tag:blogger.com,1999:blog-2546602206734889307.post4547828176480048543..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Microfoundations and the Phillips curveMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-2546602206734889307.post-11075410019620341312014-04-11T14:02:33.545+00:002014-04-11T14:02:33.545+00:00To say the evidence on the New Keynesian Phillips ...To say the evidence on the New Keynesian Phillips curve is equivocal is optimistic. The evidence is far more hostile than favourable. The current position is well summed up in the latest edition of Romer's Advanced Macroeconomics. As for Calvo pricing, it would be hard to think of a less microfounded concept. If you want to find a degenerating research programme, look no farther than New Keynesianism..Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86905371734117152732014-04-07T08:31:03.860+00:002014-04-07T08:31:03.860+00:00It seems to me that even after the 2008 crisis whe...It seems to me that even after the 2008 crisis when serious questions were raised about the value of macro-economic theory (that means to people that seem to need reminding - its contribution to informing policy), that the orthodoxy (that macroeconomics must be pursued through a certain way - general equilibrium models) seems to have re-emerged stronger than ever. <br /><br />I foresee an increasing disconnect between the academic macroeconomists and decision makers and academic macroeconomists and academics outside economics departments (apart from perhaps those in Mathematics). Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-67878443487919919822014-04-06T14:10:57.170+00:002014-04-06T14:10:57.170+00:00"So, to summarise. The Phillips curve shows w..."So, to summarise. The Phillips curve shows why microfoundations macro is really useful. However it also shows why microfoundations modelling should not be the only way of doing proper macroeconomics."<br /><br />Seems very sensible to me. Keep all promising lines of enquiry open. But why is it that macroeconomics=microfounded modelling?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55428764958732256562014-04-03T16:15:04.940+00:002014-04-03T16:15:04.940+00:00People might be less sceptical about the political...People might be less sceptical about the political elite and their use of economists using micro-founded models as a basis of policy advice if they can explain<br /><br />(1) What are they<br />(2) Are they empirically well-founded<br />(3) Are they ontologically and epistemologically well-founded.<br /><br />Once we have identified what micro-founded means, we can then start asking who came up with things things when and where and why. We can then develop several possible counter-narratives. This should be done without models or any maths. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-77072052272946418952014-04-03T15:12:13.551+00:002014-04-03T15:12:13.551+00:00unrelated:
http://krugman.blogs.nytimes.com/2014/...unrelated:<br /><br />http://krugman.blogs.nytimes.com/2014/04/03/on-the-pathetic-left/<br /><br />On the Pathetic Left by Paul Krugman<br />April 3, 2014<br /><br />"Simon Wren-Lewis asks,<br /><br />Why does the economic policy pursued or proposed by the left in Europe often seem so pathetic?<br /><br />citing the Hollande government as the prime example, but also the limpness of Labour in Britain. And he suggests that it’s a question of resources and organization:<br /><br />Seeking out good advice (and distinguishing it from bad advice) takes either money or time. An established government finds this much easier than an opposition or a new government.<br /><br />Well, I can’t speak to the European situation, but we had our own version of the sorta-kinda left utterly failing to take on austerian macro — Obama’s “pivot” from jobs to deficits, which actually began in 2009, back when Democrats still controlled both houses of Congress. And you can’t make the resources argument there; not only was Obama a sitting president with a Congressional majority, but modern U.S. progressivism has a large policy-analysis apparatus outside the government, much of which was arguing strenuously against the pivot. Yet there was Obama in November 2009 (!) warning, on Fox News no less, that excessive deficits might cause a double-dip recession.<br />..."<br />Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-20295105206820962482014-04-03T10:46:05.124+00:002014-04-03T10:46:05.124+00:00Simon, You seem to suggest there is a choice betwe...Simon, You seem to suggest there is a choice between ad hoc theorising and taking microfoundations into account. Strikes me that decent ad hoc theorising can perfectly well take microfoundations into account. I.e. aren’t you confusing issues?<br /><br />Indeed, a possible example of ad hoc theororisers doing better than those allegedly rigorous “microfounders” came with Ricardian equivalence. That is Ricardianism is a form of microfoundation, and all sorts of models were built on the assumption of Ricardianism actually exists. In contrast, various ad hoc theorisers sat in their armchairs pondering whether the average household was likely to engage in Ricardian type calculations, and decided that that was unlikely – a point which has been confirmed by the empirical evidence I think.<br /><br />Having said that, of course the ideal is rigorous microfounding backed by decent evidence as to what micro phenomenon exist and actually measuring them.<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-19633006836382674452014-04-03T09:31:57.335+00:002014-04-03T09:31:57.335+00:00Simon: "Once you do the microfoundations prop...Simon: "Once you do the microfoundations properly, you find that inflation today depends on expected inflation next period: the New Keynesian Phillips curve (NKPC)."<br /><br />Is that *generally* true? I would say that is true only for one specific type of microfoundation, the Calvo model.<br /><br />E.g. suppose all firms have to set prices for one period before the AD shock is revealed, but a small percentage chosen at random are allowed to changes their prices after the AD shock is revealed.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71697313084983040802014-04-03T08:19:26.842+00:002014-04-03T08:19:26.842+00:00Krugman blog MARCH 12, 2014, 'Wages of Fear (S...Krugman blog MARCH 12, 2014, 'Wages of Fear (Somewhat Wonkish)':<br /><br />"Ever since the 1970s, textbook macroeconomics – reflecting the experience of the 1970s — has assumed an “accelerationist” framework, in which low unemployment leads not just to rising wages but to an ever-rising rate of wage increase. But the actual data haven’t looked like that for a long time. Since the mid-1990s, in fact, they have looked much more like an old-fashioned Phillips curve, with a relationship between the unemployment rate and the level of wage increase, not the rate of change of wage increase."<br /><br />If you remember Krugman thought deflation would hit the US because he stuck initially to the new Phillips curve without inflation anchoring.<br /><br />Francis Bacon 1620 The New Organon [Book One]:<br /><br />"Those who have handled sciences have been either men of experiment or men of dogmas. The men of experiment are like the ant, they only collect and use; the reasoners resemble spiders, who make cobwebs out of their own substance. But the bee takes a middle course: it gathers its material from the flowers of the garden and of the field, but transforms and digests it by a power of its own. Not unlike this is the true business of philosophy; for it neither relies solely or chiefly on the powers of the mind, nor does it take the matter which it gathers from natural history and mechanical experiments and lay it up in the memory whole, as it finds it, but lays it up in the understanding altered and digested. Therefore from a closer and purer league between these two faculties, the experimental and the rational (such as has never yet been made), much may be hoped."<br /><br />Freshwater economics is an inland waterway infested with spiders!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33860085296329298802014-04-03T05:25:16.522+00:002014-04-03T05:25:16.522+00:00Fischer did a pretty good job of micro-founding in...Fischer did a pretty good job of micro-founding inflation inertia in the 1970s with his introduction of long-term labour contracts. Long-term being longer than the (monthly or thereabouts) decision cycle of the central bank. I still find this micro-founded story more compelling than the 'calvo fairy' alternative.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-20006701367694623822014-04-02T23:42:02.717+00:002014-04-02T23:42:02.717+00:00Thanks!Thanks!Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-62551096638275785762014-04-02T21:49:58.090+00:002014-04-02T21:49:58.090+00:00A minor correction needed to the text. In the seve...A minor correction needed to the text. In the seventh paragraph you have written "Svensson's paper" even though you're obviously referring to Steinsson's.Anonymoushttps://www.blogger.com/profile/07730077084140053327noreply@blogger.com