tag:blogger.com,1999:blog-2546602206734889307.post7807608304925139263..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: More on Schools of ThoughtMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-2546602206734889307.post-25873474932273331722012-02-18T19:16:21.672+00:002012-02-18T19:16:21.672+00:00I lived through Thatcher's economic policies a...I lived through Thatcher's economic policies and the unemployment devastated vast swathes of British society. It would seem that the old-school Keynesians were on to something. Thatcher's monetarism did nothing good and eventually led to rampant high interest rates 16.5% for a 30 year mortgage!! Can somebody tell me what good her policies did?Pinkybumhttps://www.blogger.com/profile/14966880596265799283noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5512911244771586402012-02-16T16:27:28.473+00:002012-02-16T16:27:28.473+00:00"The kind of thing I had in mind here include..."The kind of thing I had in mind here include politicians thinking that austerity would not increase unemployment, because those that worried that it would were from the same misguided Keynesian school that opposed Margaret Thatcher’s monetarism in 1981. "<br /><br />Didn't her policies radically increase unemployment?Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-20519351982385838202012-02-14T12:30:54.006+00:002012-02-14T12:30:54.006+00:00Perhaps. It would be interesting to know how the n...Perhaps. It would be interesting to know how the number of climate scientists and the amount of climate research has evolved since the climate change hypothesis became popular in the 1970s and 1980s.<br /><br />As a layman, my impression is that prior to the climate change hypothesis climatology was a much smaller field, mainly focused on understanding how the weather has evolved over time as a result of natural factors. Today, the enterprise seems much bigger and more focused on the possibility of human-caused climate change (and hence rather less scientific because there is much less evidence to go on--i.e. the past 100 years or so--and much more focused on extrapolating trends into the future). <br /><br />If I'm right, then there has been a big change whereby a rather small, arcane field of study has been replaced by a large-scale enquiry into the possibility of averting global disaster. Thus, most of the scientists currently in the field are probably motivated by the "sexy" climate change hypothesis, rather than the dry study of historical weather patterns.econojonhttps://www.blogger.com/profile/11836028530972814027noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21813131171912639312012-02-14T07:58:00.344+00:002012-02-14T07:58:00.344+00:00Scientists choose to study climate. The "cha...Scientists choose to study climate. The "change" aspect of it is an observation, not a vocation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-66526070224667187952012-02-10T15:07:40.100+00:002012-02-10T15:07:40.100+00:00it reflects an ideological divide about state inte...it reflects an ideological divide about state intervention<br /><br />is that true, or are those of us who are cynics right: that 1/2 of the divide is a group of economists who are continually seek to maximize their future earnings potential<br /><br />http://www.nakedcapitalism.com/2011/04/blacklisted-economics-professor-found-dead-nc-publishes-his-last-letter.html<br /><br />of course, events only re-enforce this POV<br /><br />Look at this paragraph by Alan Greenspan, so well mocked by so many:<br /><br />Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque. With notably rare exceptions (2008, for example), the global “invisible hand” has created relatively stable exchange rates, interest rates, prices, and wage rates.<br /><br />http://crookedtimber.org/2011/03/30/with-notably-rare-exceptions/<br /><br />Taylor then invites someone this intellectually dishonest to speak and participate in his new book and nothing is done to defrock either Taylor or Greenspan.<br /><br />Those of us in the public watch this level of intellectual dishonesty and have rightly concluded that something is very very wrong about macro.John L. Davidson, Esq., Saint Louis, Missourihttps://www.blogger.com/profile/06489381481280010964noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11193738480014555292012-02-09T20:11:49.200+00:002012-02-09T20:11:49.200+00:00Macro is limited. It tells you if something chang...Macro is limited. It tells you if something changes, something else must, but it doesn't necessarily tell you what the something else is. If only two things change, depending on which two they are macro either tells you they both go up or down together, or it tells you that as one goes down, the other goes up.<br /><br />It does not tell you how to make something happen - except if you control everything else, in which case you know it has to happen. But if you could control everything else you would be God and we wouldn't be in a mess.<br /><br />Various macro schools of thought reflect different views on what could happen, what might happen, or what has been known to happen in response to some change or other. These differences give rise to disagreements.