tag:blogger.com,1999:blog-2546602206734889307.post2502357992880222923..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Was the neoclassical synthesis unstable?Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-2546602206734889307.post-56483595179906596022014-06-29T17:36:33.164+00:002014-06-29T17:36:33.164+00:00We actually know what happens if the government do...We actually know what happens if the government doesn't intervene in the financial system: look at the various wildcat banking periods. It's a complete mess.<br /><br />There's a reason that, during the "minimum financial regulation" period of the US during the 19th century, they established an "office of the comptroller of the currency". <br /><br />Uncontrolled currency causes really interesting economic problems -- ones which we have decided are intolerable.<br /><br />Still it's really interesting to study those problems.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-72860597161128404472014-06-27T16:40:42.286+00:002014-06-27T16:40:42.286+00:00I think you make a very interesting point, which i...I think you make a very interesting point, which is elaborated in this post of yours: <br />http://robertvienneau.blogspot.co.uk/2014/06/a-sophisticated-neoclassical-response.html<br /><br />It is partly why I made my comment about microeconomists moving away from Arrow-Debreu-McKenzie. Is it revealing that - as far as I know - no economists have attempted to use general equilibrium theory to explain why minimum wage increases do not reduce employment. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83623139221036170232014-06-27T15:35:50.273+00:002014-06-27T15:35:50.273+00:00"What could have been a dialogue of the Poppe..."What could have been a dialogue of the Popperian kind became instead a theoretical and methodological counter revolution. Instead of asking ‘what can we do to get better microfoundations for sticky prices’, the assertion became ‘without good microfoundations we should ignore sticky prices’."<br /><br />What intrigues me is the way economists like to say things like "give me 12 economists and you will get 12 different answers" but in fact, compared to many other disciplines it is very monolithic. There are not competing schools of thoughts giving independent but logically coherent explanations (if they are they are pretty much ignored or forgotten). People keep talking about sticky prices, for example, when it is largely irrelevant (in most countries for example you had flexible prices which was countered very successfully with anti-cyclical policy during the Great Depression). I think the "debate" about sticky prices is an example of economists not really getting into much historical or other depth. Why is there this obsession to have an integrated methodological approach and reach consensus even between things which are incompatible? This is what makes the subject look theological. Why not accept different arguments as case specific which cannot be universally applied. Empiricial studies will then determine when they hold and what the policy response should be.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24288656213624109592014-06-26T14:18:03.805+00:002014-06-26T14:18:03.805+00:00"Standard competitive theory suggests a minim..."Standard competitive theory suggests a minimum wage will reduce employment and raise unemployment."<br /><br />Frank Hahn would find such a claim risible. It is simply not true in rigorous GET.Robert Vienneauhttps://www.blogger.com/profile/00872510108133281526noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70484978807738989742014-06-26T00:35:40.008+00:002014-06-26T00:35:40.008+00:00"As governments are the monopoly providers of..."As governments are the monopoly providers of cash, and provide a backstop to the financial system, they are involved in the ‘market’ whether they like it or not". <br />Of cash, perhaps. The other 97% of money comes from thin air, a promise on future assets, be they real or virtual : <br />http://www.primeeconomics.org/wp-content/uploads/2013/01/The-power-to-create-money-out-of-thin-air6.pdf<br /><br />Your thoughts on real economy vs paper economy would be welcomed !!!! I think Ralph Musgrave would agree ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-27099060779096746252014-06-25T12:13:26.456+00:002014-06-25T12:13:26.456+00:00As I see it there was not only an ideological poli...As I see it there was not only an ideological political agenda behind New Classical economics. It was a methodological preference. Graduate economics came to be dominated by applied mathematicians. The more they entered the discipline the more they shaped it and marginalised outsiders. These people do not like highly subjective analysis or going into the dungeons to sift tediously through archival material to gradually paint a picture of the truth. Or going out into the field or factories like an anthropologist to get primary evidence. They would like to think themselves as being like pure mathematicians who operate in a higher universe. They look for "elegance" in models. The more abstract the better. The less critical reasoning and grey area, the better. For a while this did not only happen in economics - it happened in many other subjects and you need to read Adorno and other Frankfurt philosophers to understand why it happened in the post WWII period. The odd thing was, other subjects abandoned this in the 1970s. Social Constructivism and other such methodology took over. But economics carried on with the trajectory. <br /><br />And that suited the powers to be just fine.