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description=15 posts published by Lars Syll during September 2017;

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used to declaim you shall not crucify mankind upon a cross of gold today s cross is not made of gold but is concocted of a web of obfuscatory financial rectitude from which human values have been expunged william vickrey share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky right wing extremist party in german parliament for the first time since wwii 25 sep 2017 at 13 57 posted in politics society comments off on right wing extremist party in german parliament for the first time since wwii trump s alternative facts exported to german politics seven sins of economics 23 sep 2017 at 11 44 posted in economics 4 comments there has always been some level of scepticism about the ability of economists to offer meaningful predictions and prognosis about economic and social phenomenon that scepticism has heightened in the wake of the global financial crisis leading to what is arguably the biggest credibility crisis the discipline has faced in the modern era some of the criticisms against economists are misdirected but the major thrust of the criticisms does have bite there are seven key failings or the seven sins as i am going to call them that have led economists to their current predicament these include sins of commission as well as sins of omission sin 1 alice in wonderland assumptions the problem with economists is not that they make assumptions after all any theory or model will have to rely on simplifying assumptions but when critical assumptions are made just to circumvent well identified complexities in the quest to build elegant theories such theories will simply end up being elegant fantasies sin 2 abuse of modelling what compounds the sin of wild assumptions is the sin of careless modelling and then selling that model as if it were a true depiction of an economy or society sin 3 intellectual capture several post crisis assessments of the economy and of economics have pointed to intellectual capture as a key reason the profession as a whole failed to sound alarm bells about problems in the global economy and failed to highlight flaws in the modern economic architecture sin 4 the science obsession the excessive obsession in the discipline to identify itself as science has been costly this has led to a dangerous quest for standardization in the profession leading many economists to mistake a model of the economy for the model of the economy the science obsession has diminished the diversity of the profession and arguably allowed complacency to take root in the run up to the global financial crisis sin 5 perpetuating the myth of the textbook and econ 101 the quest for standardization has also led to an astonishing level of uniformity in the manner in which economists are trained and in the manner in which economists train others central to this exercise are textbooks that help teach the lessons of econ 101 lessons disconnected from reality as they are from the frontiers of economic research sin 6 ignoring society what makes econ 101 and a lot of mainstream economics particularly limiting is its neglect of the role of culture and social norms in determining economic outcomes even though classical economists such as adam smith and karl marx took care to emphasize how social norms and social interactions shape economic outcomes economists typically don t engage with other social sciences even though insights from those disciplines have a direct bearing on the subjects of economic enquiry sin 7 ignoring history one way in which economists could have compensated for the lack of engagement with other social sciences is by studying economic history after all studying economic history carefully can help us understand the social and institutional contexts in which particular economic models worked or did not work but economic history has been relegated to the margins over the past several years and many graduate students remain unacquainted with the subject still pramit bhattacharya game theory and the shaping of neoliberal capitalism 21 sep 2017 at 17 00 posted in economics 9 comments neoliberal subjectivity arises from the intricate pedagogy of game theory that comes to the fore in the prisoner s dilemma game and is interchangeable with contemporary paradigmatic instrumental rationality rational choice is promoted as an exhaustive science of decision making but only by smuggling in a characteristic confusion suggesting that everything of value to agents can be reflected in their appraisal of existential worth even though this is patently not the case in life viewed as a fixed game without a critical and scrupulous pedagogy that carefully identifies as optional the assumptions necessary to operationalize strategic rationality a new neoliberal understanding of capitalism will dominate the worldview of the student of game theory and inhabitant of neoliberal institutions when criticising game theory you often get the rather uninformative and vacuous answer that we all have to remember that game theory as is mainstream neoclassical theory at large is nothing but as if theory built on as if rationality as ariel rubinstein has it however this only shows that the phrase as if is a way to avoid taking responsibility for the strong assumptions upon which economic models are founded missing the point the quantitative ambitions of dsge models 19 sep 2017 at 17 00 posted in economics comments off on missing the point the quantitative ambitions of dsge models a typical modern approach to writing a paper in dsge macroeconomics is as follows o to establish stylized facts about the quantitative interrelationships of certain macroeconomic variables e g moments of the data such as variances autocorrelations covariances that have hitherto not been jointly explained o to write down a dsge model of an economy subject to a defined set of shocks that aims to capture the described interrelationships and o to show that the model can replicate or match the chosen moments when it is fed with stochastic shocks generated by the assumed shock process however the test imposed by matching dsge models to the data is problematic in at least three respects first the set of moments chosen to evaluate the model is largely arbitrary second for a given set of moments there is no well defined statistic to measure the goodness of fit of a dsge model or to establish what constitutes an improvement in such a framework third the evaluation is complicated by the fact that at some level all economic models are rejected by the data in addition dsge models frequently impose a number of restrictions that are in direct conflict with micro evidence if a model has been rejected along some dimensions then a statistic that measures the goodness of fit along other dimensions is meaningless focusing on the quantitative fit of models also creates powerful incentives for researchers i to introduce elements that bear little resemblance to reality for the sake of achieving a better fit ii to introduce opaque elements that provide the researcher with free or almost free parameters and iii to introduce elements that improve the fit for the reported moments but deteriorate the fit along other unreported dimensions albert einstein observed that not everything that