tag:blogger.com,1999:blog-2546602206734889307.post2587944480862134821..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: What have microfoundations ever done for us?Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2546602206734889307.post-43884653599196889432012-03-14T19:25:29.239+00:002012-03-14T19:25:29.239+00:00Let me see if I have this straight. On the one han...Let me see if I have this straight. On the one hand we have a world just past a dramatic (and involuntary) shift in global monetary regime, experiencing heady developed market growth rates, negative output gaps, multiple massive energy supply shocks, and replete with accommodative central banks, powerful labor interests, high energy intensity and de minimis integration of developing markets in the global economy. <br /><br />And on the other hand, we have a world at the tail end of three decades of a stable post-Volcker fiat-dollar-based monetary regime, in the midst of an unprecedentedly massive disinflationary shock courtesy of hundreds of millions coming into global labor force, weakened oil cartels and much reduced geopolitical supply risk, ascendant corporatist political power against decimated trade unions, a relatively-less energy intensive economy and a Bretton Woods II system of real exchange rate appreciation for the developed markets. <br /><br />And we need, what exactly, microfoundations to detect where the possible differences in the causes and consequences of high real energy prices in these two sets of circumstances? Frankly, it's more difficult to find the similarities in these two sets of circumstances than the differences.Majorajamhttps://www.blogger.com/profile/12726411902275032723noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89034035920227234232012-03-14T14:39:55.692+00:002012-03-14T14:39:55.692+00:00For my money, I'm not sure why you are defendi...For my money, I'm not sure why you are defending something that you only have half-hearted support for. Sounds to me that you are picking a fight with PK for little or no reason. The problem with micro-economics applied to a macro scale is that microeconomics is a tool box to be applied to looking at specific markets and the economist who employs those tools can err greatly if they don't understand the caveats of those same tools. Taken to a macro-scale is a bit like using a shovel to build a canal over swamps, mountains etc. You can't aggregate any one tool to the Economy as whole. So, things like Demand mean dramatically different things for Macro than Micro.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-31021989654607819042012-03-11T04:36:56.121+00:002012-03-11T04:36:56.121+00:00I was busy as I just taught the Ramsey-Cass-Koopma...I was busy as I just taught the Ramsey-Cass-Koopmans model. I add that I tend to agree with Krugman, but "The Life of Brian" is much better than "Hotshots" so, this time, the upper hand is on the other foot.Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82525362938873966302012-03-08T19:42:57.449+00:002012-03-08T19:42:57.449+00:00As a somewhat tangential historical footnote, Keyn...As a somewhat tangential historical footnote, Keynes made a point of being concerned with microfoundations. See the discussion in the General Theory of the disconnect between the classical theory of price determination at the level of the firm and the classical views of the aggregate price level and of real wages. In explaining the General Theory he built up from the behaviour of a Marshallian firm, with the warning that, when aggregating from the microfoundations, you couldn't be casual about the cet. par. assumptions you adopted.BSFhttp://cocktailpartyeconomics.com/blogs/noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1845937192302338072012-03-08T15:38:05.934+00:002012-03-08T15:38:05.934+00:00Prof. Wren-Lewis,
Can you elaborate on why you th...Prof. Wren-Lewis,<br /><br />Can you elaborate on why you think the New Keynesian Phillips Curve led to better policy (as opposed to the traditional expectations-augmented or interia-augmented Phillips curve)? The main difference, as I understand it, is that the former includes expected future inflation, not expected current inflation.<br /><br />Thanks.tom mhttps://www.blogger.com/profile/06218456457883749242noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53837973980891179792012-03-08T15:05:08.478+00:002012-03-08T15:05:08.478+00:00Prof. Wren-Lewis,
I am following this fascinating...Prof. Wren-Lewis,<br /><br />I am following this fascinating debate and have studied both your and Prof. Schlicht papers. What calls my attention is the fact that none of you seem to see micofundamtation of macro models as a work in progress. <br />I mean, the whole idea of "go to what works" sounds in my ears as such an idealist epistemologic aproach to the whole issue that cannot be defined by a word different from choking. Why not to say instead that there are amazing results, not yet full established as a unified theoretical body, that definitely demand further studies? <br />Why is it impossible to apply to this issue an aproach epistemolicaly more realist? I mean, even the subjectivity in the process microfundamenting models cannot be understood as anything different from the better of our knowledge at present time... <br />I mean, it is a relatively new discussion, why can't we say that there is so much we still don't know that our work can only be thought as starting?<br />I am realy curious about it...<br />Thanks,<br />EduardoEduardo Weisznoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-17467994724900919822012-03-08T09:44:36.605+00:002012-03-08T09:44:36.605+00:00Simon, you ask "Can the microfoundations appr...Simon, you ask "Can the microfoundations approach embrace all kinds of heterogeneity, or will such models lose their attractiveness in their complexity? Does sticking with simple, representative agent macro impart some kind of bias?" <br />I would answer yes two both your questions, and I have a post on my blog where I give the arguments why I think both you and Paul ought to be even more critical of the call for microfoundations of macroeconomics than you are.<br />http://larspsyll.wordpress.com/2012/03/07/wren-lewis-noahpinion-and-krugman-on-microfoundations-of-macroeconomics/Prof Syllhttp://larspsyll.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-54454529871415819922012-03-08T07:48:23.176+00:002012-03-08T07:48:23.176+00:00Thanks for the link and especially for putting me ...Thanks for the link and especially for putting me in such good company. For noe, I just comment that I share your enthusiasm for that film.Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4067895634813040642012-03-07T20:27:45.109+00:002012-03-07T20:27:45.109+00:00I'd argue that there are two other, more convi...I'd argue that there are two other, more convincing reasons for the oil price shocks to not have had as big of an effect as the 70's:<br /><br />Our cars are more fuel efficient, so relatively the price of transportation has not gone up the same way it did in the 70's.<br /><br />The rise of GPS also leads to more efficient traveling.Anonymousnoreply@blogger.com