tag:blogger.com,1999:blog-2546602206734889307.post4464375504390637227..comments2024-03-29T12:16:15.785+00:00Comments on mainly macro: Heterodox laziness (or worse)Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger105125tag:blogger.com,1999:blog-2546602206734889307.post-59249749058204805292015-02-24T12:59:52.038+00:002015-02-24T12:59:52.038+00:00Of course ample of stupid Post Keynesians are just...Of course ample of stupid Post Keynesians are just distorting mainstream macro and it is pointless to engage with these morons in any way. They are the left-wing equivalent of anti-Keynesian demand denying New Classicals, i.e. a waste of time.<br /><br />But let's not forget that mainstream macro has ignored debt before the crisis and it were Post Keynesians like Minsky and Koo who did not. Great economists like e.g. Krugman acknowledged this blind spot and incorporated this insight into a model.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-14586739655392536352015-01-17T11:30:37.055+00:002015-01-17T11:30:37.055+00:00"The right won the economics debate; left and..."The right won the economics debate; left and right are just haggling over details. "<br /><br />If Nick Rowe is right about winning the academic debate in economics, thankfully, he has a lot of work to do in convincing the ideas of right-wing economic theory to many policy makers, historians, political scientists and many others. Even taking perhaps the most left of policies, prices and incomes policies, NR would very surprised to learn that in many places prices and incomes policies are not daft, and in fact have been used very successfully in many places. This does not mean they work well everywhere at any time. but understanding this would require historical and other such literacy, and a totally different way of thinking than what we have had since 1978, and perhaps since 1945.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83174766360391407952015-01-13T19:57:29.664+00:002015-01-13T19:57:29.664+00:00" the central proposition of welfare economic..." the central proposition of welfare economics: that free trade in competitive markets leads to outcomes that cannot be improved upon by government intervention."<br /><br />Roger Farmer<br /><br />Woops, sorry Anon 05.36!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-44959199207878635912015-01-13T18:56:31.104+00:002015-01-13T18:56:31.104+00:00I do not think you are listening to what I'm s...I do not think you are listening to what I'm saying. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53217916860582775222015-01-13T18:19:34.990+00:002015-01-13T18:19:34.990+00:00I am not sure about that Simon. The New-Classicals...I am not sure about that Simon. The New-Classicals went for Keynesians with a vengeance. You could say that Friedman tried to keep the basic Keynesian framework - he said so, "the framework is right, but not the conclusion" in his article he wrote called "Friedman on Keynes". The New-Classicists were a different matter. In many ways they tried to restore pre-Keynesian monetarism (see Sargent 1981), but in an even more extreme form. It would be good to review what happened, the battles were not pretty. The Keynesians were also grossly misrepresented. Angus Maddison and Robert Gordon are good on this.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-18515224148500435942015-01-13T17:57:41.422+00:002015-01-13T17:57:41.422+00:00Models missed how growth was dependent on fiscal s...Models missed how growth was dependent on fiscal support from government, which makes them very bad models. <br /><br />" Osborne [...] blamed "all sorts of economic storms" for the failure to clear the UK's budget deficit as promised. "<br /><br />Promise, that was based on these failed predictions. In the real world these predictions are used very much as a basis for policy.<br /><br />" Chief Secretary to the Treasury Danny Alexander defended the government's record after Labour accusations its budget promises were "in tatters".<br /><br />The Lib Dem cabinet minister said the coalition had been right not to stick to its targets after economic problems in the eurozone had affected the UK.<br /><br />"The impact of the financial crisis on our own domestic economy also was greater than we expected," he said. "<br /><br />Ditto. What ailed the economy was governments austerity not these silly excuses.<br /><br />This is all product of rubbish economics that produces terrible outcomes. Admitting problem is the first step in the way to solve it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-85810940129891831502015-01-13T17:07:50.379+00:002015-01-13T17:07:50.379+00:00What you are missing is that the forecasts had not...What you are missing is that the forecasts had nothing to do with how fiscal policy is treated in these models. But you also presume that the forecasts, if they had been right, would have justified the policy. Because forecasts often go wrong, you do not take risks with the recovery by undertaking austerity at the ZLB. That is straight macro textbook logic. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-34154208116900982882015-01-13T16:31:15.643+00:002015-01-13T16:31:15.643+00:00On the one hand, you and Krugman are saying that w...On the one hand, you and Krugman are saying that we new keynesians have known effects of fiscal policy for decades. On the other hand, models that produced disastrous predictions about (non-) effects of austerity were orthodox, mainstream new keynesian. What I am missing here?<br /><br />Setting aside the blame game, there is a huge problem here. In the UK for example, conservatives set themselfs a goal "we will balance budged by end of our term", based on these over optimistic forecasts about growth in times of austerity. When the economy fails to deliver, they just move the goalpost to the end of next governments term. And so fort. So the need for austerity never goes away and of course austerity only means spending cuts, not raising taxes.