counts can be counted and not everything that can be counted counts dsge models make it easy to offer a wealth of numerical results by following a well defined set of methods that requires one or two years of investment in graduate school but is relatively straightforward to apply thereafter there is a risk for researchers to focus too much on numerical predictions of questionable reliability and relevance that absorb a lot of time and effort rather than focusing on deeper conceptual questions that are of higher relevance for society anton korinek great essay showing that rigorous and precise dsge models cannot be considered anything else than unsubstantiated conjectures as long as they aren t supported by evidence from outside the theory or model to my knowledge no in any way decisive empirical evidence has been presented no matter how precise and rigorous the analysis and no matter how hard one tries to cast the argument in modern mathematical form they do not push economic science forwards one single millimetre if they do not stand the acid test of relevance to the target no matter how clear precise rigorous or certain the inferences delivered inside these models are they do not say anything about real world economies proving things rigorously in dsge models is at most a starting point for doing an interesting and relevant economic analysis forgetting to supply export warrants to the real world makes the analysis an empty exercise in formalism without real scientific value mainstream economists think there is a gain from the dsge style of modelling in its capacity to offer some kind of structure around which to organise discussions to me that sounds more like a religious theoretical methodological dogma where one paradigm rules in divine hegemony that s not progress that s the death of economics as a science as kornik argues using dsge models creates a bias towards models that have a well behaved ergodic steady state since we know that most real world processes do not follow an ergodic distribution this is to say the least problematic to understand real world non routine decisions and unforeseeable changes in behaviour stationary 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 imposing invalid probabilistic assumptions on the data make all dsge models statistically misspecified advocates of dsge modelling 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 idealized models conclusions can only be as certain as their premises and that also applies to the quest for causality and forecasting predictability in dsge models if substantive questions about the real world are being posed it is the formalistic mathematical representations utilized that have to match reality not the other way around the modelling convention used when constructing dsge models makes it impossible to fully incorporate things that we know are of paramount importance for understanding modern economies such as income and wealth inequality asymmetrical power relations and information liquidity preference just to mention a few given all these fundamental problems for the use of these models and their underlying methodology it is beyond understanding how the dsge approach has come to be the standard approach in modern macroeconomics dsge models are based on assumptions profoundly at odds with what we know about real world economies that also makes them little more than overconfident story telling devoid of real scientific value macroeconomics would do much better with more substantive diversity and plurality dangers of running with the mainstream pack 18 sep 2017 at 14 43 posted in economics 3 comments an absolutely fabulous speech and soskice and carlin s textbook macroeconomics institutions instability and the financial system that dullien mentions at the beginning of his speech is really a very good example of the problems you run into if you want to be pluralist within the mainstream pack carlin and soskice explicitly adapts a new keynesian framework including price rigidities and adding a financial system to the usual neoclassical macroeconomic set up but although i find things like the latter amendment an improvement it s definitely more difficult to swallow their methodological stance and especially their non problematized acceptance of the need for macroeconomic microfoundations some months ago another sorta kinda new keynesian paul krugman argued on his blog that the problem with the academic profession is that some macroeconomists aren t bothered to actually figure out how the new keynesian model with its euler conditions based on the assumption that people have perfect access to capital markets so that they can borrow and lend at the same rate really works according to krugman this shouldn t be hard at all at least it shouldn t be for anyone with a graduate training in economics carlin soskice seem to share krugman s attitude from the first page of the book they start to elaborate their preferred 3 equations new keynesian macromodel and after twenty two pages they have already come to specifying the demand side with the help of the permanent income hypothesis and its euler equations but if people not the representative agent at least sometimes can t help being off their labour supply curve as in the real world then what are these hordes of euler equations that you find ad nauseam in these new keynesian macromodels gonna help us yours truly s doubts regarding the new keynesian modellers obsession with euler equations is basically that as with so many other assumptions in modern macroeconomics the euler equations don t fit reality all empirical sciences use simplifying or unrealistic assumptions in their modelling activities that is not the issue as long as the assumptions made are not unrealistic in the wrong way or for the wrong reasons if we cannot show that the mechanisms or causes we isolate and handle in our models are stable in the sense that what when we export them from our models to our target systems they do not change from one situation to another then they only hold under ceteris paribus conditions and a fortiori are of limited value for our understanding explanation and prediction of our real world target system no matter how many convoluted refinements of concepts made in the model if the successive approximations do not result in models similar to reality in the appropriate respects such as structure isomorphism etc the surrogate system becomes a substitute system that does not bridge to the world but rather misses its target from this methodological perspective yours truly has to conclude that carlin s and soskice s microfounded macroeconomic model is a rather unimpressive attempt at legitimizing using fictitious idealizations such as euler equations for reasons more to do with model tractability than with a genuine interest in understanding and explaining features of real economies running with the mainstream pack is not a good idea if you want to develop realist and relevant economics putting predictions to the test 17 sep 2017 at 11 58 posted in economics 1 comment it is the somewhat gratifying lesson of philip tetlock s new book that people who make prediction their business people who appear as experts on television get quoted in newspaper articles advise governments and businesses and participate in punditry roundtables are no better than the rest of us when they re...