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description=15 posts published by Lars Syll during August 2015;

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and, the, of, wrong, on, are, they, kids, significance, recent, comments, lars, syll, brad, delong, is, realism, inference, to, best, explanation, unbiased, econometric, estimates, forget, it, new, keynesian, models, not, too, simple, just, funeral, ikos, has, macroeconomics, really, progressed, top, universities, preserves, bad, economics, things, economists, could, learn, from, statistical, power, robert, solow, kicking, lucas, sargent, in, pants, our, american, dream, general, equilibrium, theory, gross, misallocation, intellectual, resources, time, ragnar, frisch, limits, statistics, testing, noah, smith, thinks, values, work, read, my, lips, don, perfect, day, private, rethinking, expectations, posts, policy, reading, list, categories, archives,

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es brand of keynesian theory of 40 or 50 years ago except for this stress on inflexibilities this brand of contemporary macroeconomic theory has basically nothing keynesian about it i conclude that dynamic stochastic general equilibrium theory has shown itself an intellectually bankrupt enterprise but this does not mean that we should revert to the old keynesian theory that preceded it or adopt the new keynesian theory that has tried to compete with it what we need to learn from keynes are about how to view our responsibilities and how to approach our subject if macroeconomic models no matter of what ilk build on microfoundational assumptions of representative actors rational expectations market clearing and equilibrium and we know that real people and markets cannot be expected to obey these assumptions the warrants for supposing that conclusions or hypothesis of causally relevant mechanisms or regularities can be bridged are obviously non justifiable incompatibility between actual behaviour and the behaviour in macroeconomic models building on representative actors and rational expectations microfoundations is not a symptom of irrationality it rather shows the futility of trying to represent real world target systems with models flagrantly at odds with reality a gadget is just a gadget and no matter how brilliantly silly dsge models you come up with they do not help us working with the fundamental issues of modern economies using dsge models only confirms robert gordon s dictum that today rigor competes with relevance in macroeconomic and monetary theory and in some lines of development macro and monetary theorists like many of their colleagues in micro theory seem to consider relevance to be more or less irrelevant share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky funeral ikos 30 aug 2015 at 09 31 posted in varia comments off on funeral ikos if thou hast shown mercy unto man o man that same mercy shall be shown thee there and if on an orphan thou hast shown compassion that same shall there deliver thee from want if in this life the naked thou hast clothed the same shall give thee shelter there and sing the psalm alleluia a life without the music of people like john tavener and arvo pärt would be unimaginable has macroeconomics really progressed 25 aug 2015 at 09 32 posted in economics 3 comments a typical dsge model has a key property that from my work seems wrong a good example is the model in galí and gertler 2007 in this model a positive price shock a cost push shock is explosive unless the fed raises the nominal interest rate more than the increase in the inflation rate in other words positive price shocks with the nominal interest rate held constant are expansionary because the real interest rate falls in my work however they are contractionary if there is a positive price shock like an oil price increase nominal wages lag output prices and so the real wage initially falls this has a negative effect on consumption in addition household real wealth falls because nominal asset prices don t initially rise as much as the price level this has a negative effect on consumption through a wealth effect there is little if any offset from lower real interest rates because households appear to respond more to nominal rates than to real rates positive price shocks are thus contractionary even if the fed keeps the nominal interest rate unchanged this property is important for a monetary authority in deciding how to respond to a positive price shock if the authority used the galí and gertler 2007 model it would likely raise the nominal interest rate too much thinking that the price shock is otherwise expansionary typical dsge models are thus likely to be misleading for guiding monetary policy if this key property of the models is wrong ray c fair share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky top universities preserves of bad economics 19 aug 2015 at 09 56 posted in economics comments off on top universities preserves of bad economics there are certainly some things that the top institutions offer which lower ranked once simply can t great buildings and history for starters to walk around cambridge to see its grand architecture and to feel drenched in its history is an amazing experience but the quality of the education you get at university depends very much on the individual people you are taught by and here university rankings are far from a perfect guide extremely gifted teachers and researchers can be at lower ranked universities for a multitude of reasons from personal preferences to sheer lock in a capable person can start in a lower ranked institution and find that the old boys network locks them out of the higher ranked ones in my own field of economics there is also a paradox at play in many ways the top universities have become preserves of bad economics both in content and in teaching quality while the best education in economics often comes from the lower ranked universities in fact there s a case to be made that the better the university is ranked the worse the education in economics will be and before you think i m just flogging my own wares here consider what the american economics association had to say about the way that economics education appeared to be headed in the usa back in 1991 the commission s fear is that graduate programs may be turning out a generation with too many idiots savants skilled in technique but innocent of real economic issues report of the commission on graduate education in economics american economic association 1991 the graduates of 1991 have become the university lecturers of today and thanks to them the trend the report identified at the graduate level has trickled down to undergraduate education at the so called leading universities steve keen forbes share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky things economists could learn from kids 18 aug 2015 at 19 26 posted in economics comments off on things economists could learn from kids kids somehow seem to be more in touch with real science than can opener assuming economists a physicist a chemist and an economist are stranded on a desert island one can only imagine what sort of play date went awry to land them there anyway they re hungry like desert island hungry and then a can of soup washes ashore progresso reduced sodium chicken noodle let s say which is perfect because the physicist can t have much salt and the chemist doesn t eat red meat but famished as they are our three professionals have no way to open the can so they put their brains to the problem the physicist says we could drop it from the top of that tree over there until it breaks open and the chemist says we could build a fire and sit the can in the flames until it