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description= 15 posts published by Lars Syll during May 2014;
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Text of the page (random words):
r the high unemployment of the great depression but this is pure nonsense for although keynes in general theory devoted substantial attention to the subject of wage rigidities he certainly did not hold the view that wage rigidities were the reason for the high unemployment of the great depression what keynes actually did argue in general theory was that the classical proposition that lowering wages would lower unemployment and ultimately take economies out of depressions was ill founded and basically wrong to keynes flexible wages would only make things worse by leading to erratic price fluctuations the basic explanation for unemployment is insufficient aggregate demand and that is mostly determined outside the labor market unfortunately jones macroeconomics textbook is not the only one containing this kind of utter nonsense on keynes similar distortions of keynes views can be found in e g the economics textbooks of the new keynesian a grotesque misnomer greg mankiw how is this possible probably because these economists have but a very superficial acquaintance with keynes own works and rather depend on second hand sources like hansen samuelson hicks and the likes but the problems don t end here the rather embarrassing history revision on keynes is followed up a couple of pages later with the following gobsmacking remark in recent years different countries in europe have sought to reform their labor market institutions as a result unemployment rates in spain ireland and the netherlands for example have decreased substantially from levels in the 1980s checking up on spain i get the following graph hardly consistent with the textbook s have decreased substantially share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky chicago economics out of touch with the real world 25 may 2014 at 20 44 posted in economics 6 comments tom sargent is a bit out of touch with the real world up there in his office certain people have a capacity for ignoring facts which are patenty obvious but are counter to their view of the world so they just ignore them sargent is a sort of tinkerer playing an intellectual game he looks at a puzzle to see if h ecan solve it in a particular way exercising these fancy techniques alan blinder do you think this is too harsh well then i suggest you read the following excerpt from the interview with sargent in arjo klamer s the new classical macroeconomics 1984 people say that many of your assumptions are unrealistic it is true that these assumptions are unrealistic do you feel comfortable with them yes about certain matters i m aware of all the problems with them there are philosophical contradictions about using this methodoology deep down i don t believe in them but i don t have a better method of understanding what s going on out there but if the best is not good enough wittgenstein s dictum in tractatus logico philosophicus comes to mind wovon man nicht sprechen kann darüber muss man schweigen share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky léo ferré tout simplement merveilleux 25 may 2014 at 17 12 posted in varia comments off on léo ferré tout simplement merveilleux human dogs 25 may 2014 at 15 39 posted in varia comments off on human dogs the appropriate use of hypothesis testing 25 may 2014 at 09 44 posted in theory of science methodology 2 comments hypothesis testing and p values are so compelling in that they fit in so well with the popperian model in which science advances via refutation of hypotheses for both theoretical and practical reasons i am supportive of a modified popperian philosophy of science in which models are advanced and then refuted gelman and shalizi 2013 but a necessary part of falsificationism is that the models being rejected are worthy of consideration if a group of researchers in some scientific field develops an interesting scientific model with predictive power then i think it very appropriate to use this model for inference and to check it rigorously eventually abandoning it and replacing it with something better if it fails to make accurate predictions in a definitive series of experiments this is the form of hypothesis testing and falsification that is valuable to me in common practice however the null hypothesis is a straw man that exists only to be rejected in this case i am typically much more interested in the size of the effect its persistence and how it varies across different situations i would like to reserve hypothesis testing for the exploration of serious hypotheses and not as in indirect form of statistical inference that typically has the effect of reducing scientific explorations to yes no conclusions andrew gelman assumptions in scientific theories models are often based on mathematical tractability and so necessarily simplifying and used for more or less self evidently necessary theoretical consistency reasons but one should also remember that assumptions are selected for a specific purpose and so the arguments in economics shamelessly often totally non existent put forward for having selected a specific set of assumptions have to be judged against that background to check if they are warranted this however only shrinks the assumptions set minimally it is still necessary to decide on which assumptions are innocuous and which are harmful and what constitutes interesting important assumptions from an ontological epistemological point of view explanation understanding prediction especially so if you intend to refer your theories models to a specific target system preferably the real world to do this one should start by applying a r eal world filter in the form of a smell test is the theory model reasonable given what we know about the real world if not why should we care about it if not we shouldn t apply it remember time is limited and economics is a science on scarcity optimization share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky on math and economics a feeble minded pseudo debate 24 may 2014 at 14 45 posted in economics 8 comments many mainstream economists have the unfounded and ridiculous idea that because heterodox people like yours truly often criticize the application of mathematics in mainstream economics we are critical of math per se i don t know how many times i ve been asked to answer this straw man objection to heterodox economics but here we go again no there is nothing wrong with mathematics per se no there is nothing wrong with applying mathematics to economics mathematics is one valuable tool among other valuable tools for understanding and explaining things in economics what is however totally wrong are the utterly simplistic beliefs that math is the only valid tool math is always and everywhere self evidently applicable math is all that really counts if it s not in math it s not really economics almost everything can be adequately understood and analyzed with math so please let s have no more of this feeble minded pseudo debate where heterodox economics is described as simply anti math a common mistake amongst ph d students is to place too much weight on the ability of mathematics to solve an economic problem they take a model off the shelf and add a new twist a model that began as an elegant piece of