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description= 15 posts published by Lars Syll during June 2014;
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oward the sky when you finally arrange a meeting with some dafs you meet a few men with yellow hats and a few other plainer people believing the first to be leaders you offer them presents at which point all the dafs are outraged and assault you what you have not observed is that yellow hats mark slaves who throw grain to the household chickens in the yard on sunny days and inside on rainy ones it would have been worth your while not to settle for treating arm waving and wearing yellow hats as the phenomena to be explained but to test your assumptions about behavior by taking risks to sneak up closer and see precisely what the men were up to share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky did keynes accept the is lm model 22 jun 2014 at 19 13 posted in economics 1 comment lord keynes has some interesting references and links for those wanting to dwell upon the question if keynes really accepted hicks s is lm model my own view is that is lm doesn t adequately reflect the width and depth of keynes s insights on the workings of modern market economies 1 almost nothing in the post general theory writings of keynes suggests him considering hicks s is lm anywhere near a faithful rendering of his thought in keynes s canonical statement of the essence of his theory in the famous 1937 quarterly journal of economics article there is nothing to even suggest that keynes would have thought the existence of a keynes hicks is lm theory anything but pure nonsense john hicks the man who invented is lm in his 1937 econometrica review of keynes general theory mr keynes and the classics a suggested interpretation returned to it in an article in 1980 is lm an explanation in journal of post keynesian economics self critically he wrote that the only way in which is lm analysis usefully survives as anything more than a classroom gadget to be superseded later on by something better is in application to a particular kind of causal analysis where the use of equilibrium methods even a drastic use of equilibrium methods is not inappropriate what hicks acknowledges in 1980 is basically that his original is lm model ignored significant parts of keynes theory is lm is inherently a temporary general equilibrium model however much of the discussions we have in macroeconomics is about timing and the speed of relative adjustments of quantities commodity prices and wages on which is lm doesn t have much to say 2 is lm forces to a large extent the analysis into a static comparative equilibrium setting that doesn t in any substantial way reflect the processual nature of what takes place in historical time to me keynes s analysis is in fact inherently dynamic at least in the sense that it was based on real historic time and not the logical ergodic non entropic time concept used in most neoclassical model building and as niels bohr used to say thinking is not the same as just being logical 3 is lm reduces interaction between real and nominal entities to a rather constrained interest mechanism which is far too simplistic for analyzing complex financialised modern market economies 4 is lm gives no place for real money but rather trivializes the role that money and finance play in modern market economies as hicks commenting on his is lm construct had it in 1980 one did not have to bother about the market for loanable funds from the perspective of modern monetary theory it s obvious that is lm to a large extent ignores the fact that money in modern market economies is created in the process of financing and not as is lm depicts it something that central banks determine 5 is lm is typically set in a current values numéraire framework that definitely downgrades the importance of expectations and uncertainty and a fortiori gives too large a role for interests as ruling the roost when it comes to investments and liquidity preferences in this regard it is actually as bad as all the modern microfounded neo walrasian new keynesian models where keynesian genuine uncertainty and expectations aren t really modelled especially the two dimensionality of keynesian uncertainty both a question of probability and confidence has been impossible to incorporate into this framework which basically presupposes people following the dictates of expected utility theory high probability may mean nothing if the agent has low confidence in it reducing uncertainty to risk implicit in most analyses building on is lm models is nothing but hand waving according to keynes we live in a world permeated by unmeasurable uncertainty not quantifiable stochastic risk which often forces us to make decisions based on anything but rational expectations keynes rather thinks that we base our expectations on the confidence or weight we put on different events and alternatives to keynes expectations are a question of weighing probabilities by degrees of belief beliefs that often have preciously little to do with the kind of stochastic probabilistic calculations made by the rational agents as modeled by modern social sciences and often we simply do not know 6 is lm not only ignores genuine uncertainty but also the essentially complex and cyclical character of economies and investment activities speculation endogenous money labour market conditions and the importance of income distribution and as axel leijonhufvud so eloquently notes on is lm economics one doesn t find many inklings of the adaptive dynamics behind the explicit statics most of the insights on dynamic coordination problems that made keynes write general theory are lost in the translation into the is lm framework given this it s difficult to see how and why keynes in earnest should have accepted hicks s construct share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky if you only have time to read one statistics book this is the one 21 jun 2014 at 12 19 posted in statistics econometrics comments off on if you only have time to read one statistics book this is the one mathematical statistician david a freedman s statistical models and causal inference cambridge university press 2010 is a marvellous book it ought to be mandatory reading for every serious social scientist including economists and econometricians who doesn t want to succumb to ad hoc assumptions and unsupported statistical conclusions how do we calibrate the uncertainty introduced by data collection nowadays this question has become quite salient and it is routinely answered using wellknown methods of statistical inference with standard errors t tests and p values these conventional answers however turn out to depend critically on certain rather restrictive assumptions for instance random sampling thus investigators who use conventional statistical technique turn out to be making explicitly or implicitly quite restrictive behavioral assumptions about their data collection process more typically perhaps the data in hand are simply the data most readily available the moment that conventional statistical inferences are made from convenience samples substantive assumptions are made about how the social world operates when applied to convenience samples the random sampling assumption is not a mere technicality or a minor revision on the periphery the assumption becomes an integral part of the theory in particular regression and