dunnettreader + economic_models   158

Politics and numbers | The Enlightened Economist
I’m thoroughly enjoying William Deringer’s Calculated Values: Finance, Politics and the Quantitative Age – almost finished. The book asks, why from the early…
reviews  17thC  18thC  19thC  economic_history  economic_culture  economic_models  statistics  rhetoric-political  political_press  parties  partisanship  books  review  kindle-available  from instapaper
march 2018 by dunnettreader
Paul Pfleiderer a Chameleons: The Misuse of Theoretical Models in Finance and Economics (2014) | Stanford Graduate School of Business
Chameleons: The Misuse of Theoretical Models in Finance and Economics
By Paul Pfleiderer
March 2014Working Paper No. 3020
Finance
In this essay I discuss how theoretical models in finance and economics are used in ways that make them “chameleons” and how chameleons devalue the intellectual currency and muddy policy debates. A model becomes a chameleon when it is built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically (or not critically enough) applied to understanding our economy. I discuss how chameleons are created and nurtured by the mistaken notion that one should not judge a model by its assumptions, by the unfounded argument that models should have equal standing until definitive empirical tests are conducted, and by misplaced appeals to “as-if” arguments, mathematical elegance, subtlety, references to assumptions that are “standard in the literature,” and the need for tractability.

Download
financial_system  downloaded  macroeconomics  economic_policy  economic_theory  economic_models 
april 2017 by dunnettreader
Adair Turner - The Skills Delusion | Project Syndicate - Oct 2016
LONDON – Everybody agrees that better education and improved skills, for as many people as possible, is crucial to increasing productivity and living standards…
economic_growth  economic_models  economic_history  inequality  social_mobility  education-higher  education-training  skills  Labor_markets  wages  student_debt  from instapaper
october 2016 by dunnettreader
Harry Garretsen and Ron Martin - Rethinking (New) Economic Geography Models: Taking Geography and History More Seriously | Spatial Economic Analysis: Vol 5, No 2 (2010)
Harry Garretsen and Ron Martin -- Spatial Economic Analysis, Vol. 5 , Iss. 2, 2010 -- Two aspects of New Economic Geography models are often singled out for criticism, especially by geographers: the treatment of geography, typically as a pre-given, fixed and highly idealized abstract geometric space; and the treatment of history, typically as ‘logical’ time (the movement to equilibrium in a model's solution space) rather than real history. In this paper we examine the basis for these criticisms, and explore how far and in what ways NEG models might be made more credible with respect to their representation of geography and history, and particularly whether and to what extent the work of geographers themselves provides some insights in this regard. We argue that the conceptualization of space and time is in fact a challenge for both NEG theorists and economic geographers, and that, notwithstanding their ontological and epistemological differences, both groups would benefit from an interchange of ideas on this front. -- downloaded to Tab S2
article  downloaded  economic_theory  economic_sociology  geography-and-economics  geography  economic_models  philosophy_of_social_science  historical_sociology  historiography 
august 2016 by dunnettreader
Michael T. Kiley - Macroeconomic Modeling of Financial Frictions for Macroprudential Policymaking: A Review of Pressing Challenges | FRB: FEDS Notes: May 2016
Structural macroeconomic modeling plays a central role economic policy discussions. Over the past fifty years, the overwhelming majority of such efforts have focused on the structural features of household, firm, and government behavior that lead to cyclical fluctuations in employment and inflation and the roles of monetary and fiscal policy in ameliorating undesirable volatility in economic performance. In recent years, the potential role of macroprudential policies in limiting excessive volatility in the financial sector and the consequent effects on economic performance has risen to the fore in academic and policy discussions. While progress in modeling for macroprudential policy analysis has been substantial, there remain many important challenges, and consensus on a core modeling framework remains far away. This note reviews some of the progress witnessed in recent years and challenges that remain. - downloaded to Tab S2
paper  Fed  macroprudential_policies  macroeconomics  economic_models  economic_theory  financial_stability  Great_Recession  bank_runs  money_market  housing  households  house_prices  leverage  intermediation  non-linear_models  downloaded 
july 2016 by dunnettreader
Bond Economics: review, "Capitalism" - By Anwar Shaikh - April 2016
Capitalism: Competition, Conflict, Crises is a comprehensive overview of economics published by the noted heterodox economist Anwar Shaikh. This article is…