<br /><br />Wrong predictions about economic growth give raise to very toxic political dynamics. There is nothing wrong is people, collectively, want smaller public sector, and exercise their power democratically. But this is far away from democratic choice.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-16331973306155707542015-01-13T15:46:51.974+00:002015-01-13T15:46:51.974+00:00Rather closer to home, lets think about the two ma...Rather closer to home, lets think about the two major revolutions in macro that have occurred in the last century. Both Keynes and the New Classical economists had a deep understanding of what they were trying to overthrow. They did not try and argue that everything that had gone before was worthless, but instead focused on what they thought the critical problems were, and came up with clear alternative ways of doing things. In particular - and this is what this post is about - they did not misrepresent what they were trying to change.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-73310813059414699742015-01-13T15:43:59.583+00:002015-01-13T15:43:59.583+00:00If they were not using heterodox, surely they were...If they were not using heterodox, surely they were using orthodox? <br /><br />Are you saying they were using orthodox models that were not mainstream? How is that even possible?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64486320261815648342015-01-13T15:07:22.565+00:002015-01-13T15:07:22.565+00:00At the risk of flogging a dead horse and further d...At the risk of flogging a dead horse and further drawing out an already lengthy (but interesting) discussion, I want to take issue with this statement of yours. Let me tell a story to do so.<br /><br />Once upon a time, and for quite a long time, the Ptolemaic earth-centered model was perfectly fine for what humans needed to do. That model could explain the motion of heavenly bodies, and it could explain/predict even the seemingly odd retrograde motion of Mars—although the fit wasn’t perfect.<br /><br />Now, we know today that the Ptolemaic model was incorrect, even if it mostly worked. So, given your comment above, what would you tell a young Johannes Kepler?<br /><br />Further, what would you tell Kepler when we used a sun-centered model with the planets in perfectly circular orbits around the sun (because he could then base planetary motion on a nested model of the five perfect solids, thus proving the mind and creation of a perfect God at work)? That model had a better fit with evidence than the Ptolemaic model—except the retrograde motion of Mars was off by, if I recall correctly, two seconds (not minutes or degrees) of arc. Pretty small error—but Kepler took it seriously and refined his model—planetary orbits were not circular but oval, and the five perfect solids were thrown out (a big step on his part). <br /><br />What advice would you give Kepler in either case?<br /><br />Now, I understand that a real rethinking of economics is costly. You have sunk costs in what you are doing—human capital (knowledge), social capital (reputation), etc.—and you are trying to influence policy making to avoid the stupidity that politicians always fall for. Rethinking economics is hard work, and has its risks. But there is not just heterodox literature, but also models and ideas outside mainstream economics (Weber, Bourdieu, etc) that might require thinking outside the box in terms of theory, methods, how we evaluate models, etc. And I think that is what some “heterodox” scholars really are saying.<br /><br />Anyway, a last thought.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-87857235709544425802015-01-13T13:30:37.962+00:002015-01-13T13:30:37.962+00:00Good grief - who said they were using heterodox mo...Good grief - who said they were using heterodox models? Did you read what I just wrote? You should start debating with market monetarists - you have a lot in common. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69041722577040929202015-01-13T13:20:54.217+00:002015-01-13T13:20:54.217+00:00To my knowledge they were using new keynesian and ...To my knowledge they were using new keynesian and new classical models, from where this error originated. But feel free to correct.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82148424479473608582015-01-13T13:07:39.451+00:002015-01-13T13:07:39.451+00:00So the IMF, World Bank, ECB, European Comission, a...So the IMF, World Bank, ECB, European Comission, and national governments were all using heterodox economics?<br /><br />Oh my. Does this heterodox school have a name it would be nice to know.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46600609814189045012015-01-13T12:31:42.099+00:002015-01-13T12:31:42.099+00:00Because it was not my own failure, as everything I...Because it was not my own failure, as everything I have written makes crystal clear. I suggest you do some research before making such a ridiculous statement. Policy makers abandoned mainstream macroeconomics in 2010, as a result of pressure from the right and panic about the Eurozone. That is obvious to anyone who has an open mind.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-17813581821063728802015-01-13T12:23:41.489+00:002015-01-13T12:23:41.489+00:00Why don't you own your failure instead of tryi...Why don't you own your failure instead of trying to squirm out of it? <br /><br />Where did over optimistic projections that were wrong, that growth will resume despite austerity came from if not mainstream? If policy makers are not listening to mainstream, who are they listening to? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-34606999060224146262015-01-12T20:09:51.733+00:002015-01-12T20:09:51.733+00:00Simon, what is your view on Modern Monetary Theory...Simon, what is your view on Modern Monetary Theory (MMT)?Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71561370498430945362015-01-12T18:08:18.595+00:002015-01-12T18:08:18.595+00:00Your argument might make some sense if all of macr...Your argument might make some sense if all of macro fell apart once you stopped assuming rational expectations. It does not. If you do not learn something because you are suspicious of a (small) part of it before learning what role it plays, well in that case someone critical might never learn anything. