainty like taleb s black swan assumes an ergodic process the difference is the for knight and taleb the uncertain outcome lies so far out in the tail of the unchanging over time probability distribution that it appears empirically to be in knight s terminology unique in other words like taleb s black swan the uncertain outcome already exists in the probability distribution but is so rarely observed that it may take several lifetimes for one observation making that observation unique in the latest edition of taleb s book he was forced to concede that philosophically there is a difference between a nonergodic system and a black swan ergodic system but then waves away the problem with the claim that the difference is irrelevent lps paul on the whole i think you re absolutely right on this knight s uncertainty concept has an epistemological founding and keynes s definitely an ontological founding of course this also has repercussions on the issue of ergodicity in a strict methodological and mathematical statistical sense i think keynes s view is the most warranted of the two but from a practical point of view i have to agree with taleb because if there is no reliable information on the future whether you talk of epistemological or ontological uncertainty you can t calculate probabilities the most interesting and far reaching difference between the epistemological and the ontological view is that if you subscribe to the former knightian view as taleb and black swan theorists basically do you open up for the mistaken belief that with better information and greater computer power we somehow should always be able to calculate probabilities and describe the world as an ergodic universe as both you and keynes convincingly have argued that is ontologically just not possible pd lars your last sentence says it all if you believe it is an ergodic system and epistemology is the only problem then you should urge more transparency better data collection hiring more quants on wall street to generate better risk management computer problems etc and above all keep the government out of regulating financial markets since all the government can do is foul up the outcome that the ergodic process is ready to deliver long live stiglitz and the call for transparency to end asymmetric information and permit all to know the epistemological solution for the ergodic process controlling the economy or as milton friedman would say those who make decisions as if they knew the ergodic stochastic process create an optimum market solution while those who make mistakes in trying to figure out the ergodic process are like the dinosaurs doomed to fail and die off leaving only the survival of the fittest for a free market economy to prosper on the proof is why all those 1 far c...
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