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90429305929645235762014-06-25T11:17:25.300+00:002014-06-25T11:17:25.300+00:00"This is one sense in which the term neo-clas..."This is one sense in which the term neo-classical synthesis can be used: to allow the state to combat the market failure represented by Keynesian unemployment (albeit, in the case of Friedman, in as rule like way as possible), but to maintain advocacy of non-intervention elsewhere."<br /><br />I don't think this is a fair characterization of the neoclassical synthesis. I view it as saying that Keynesian macro is relevant when the economy is below full-employment, but once full-employment is reached standard microeconomics applies. This does not imply anything about intervention. Friedman accepted Keynesian macro but was skeptical about intervention in general. Pigou's micro made the case for intervention to address externalizes. In other words, even within the 2 paradigms (Keynesian and neoclassical) there is scope for disagreement over the extent and nature of intervention.<br /><br />Both sides in the debate interpret the evidence to support their point of view. The pro-interventionist side has typically been dominant (since WWII). Both sides try to portray their approach as "scientific" and their analysis and conclusions as objective facts rather than opinions. Whether the scientific method can be applied to economics is highly debatable, the evidence always seems inconclusive.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88893464085241986652014-06-25T11:05:41.928+00:002014-06-25T11:05:41.928+00:00I think the big thing that is getting talked about...I think the big thing that is getting talked about is the importance of the distribution of income. Not just for the sake of fairness, but its importance for growth itself. It is not unrelated to secular stagnation arguments. People working in development studies have long understood that poverty traps are related to concentrations of wealth and political power that suppress the marginal products of large sections of the population. It was once talked about a lot - in the General Theory for example, for its importance in getting multiplier effects. I think the arguments for deregulation and unfettered markets are largely lost. Most people, for example, want tough rules on the financial sector. These particular arguments against government intervention have gone.<br /><br />But the big divide now is the importance of the distribution of wealth. Sustainable growth, according to many people outside the Cochrane/Sargent zone requires a fairly egalitarian wealth distribution. Just going for growth is not enough, even for growth itself.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21589077911858984452014-06-25T07:11:55.429+00:002014-06-25T07:11:55.429+00:00“As governments are the monopoly providers of cash...“As governments are the monopoly providers of cash, and provide a backstop to the financial system, they are involved in the ‘market’ whether they like it or not. Complete non-intervention is not an option…”. <br /> <br />“Non-intervention” and ceasing to have government “backstop the financial system” actually IS AN OPTION. All we need do is have a rule saying that all entities (e.g. like banks) that lend must be funded entirely by shareholders and not by depositors. That way, when a lending entity makes silly loans it cannot go bust, ergo there is no reason for a “backstop”. That system is called "full reserve banking".<br /><br />Put another way, the fragility of the financial system and the need for taxpayer funded backstops arises from our allowing banks / lending entities to have liquid liabilities on one side of their balance sheets that are fixed in value, while they have ILLIQUID assets on the other side which can fall in value (when silly loans are made). That’s a recipe for disaster, as we saw five years ago and has been demonstrated a hundred times over the centuries. But we never learn.<br /><br />Unfortunately bankers pay BIG BUCKS to the economic illiterates in Westminster to induce them to continue with the status quo, and they succeed. Same applies in other countries.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-32484049169700048692014-06-24T13:59:15.906+00:002014-06-24T13:59:15.906+00:00I agree with Caldwell's 'Popper and Hayek:...I agree with Caldwell's 'Popper and Hayek: who influenced whom' (2006) that Popper and Hayek did not methodologically influence each other.<br /><br />DeLong's piece at Project Syndicate 'Re-Capturing the Friedmans' reminds us that Ludwig von Mises called Freidman's monetarists a group of 'socialists'.Anonymousnoreply@blogger.com