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-85092549814640677112015-01-12T18:06:14.146+00:002015-01-12T18:06:14.146+00:00I am a private sector macroeconomist who "lea...I am a private sector macroeconomist who "learned" his economics a while ago (circa the seventies) and I think that there are a lot of people somewhat like me who may well have missed out on some of the more recent controversies...Furthermore in the present stage of my career, I happen to work about 9000 km south of the UK, where libraries and book stores are yet to be discovered technical innovations.<br /><br />I have been trying to follow these debates, but it is somewhat hard when you not quite sure of having accessed the fundamental papers on the Internet (forget Journals, they are expensive and anyway, they don't take credit cards from where I live).<br /><br />Please allow me to make this suggestion and erhaps you have already done this or know of someone who has done this well, but it seems to me that you could provide a great service to the non-academic part of the profession: put together a bibliography of essential papers that is easily accessible from the internet and set it up on your blog. I am sure a lot of people like me would be ever so grateful. And on a sarcastic note, I know of a great deal of City economists - been there, done that - who would greatly benefit, but likely won't.bernardnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4626672002723244542015-01-12T17:54:47.481+00:002015-01-12T17:54:47.481+00:00"In my view heterodox economics is far more d..."In my view heterodox economics is far more dangerous in giving young students that lean to the left a distorted view of the mainstream which can have lasting damage. "<br /><br />The starting point of mainstream economics is limited resources and unlimited wants. That is we are all greedy. That is how it defines the economic problem. The basis of modern macro-economics is rational expectations models, something else many people do not feel comfortable with. It is the philosophical foundations that many people don't like. My guess it is particularly uncomfortable having such foundations for people whose strengths are in the humanities and philosophical side, people who naturally like to question. They just do not like starting off their way of thinking this way.<br /><br />But these may have an interest in economic problems and most likely could be very creative and make a very important contribution.<br /><br />Spending years learning something which they think starts off very suspiciously entails a huge opportunity cost and they may not consider it the best way of getting to the truth.<br /><br />What do you suggest they do?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-68676916777483274872015-01-12T12:13:52.311+00:002015-01-12T12:13:52.311+00:00I can only speak for myself; I have no more convin...I can only speak for myself; I have no more convincing method, but that's exactly my problem. It's a case where intuition and available methods do not seem to fit. I have now found something by Ken Binmore discussing the problems and proposing a solution, but I have not yet really understood it.Achimnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-48644111774614589762015-01-12T07:07:58.271+00:002015-01-12T07:07:58.271+00:00"Or does "aggregate welfare increased af..."Or does "aggregate welfare increased after a redistribution" imply that efficiency can be increased by the redistribution as well?"<br /><br />Yes!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-84012488091298125762015-01-12T02:41:10.320+00:002015-01-12T02:41:10.320+00:00The problem is that heterodox in the real world is...The problem is that heterodox in the real world is now orthodox - no one believes in orthodox economics any more. Whilst the row goes on about the necessity and impact of austerity there is a sense that orthodox models are unable to cope with the reality of fearful markets and that heterodox "economists" are just frightened renters. Someone needs to change the game?Anonymoushttps://www.blogger.com/profile/00942366424372816367noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-47279404082690180522015-01-11T19:20:51.642+00:002015-01-11T19:20:51.642+00:00But I thought your original argument was that dimi...But I thought your original argument was that diminishing marginal utility was not important in what mainstream economics did. And what alternative more convincing method do you have in mind? Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-79512941018848894262015-01-11T19:17:01.074+00:002015-01-11T19:17:01.074+00:00"Then why do many mainstream economists aggre..."Then why do many mainstream economists aggregate utility across individuals to construct social welfare functions? I think this is a good example of those on the right trying to suggest economics says something (utility cannot be compared across individuals) which does not represent what mainstream economists actually do. "<br /><br />Simon, I don't think that claim is completely right. Of course mainstream economists aggregate; that however does not say that they do it in a consistent way.<br /><br /> I, at least, am absolutely sympathetic to redistribution and I think that "equalizing marginal utility" sounds a lot like good intuition; but it still seems to me that this is not a consistent method. "why do many mainstream economists aggregate utility across individuals to construct social welfare functions"? Because it is the only way that we have to answer the questions we want to answer; but that does not mean that we have a convincing method. Economists often assume populations consisting of quasilinear-utility individuals or identical individuals so that they can aggregate consistently - but what if we want to say something about non-identical people with non-quasilinear utility functions... Internal and external consistency are not always good friends.<br /><br />However, if you could point me to literature discussing this, I'd be grateful.Achimnoreply@blogger.com