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description=15 posts published by Lars Syll during December 2014;

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Text of the page (random words):
anced an alternative to rational expectations that alternative he called an errors in the variables model that is to say it allowed the expectation error to be correlated with both the realization and the prediction muth found that his errors in variables model worked better than rational expectations or mills implicit expectations but it did not entirely pass the tests in a shortened version of his paper published in the eastern economic journal he reported the results of the analysis do not support the hypotheses of the naive exponential extrapolative regressive or rational models only the expectations revision model used by meiselman is consistently supported by the statistical results these conclusions should be regarded as highly tentative and only suggestive however because of the small number of firms studied muth 1985 p 200 muth thought that we should not only have rational expectations but if we re going to have rational behavioral equations then consistency requires that our model include rational expectations but he was also interested in the results of people who do behavioral economics which at that time was a very undeveloped area hoover does anyone else want to comment on issue of testing rational expec tations against alternatives and if it matters whether rational expectations stands up to empirical tests or whether it is not the sort of thing for which testing would be relevant robert shiller what comes to my mind is that rational expectations models have to assume away the problem of regime change and that makes them hard to apply it s the same criticism they make of kahnemann and tversky that the model isn t clear and crisp about exactly how you should apply it well the same is true for rational expectations models and there s a new strand of thought that s getting impetus lately that the failure to predict this crisis was a failure to understand regime changes omitting key variables because we don t have the data history on them creates a fundamental problem that s why many nice concepts don t find their way into empirical models and are not used more they remain just a conceptual model hoover bob did you want to comment on that you re looking unhappy i thought robert lucas no i mean you can t read muth s paper as some recipe for cranking out true theories about everything under the sun we don t have a recipe like that my paper on expectations and the neutrality of money was an attempt to get a positive theory about what observations we call a phillips curve basically it didn t work after several years trying to push that model in a direction of being more operational it didn t seem to explain it so we had what we call price stickiness which seems to be central to the way the system works i thought my model was going to explain price stickiness and it didn t so we re still working on it somebody s working on it i don t think we have a satisfactory solution to that problem but i don t think that s a cloud over muth s work if jack thinks it is i don t agree with him mike cites some data that jack couldn t make sense out of using rational expectations there re a lot of bad models out there i authored my share and i don t see how that affects a lot of things we ve been talking about earlier on about the value of muth s contribution warren young just to wrap up the issue of possible alternatives to rational expectations or complements to rational expectations does behavioral economics or psychology in general provide a useful and viable alternative to rational expectations with the emphasis on useful laughter shiller well that s the criticism of behavioral economics that it doesn t provide elegant models if you read kahnemann and tversky they say that preferences have a kink in them and that kink moves around depending on framing but framing is hard to pin down so we don t have any elegant behavioral economics models the job isn t done and economists have to read widely and think about these issues i am sorry i don t have a good answer my opinion is that behavioral economics has to be on the reading list ultimately the whole rationality assumption is another thing it s interesting to look back on the history of it back at the turn of the century around 1900 when utility maximizing economic theory was being discovered it was described as a psychological theory did you know that that utility maximization was a psychological theory the idea about rational expectations again reflects insights about people that if you show people recurring patterns in the data they can actually process it a little bit like an arima model and they can start using some kind of brain faculties that we do not fully comprehend they can forecast it s an intuitive thing that evolved and it s in our psychology so i don t think that there s a conflict between behavioral economics and classical economics it s all something that will evolve responding to each other psychology and economics lucas i totally disagree hoover the great recession and the recent financial crisis have been widely viewed in both popular and professional commentary as a challenge to rational expectations and to efficient markets i really just want to get your comments on that strain of the popular debate that s been active over the last couple years lucas you know people had no trouble having financial meltdowns in their economies before all this stuff we ve been talking about came on board we didn t help though there s no question about that we may have focused attention on the wrong things i don t know shiller well i ve written several books on that another name that s not been mentioned is john maynard keynes i suspect that he s not popular with everyone on this panel to understand keynes you have to go back to his 1921 book treatise on probability he said he s really into almost this regime change thing that we brought up before that people don t have probabilities except in very narrow special circumstances you can think of a coin toss experiment and then you know what the probabilities are but in macroeconomics it s always fuzzy share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky den goda viljan 26 dec 2014 at 19 09 posted in varia comments off on den goda viljan det mesta som sänds på tv nu för tiden är en massa substanslös spring lek hamra sjung skit det är först när man som i kväll får se film av den här kalibern som man förstår varför man trots allt betalar tv licens on the limits of experimental economics 26 dec 2014 at 16 25 posted in theory of science methodology comments off on on the limits of experimental economics according to some people there s really no need for heterodox theoretical critiques of mainstream neoclassical economics but rather challenges to neoclassical economics buttressed by good empirical work out with big think theorizing and in with ordinary empiricism although thought provoking the view on empiricism and experiments offered is however too simplistic and for several reasons but mostly because the kind of experimental empiricism it favours is largely untenable experiments are actually very similar to theoretical models in many ways they e g have the same basic problem that they are built on rather artificial conditions and have difficulties with the trade off between internal and external