machinery designed to illustrate a particular economic issue goes through five or six amendments from one paper to the next by the time it reaches the n th iteration it looks like a dog designed by committee mathematics doesn t solve economic problems economists solve economic problems my advice never formalize a problem with mathematics until you have already figured out the probable answer then write a model that formalizes your intuition and beat the mathematics into submission that last part is where the fun begins because the language of mathematics forces you to make your intuition clear sometimes it turns out to be right sometimes you will realize your initial guess was mistaken always it is a learning process roger farmer good advice coming from a professor of economics and fellow of the econometric society and research associate of the nber well worth following share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky beat a dead horse award 24 may 2014 at 10 35 posted in economics comments off on beat a dead horse award if i ask myself what i could legitimately assume a person to have rational expectations about the technical answer would be i think about the realization of a stationary stochastic process such as the outcome of the toss of a coin or anything that can be modeled as the outcome of a random process that is stationary i don t think that the economic implications of the outbreak of world war ii were regarded by most people as the realization of a stationary stochastic process in that case the concept of rational expectations does not make any sense similarly the major innovations cannot be thought of as the outcome of a random process in that case the probability calculus does not apply robert solow modern macroeconomic theories are as a rule founded on the assumption of rational expectations where the world evolves in accordance with fully predetermined models where uncertainty has been reduced to stochastic risk describable by some probabilistic distribution the tiny little problem that there is no hard empirical evidence that verifies these models cf michael lovell 1986 nikolay gertchev 2007 usually doesn t bother its protagonists too much rational expectations überpriest thomas sargent has the following to say on the epistemological status of the rational expectations hypothesis emphasis added partly because it focuses on outcomes and does not pretend to have behavioral content the hypothesis of rational epectations has proved to be a powerful tool for making precise statements about complicated dynamic economic systems precise yes in the celestial world of models but relevant and realistic i ll be dipped and a few years later when asked if he thought that differences among people s models are important aspects of macroeconomic policy debates sargent replied emphasis added the fact is you simply cannot talk about their differences within the typical rational expectations model there is a communism of models all agents within the model the econometricians and god share the same model building models on rational expectations either means we are gods or idiots most of us know we are neither so god may share sargent s and lucas s models but they certainly aren t my models on the use and misuse of theories and models in economics 24 may 2014 at 08 59 posted in theory of science methodology comments off on on the use and misuse of theories and models in economics my presentation on microfoundations the use and misuse of theories and models in economics at the aalborg conference yesterday post keynesian conference 21 may 2014 at 12 50 posted in economics comments off on post keynesian conference yours truly is off to a conference in aalborg on 22 23 may only sporadic blogging until the weekend how to reform the teaching of economics 20 may 2014 at 08 47 posted in economics 13 comments to what extent has or should the teaching of economics be modified in the light of the current economic crisis for macroeconomists in particular the reaction has been to suggest that modifications of existing models to take account of frictions or imperfections will be enough however other economists such as myself feel that we have finally reached the turning point in economics where we have to radically change the way we conceive of and model the economy rather than making steady progress towards explaining economic phenomena professional economists have been locked into a narrow vision of the economy we constantly make more and more sophisticated models within that vision until as bob solow put it the uninitiated peasant is left wondering what planet he or she is on every student in economics is faced with the model of the isolated optimising individual who makes his choices within the constraints imposed by the market somehow the axioms of rationality imposed on this individual are not very convincing but the student is told that the aim of the exercise is to show that there is an equilibrium there can be prices that will clear all markets simultaneously and furthermore the student is taught that such an equilibrium has desirable welfare properties importantly the student is told that since the 1970s it has been known that whilst such a system of equilibrium prices may exist we cannot show that the economy would ever reach an equilibrium nor that such an equilibrium is unique the student then moves on to macroeconomics and is told that the aggregate economy or market behaves just like the average individual she has just studied she is not told that these general models in fact poorly reflect reality for the macroeconomist this is a boon since he can now analyse the aggregate allocations in an economy as though they were the result of the rational choices made by one individual the student may find this even more difficult to swallow when she is aware that peoples preferences choices and forecasts are often influenced by those of the other participants in the economy students take a long time to accept the idea that the economy s choices can be assimilated to those of one individual we owe it to our students to point out difficulties with the structure and assumptions of our theory although we are still far from a paradigm shift in the longer run the paradigm will inevitably change we would all do well to remember that current economic thought will one day be taught as history of economic thought alan kirman share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky with wings on their heels 18 may 2014 at 09 42 posted in varia comments off on with wings on their heels next page recent posts arbetslöshetsiffran som styr den ekonomiska politiken 50 år efter studenten personal finding the late student stuff love s secret stein s paradox a lesson on precision and unbiasedness audioholic summer research ett välförtjänt bottenrekord arbetslösheten inte statsskulden är problemet how credible is the credibility revolution in econometrics randomness and representativeness are not the same lönebildning och arbetslöshet i sverige nancy cartwright s contributions to the philosophy of science what does randomisation guarantee nothing model reification in statistics and econometrics why democracy outperforms dictatorship comments policy i like comments follow netiquette comments especially anonymous ones with pseudo argumentations abusive language or irrelevant 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