its elaborations are now standard tools of the trade although rarely discussed statistical assumptions have major impacts on analytic results obtained by such methods consider the usual textbook exposition of least squares regression we have n observational units indexed by i 1 n there is a response variable yi conceptualized as μi i where μi is the theoretical mean of yi while the disturbances or errors i represent the impact of random variation sometimes of omitted variables the errors are assumed to be drawn independently from a common gaussian distribution with mean 0 and finite variance generally the error distribution is not empirically identifiable outside the model so it cannot be studied directly even in principle without the model the error distribution is an imaginary population and the errors i are treated as if they were a random sample from this imaginary population a research strategy whose frailty was discussed earlier usually explanatory variables are introduced and μi is hypothesized to be a linear combination of such variables the assumptions about the μi and i are seldom justified or even made explicit although minor correlations in the i can create major bias in estimated standard errors for coefficients why do μi and i behave as assumed to answer this question investigators would have to consider much more closely than is commonly done the connection between social processes and statistical assumptions we have tried to demonstrate that statistical inference with convenience samples is a risky business while there are better and worse ways to proceed with the data at hand real progress depends on deeper understanding of the data generation mechanism in practice statistical issues and substantive issues overlap no amount of statistical maneuvering will get very far without some understanding of how the data were produced more generally we are highly suspicious of efforts to develop empirical generalizations from any single dataset rather than ask what would happen in principle if the study were repeated it makes sense to actually repeat the study indeed it is probably impossible to predict the changes attendant on replication without doing replications similarly it may be impossible to predict changes resulting from interventions without actually intervening share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky one woman seventeen british accents 21 jun 2014 at 11 57 posted in varia 1 comment impressive piketty s second fundamental law of capitalism 20 jun 2014 at 10 43 posted in economics 4 comments when piketty introduces this law in the text of capital in the twenty first century he abbreviates it in the form β s g for the benefit of the general reader but he then follows up that introductory statement with several pages of explanatory text and warnings to the reader that make it clear that that his intent is only to describe the value toward which β would converge in the long run if s and g remain relatively constant unfortunately the abbreviated statement of the law has thrown many people off economists are in the habit of using equilibrium methods to turn long term asymptotic limits of processes that evolve over time into unchanging constraints on some idealized steady state equilibrium so rather than use the inherently dynamic accounts of wealth income and the capital to income ratio that are partially explained above and that piketty uses to study the dynamical evolution of the structure of economic inequality as it evolves over time some commentators have instead gone right to a steady state model in which β is set constantly equal to s g and from which they then fallaciously deduce immediate and absurd changes in β from the fluctuations in s and g this is quite far from piketty s intent and misrepresents his framework since part of the point of the second fundamental law and its surrounding framework is to analyze what happens as the capital to income ratio increases over time not what happens in the less usual conditions when it is stable the focus on steady state conditions seems to me misguided for example if a society begins in 2014 with a capital to income ratio of 4 a savings rate of 10 and a growth rate of 1 5 then even if the savings rate and growth rate remained constant indefinitely it would take a very long time for β to get near its limiting value of s g 6 7 specifically β would not get to within 10 of s g until the year 2115 it would not get to within 5 of s g until the year 2159 and it would not get to within 1 of s g until the year 2159 the distance between the present value of β and the present value of s g is a measure of the present strength of the force pushing the capital to income ratio higher since some of the forces generating inequality depend on the rapidity with which β is increasing it is the strength of this force and the direction in which β is moving that are important piketty s fundamental law should not be interpreted as the statement that β is approximately equal to s g under ordinary conditions β can be quite far from s g that s part of the point dan kervick skidelsky on the need for an economics curriculum reform 19 jun 2014 at 10 03 posted in economics 2 comments in a manifesto published in april economics students at the university of manchester advocated an approach that begins with economic phenomena and then gives students a toolkit to evaluate how well different perspectives can explain it rather than with mathematical models based on unreal assumptions the manchester students argue that the mainstream within the discipline neoclassical theory has excluded all dissenting opinion and the crisis is arguably the ultimate price of this exclusion today s post crash students are right so what is keeping the mainstream s intellectual apparatus going for starters economics teaching and research is deeply embedded in an institutional structure that as with any ideological movement rewards orthodoxy and penalizes heresy the great classics of economics from smith to ricardo to veblen go untaught research funding is allocated on the basis of publication in academic journals that espouse the neoclassical perspective publication in such journals is also the basis of promotion for now the best that curriculum reform can do is to remind students that economics is not a science like physics and that it has a much richer history than is to be found in the standard textbooks indeed mainstream economics is a pitifully thin distillation of historical wisdom on the topics that it addresses it should be applied to whatever practical problems it can solve but its tools and assumptions should always be in creative tension with other beliefs concerning human wellbeing and flourishing what students are taught today certainly does not deserve its imperial status in social thought robert skidelsky share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky ricardian equivalence total horseshit 18 jun 2014 at 08 32 posted in economics 13 comments ricardian equivalence basically means that financing government expenditures through taxes or debts is equivalent since debt financing must be repaid with interest and agents equipped with rational expectations would only increase savings in order to be able to pay the higher taxes in the future thus leaving total expenditures unchanged why in the standard neoclassical consumption model used in dsg...
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