validity the more artificial conditions the more internal validity but also less external validity the more we rig experiments models to avoid the confounding factors the less the conditions are reminicent of the real target system the nodal issue is how economists using different isolation strategies in different nomological machines attempt to learn about causal relationships i doubt the generalizability of both research strategies because the probability is high that causal mechanisms are different in different contexts and that lack of homogeneity stability invariance doesn t give us warranted export licenses to the real societies or economies if we see experiments as theory tests or models that ultimately aspire to say something about the real target system then the problem of external validity is central assume that you have examined how the work performance of swedish workers a is affected by b treatment how can we extrapolate generalize to new samples outside the original population e g to the uk how do we know that any replication attempt succeeds how do we know when these replicated experimental results can be said to justify inferences made in samples from the original population if for example p a b is the conditional density function for the original sample and we are interested in doing a extrapolative prediction of e p a b how can we know that the new sample s density function is identical with the original unless we can give some really good argument for this being the case inferences built on p a b is not really saying anything on that of the target system s p a b as i see it is this heart of the matter external validity extrapolation generalization is founded on the assumption that we can make inferences based on p a b that is exportable to other populations for which p a b applies sure if one can convincingly show that p and p are similar enough the problems are perhaps not insurmountable but arbitrarily just introducing functional specification restrictions of the type invariance stability homogeneity is at least for an epistemological realist far from satisfactory and often it is unfortunately exactly this that we see when we take part of neoclassical economists models experiments by this i do not mean to say that empirical methods per se are so problematic that they can never be used on the contrary i am basically though not without reservations in favour of the increased use of experiments within economics as an alternative to completely barren bridge less axiomatic deductive theory models my criticism is more about aspiration levels and what we believe we can achieve with our mediational epistemological tools and methods in social sciences many experimentalists claim that it is easy to replicate experiments under different conditions and therefore a fortiori easy to test the robustness of experimental results but is it really that easy if in the example given above we run a test and find that our predictions were not correct what can we conclude the b works in sweden but not in the uk or that b works in a backward agrarian society but not in a post modern service society that b worked in the field study conducted in year 2005 but not in year 2014 population selection is almost never simple had the problem of external validity only been about inference from sample to population this would be no critical problem but the really interesting inferences are those we try to make from specific labs experiments to specific real world situations institutions structures that we are interested in understanding or causally to explain and then the population problem is more difficult to tackle just as traditional neoclassical modelling randomized experiments is basically a deductive method given the assumptions such as manipulability transitivity separability additivity linearity etc these methods deliver deductive inferences the problem of course is that we will never completely know when the assumptions are right real target systems are seldom epistemically isomorphic to our axiomatic deductive models systems and even if they were we still have to argue for the external validity of the conclusions reached from within these epistemically convenient models systems causal evidence generated by randomization procedures may be valid in closed models but what we usually are interested in is causal evidence in the real target system we happen to live in ideally controlled experiments still the benchmark even for natural and quasi experiments tell us with certainty what causes what effects but only given the right closures making appropriate extrapolations from ideal accidental natural or quasi experiments to different settings populations or target systems is not easy it works there is no evidence for it will work here causes deduced in an experimental setting still have to show that they come with an export warrant to the target population system the causal background assumptions made have to be justified and without licenses to export the value of rigorous and precise methods is despairingly small many advocates of randomization and experiments want to have deductively automated answers to fundamental causal questions but to apply thin methods we have to have thick background knowledge of what s going on in the real world and not in ideally controlled experiments conclusions can only be as certain as their premises and that also goes for methods based on randomized experiments the claimed strength of a social experiment relatively to non experimental methods is that few assumptions are required to establish its internal validity in identifying a project s impact the identification is not assumption free people are typically and thankfully free agents who make purposive choices about whether or not they should take up an assigned intervention as is well understood by the randomistas one needs to correct for such selective compliance the randomized assignment is assumed to only affect outcomes through treatment status the exclusion restriction there is another more troubling assumption just under the surface inferences are muddied by the presence of some latent factor unobserved by the evaluator but known to the participant that influences the individual specific impact of the program in question then the standard instrumental variable method for identifying the average treatment effect on the treated is no longer valid even when the instrumental variable is a randomized assignment most social experiments in practice make the implicit and implausible assumption that the program has the same impact for everyone while internal validity is the claimed strength of an experiment its acknowledged weakness is external validity the ability to learn from an evaluation about how the specific intervention will work in other settings and at larger scales the randomistas see themselves as the guys with the lab coats the scientists while other types the policy analysts worry about things like external validity yet it is hard to argue that external validity is less important than internal validity when trying to enhance development effectiveness against poverty nor is external validity any less legitimate as a topic for scientific inquiry martin ravaillon share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky perfect day private 25 dec 2014 at 14 38 posted in varia comments off on perfect day private after almost forty years in lund yours truly has returned to the town where he was born and bred malmö ...