bursts open those two squabble a bit until the economist says no no no come on guys you d lose most of the soup let s just assume a can opener share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky statistical power and significance 18 aug 2015 at 09 41 posted in statistics econometrics 1 comment much has been said about significance testing most of it negative methodologists constantly point out that researchers misinterpret p values some say that it is at best a meaningless exercise and at worst an impediment to scientific discoveries consequently i believe it is extremely important that students and researchers correctly interpret statistical tests this visualization is meant as an aid for students when they are learning about statistical hypothesis testing kristoffer magnusson great stuff share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky robert solow kicking lucas and sargent in the pants 16 aug 2015 at 20 34 posted in economics 6 comments mcnees documented the radical break between the 1960s and 1970s the question is what are the possible responses that economists and economics can make to those events one possible response is that of professors lucas and sargent they describe what happened in the 1970s in a very strong way with a polemical vocabulary reminiscent of spiro agnew let me quote some phrases that i culled from thepaper wildly incorrect fundamentally flawed wreckage failure fatal of no value dire implications failure on a grand scale spectac ular recent failure no hope i think that professors lucas and sargent really seem to be serious in what they say and in turn they have a proposal for constructive research that i find hard to talk about sympathetically they call it equilibrium business cycle theory and they say very firmly that it is based on two terribly important postulates optimizing behavior and perpetual market clearing when you read closely they seem to regard the postulate of optimizing behavior as self evident and the postulate of market clearing behavior as essentially meaningless i think they are too optimistic since the one that they think is self evident i regard as meaningless and the one that they think is meaningless i regard as false the assumption that everyone optimizes implies only weak and uninteresting consistency conditions on their behavior anything useful has to come from knowing what they optimize and what constraints they perceive lucas and sargent s casual assumptions have no special claim to attention it is plain as the nose on my face that the labor market and many markets for produced goods do not clear in any meaningful sense professors lucas and sargent say after all there is no evidence that labor markets do not clear just the unemployment survey that seems to me to be evidence suppose an unemployed worker says to you yes i would be glad to take a job like the one i have already proved i can do because i had it six months ago or three or four months ago and i will be glad to work at exactly the same wage that is being paid to those exactly like myself who used to be working at that job and happen to be lucky enough still to be working at it then i m inclined to label that a case of excess supply of labor and i m not inclined to make up an elaborate story of search or misinformation or anything of the sort by the way i find the misinformation story another gross implausibility i would like to see direct evidence that the unemployed are more misinformed than the employed as i presume would have to be the case if everybody is on his or her supply curve of employment similarly if the chrysler motor corporation tells me that it would be happy to make and sell 1000 more automobiles this week at the going price if only it could find buyers for them i am inclined to believe they are telling me that price exceeds marginal cost or even that marginal revenue exceeds marginal cost and regard that as a case of excess supply of automobiles now you could ask why do not prices and wages erode and crumble under those circumstances why doesn t the unemployed worker who told me yes i would like to work at the going wage at the old job that my brother in law or my brother in law s brother in law is still holding why doesn t that person offer to work at that job for less indeed why doesn t the employer try to encourage wage reduction that doesn t happen either why does the chrysler corporation not cut the price those are questions that i think an adult person might spend a lifetime studying they are important and serious questions but the notion that the excess supply is not there strikes me as utterly implausible robert solow no unnecessary beating around the bush here the always eminently quotable solow says it all the purported strength of new classical macroeconomics is that it has firm anchorage in preference based microeconomics and especially the decisions taken by inter temporal utility maximizing forward loooking individuals to some of us however this has come at too high a price the almost quasi religious insistence that macroeconomics has to have microfoundations without ever presenting neither ontological nor epistemological justifications for this claim has put a blind eye to the weakness of the whole enterprise of trying to depict a complex economy based on an all embracing representative actor equipped with superhuman knowledge forecasting abilities and forward looking rational expectations it is as if after having swallowed the sour grapes of the sonnenschein mantel debreu theorem these economists want to resurrect the omniscient walrasian auctioneer in the form of all knowing representative actors equipped with rational expectations and assumed to somehow know the true structure of our model of the world that anyone should take that kind of stuff seriously is totally and unbelievably ridiculous or as solow has it suppose someone sits down where you are sitting right now and announces to me that he is napoleon bonaparte the last thing i want to do with him is to get involved in a technical discussion of cavalry tactics at the battle of austerlitz if i do that i m getting tacitly drawn into the game that he is napoleon now bob lucas and tom sargent like nothing better than to get drawn into technical discussions because then you have tacitly gone along with their fundamental assumptions your attention is attracted away from the basic weakness of the whole story since i find that fundamental framework ludicrous i respond by treating it as ludicrous that is by laughing at it so as not to fall into the trap of taking it seriously and passing on to matters of technique robert solow share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky our kids and the american dream 15 aug 2015 at 17 37 posted in education school comments off on our kids and the american dream no doubt one of the most important books you will read this year share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky general equilibrium theory a gross misallocation of intellectual resources and time 15 aug 2015 at 10 30 posted in economics 2 comments general equilibrium is fundamental to economics on a more normative level as well a story about adam smith the invisible hand and the merits of markets pervades introductory textbooks classroom teaching and contemporary political discourse the intellectual foundation of this story rests on general equilibrium not on the latest mathematical excursions if the foundation of everyone s favourite economics story is now known to be unsound and according to some uninteresting as well then the profession owes the world a bit of an explanation frank ackerman almost a century and a half after léon walras founded general equilibrium theory economists st...