<br /><br />Micro is about linkages and mechanisms. There are an imaginably large number of these, all of which are probably valid somewhere, so none of them are wrong. Each economist can add his or her own pet linkage without disagreeing about the other linkages of other economists. No discourteous disagreements are necessary, so no tribal taking sides in a duel to the death!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11287863051322804462012-02-09T14:39:21.692+00:002012-02-09T14:39:21.692+00:00"monetary policy became relatively impotent a..."monetary policy became relatively impotent at the zero bound after the Great Recession"<br /><br />UK real GDP, quarter on quarter, vs Bank Rate:<br /><br />2008 Q1: 0.0% (Bank Rate: 5% throughout)<br />2008 Q2: -1.5% (Bank Rate: 5% throughout)<br />2008 Q3: -2.0% (Bank Rate: 5% throughout)<br />2008 Q4: -2.3% (Bank Rate dropped to 2%; average rate over quarter 3.3%)<br />2009 Q1: -1.6% (Bank Rate lowered to 0.5% by March, average rate 1% over q)<br /><br />This is the period during which monetary policy was "potent"? The UK suffered its deepest contraction in modern history in the period above, and Bank Rate was ABOVE ZERO FOR ALMOST ALL OF THAT PERIOD.<br /><br />If your model tells you monetary policy is effective ABOVE the ZLB, then why are you not decrying the MASSIVE failure of monetary policy in 2008? Why are you not asking how the Bank of England failed so badly?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-23250058050709363382012-02-09T13:10:03.992+00:002012-02-09T13:10:03.992+00:00"And I'm really not sure if all New Keyne..."And I'm really not sure if all New Keynesians understand the importance of this distinction, and that NK models only make sense (if at all) in a monetary exchange economy. (I.e. NK models are nonsense in a barter economy)."<br /><br />I'm pretty sure Woodford would explicitly reject this assertion, he seems to believe money is not important for NK results, except as a unit of account. All that matters are sticky prices and the ability to control the interest rate.econojonhttps://www.blogger.com/profile/11836028530972814027noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-80899140193749912242012-02-09T13:04:05.358+00:002012-02-09T13:04:05.358+00:00"The microfoundation of macroeconomics does l..."The microfoundation of macroeconomics does logically imply that mainstream macro should be as free from alternative schools as microeconomics."<br /><br />This is only true insofar as microeconomics means the same thing in both macro and micro. I'm not sure that it does. Microeconomists typically don't take the microfoundations in macro seriously; they seem to regard them as less rigorous than "proper" microeconomic analysis. So, even though macroeconomists claim to use models with microfoundations, this doesn't imply the analysis should be as free from schools of thought as micro appears to be.<br /><br />As for the absence of schools of thought within micro, I wonder if there's an element of people who tend to favour government intervention studying models with externalities, whereas others regard externalities as unimportant and hence research something else. I've often thought there may be an element of this in the climate change "consensus", as one is unlikely to become a climate change scientist if he does not initially believe in climate change, just as he is unlikely to devote his life to the study of the Bible if he is an atheist.econojonhttps://www.blogger.com/profile/11836028530972814027noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90313880967219598352012-02-09T08:05:08.060+00:002012-02-09T08:05:08.060+00:00On the micro vs macro difference: It seems to me t...On the micro vs macro difference: It seems to me that due to the prevalence of aggregate feedback loops in macro (output becomes income, savings becomes investment + consumption etc.) even minor behavioral "irrationalities" tend to amplify into major effects under some extreme conditions. E.g. herding leads to flights to safety leading to liquidity trap, inflation illusion leads to price stickiness leading to labor market clearance failure etc. This matters much less in micro since *aggregation* and feedback amplification are not that much of a problem.Arun Gargnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15137045116809705312012-02-08T23:38:08.387+00:002012-02-08T23:38:08.387+00:00Simon: "This would require freshwater macroec...Simon: "This would require freshwater macroeconomists to recognise that New Keynesian models are essentially RBC models plus sticky prices,...."<br /><br />I can imagine a model of a barter economy with sticky prices. And I can imagine a model of a monetary exchange economy with sticky prices. And those two models are very very different.<br /><br />In my opinion, New Keynesian macroeconomic models only make sense as models of monetary exchange economies. And the whole concept of aggregate demand and the problem of deficient demand only make sense in a monetary exchange economy.<br /><br />And I'm really not sure if all New Keynesians understand the importance of this distinction, and that NK models only make sense (if at all) in a monetary exchange economy. (I.e. NK models are nonsense in a barter economy).<br /><br />And I'm even less sure if "freshwater economists" are clear on this distinction.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com