Instapaper  books  reviews  economic_theory  heterodox_economics  macroeconomics  capitalism  business_cycles  competition  capitalism-systemic_crisis  financial_crisis  emergence  econophysics  economic_models  from instapaper
may 2016 by dunnettreader
Geoffrey M. Hodgson - Conceptualizing Capitalism (summary) - Books & ideas - May 2015
Conceptualizing Capitalism: How the Misuse of Key Concepts Impedes our Understanding of Modern Economies -- One of the most commonly used concepts in modern humanities and social sciences, capitalism is also one of the most misunderstood. Away from politically biased takes on the subject, Geoffrey M. Hodgson proposes a new, law-based framework for understanding capitalism. Downloaded pdf to Note
books  kindle-available  intellectual_history  economic_theory  economic_models  economic_sociology  political_economy  legal_theory  philosophy_of_social_science  capitalism  downloaded 
april 2016 by dunnettreader
Brad DeLong - No: We Can't Wave a Magic Demand Wand Now and Get the Recovery We Threw Away in 2009 - Feb 2016
The estimable Mike Konczal writes: Mike Konczal: Dissecting the CEA Letter and Sanders's Other Proposals: "I would have done Gerald Friedman’s paper…
Instapaper  Great_Recession  macroeconomic_policy  macroeconomics  economic_growth  economic_models  hysterisis  elections-2016  from instapaper
february 2016 by dunnettreader
M. Ali Khan, The Irony in/of Economic Theory | JSTOR - MLN Vol. 108, No. 4 (Sep., 1993)
MLN, Vol. 108, No. 4, French Issue (Sep., 1993), pp. 759-803 -- DOI: 10.2307/2904961 -- via Eric Schliesser, attack on lack of reflexive thought by economists about the nature of their own enterprise and the assumptions undergirding their work -- starts with Samuelson's justification of the language of mathematics, and includes discussion of Kenneth Boulding's attack on his own profession for its failure to engage in philosophy of science, referring back positively to Veblen's critique -- downloaded pdf to Note
article  jstor  philosophy_of_science  philosophy_of_social_science  economic_theory  economic_models  history_of_science  history-and-social_sciences  economic_history  sociology_of_knowledge  sociology_of_science  mathematization  Methodenstreit  Samuelson  downloaded 
january 2016 by dunnettreader
Ravi Kanbur, Joseph Stiglitz - Wealth and income distribution: New theories needed for a new era | VOX, CEPR’s Policy Portal - 18 August 2015
Growth theories traditionally focus on the Kaldor-Kuznets stylised facts. Ravi Kanbur and Nobelist Joe Stiglitz argue that these no longer hold; new theory is needed. The new models need to drop competitive marginal productivity theories of factor returns in favour of rent-generating mechanism and wealth inequality by focusing on the ‘rules of the game.’ They also must model interactions among physical, financial, and human capital that influence the level and evolution of inequality. A third key component will be to capture mechanisms that transmit inequality from generation to generation. -- short and sweet summary of the various gaps in standard models and where both new explanatory and normative work needed -- also see references -- downloaded as pdf to Note
paper  economic_growth  economic_theory  economic_models  capital  productivity-labor_share  production  macroeconomics  distribution-wealth  distribution-income  inequality  inequality-wealth  labor_share  wages  inequality-opportunity  downloaded 
september 2015 by dunnettreader
Noah Smith - Economics Has a Math Problem - Bloomberg View - September 2015
A lot of people complain about the math in economics. Economists tend to quietly dismiss such complaints as the sour-grapes protests of literary types who lack…
Instapaper  economic_theory  economic_models  mathematization  statistics  big_data  machine_learning  from instapaper
september 2015 by dunnettreader
David Glaser - Romer v. Lucas | Uneasy Money - August 13 2015
If the social functions of science were being efficiently discharged, this rather obvious replacement of problem solving by question begging would not have escaped effective challenge and opposition. But Lucas was able to provide cover for this substitution by persuading the profession to embrace his microfoundational methodology, while offering irresistible opportunities for professional advancement to younger economists who could master the new analytical techniques that Lucas and others were rapidly introducing, thereby neutralizing or coopting many of the natural opponents to what became modern macroeconomics. So while Romer considers the conquest of MIT by the rational-expectations revolution, despite the opposition of Robert Solow, to be evidence for the advance of economic science, I regard it as a sign of the social failure of science to discipline a regressive development driven by the elevation of technique over substance.
prices  sociology_of_knowledge  sociology_of_science  neoclassical_economics  Keynesianism  RBC  economic_models  macroeconomics  Kuhn  Romer  Laktos  economic_theory  Solow  New_Keynesian  sociology_of_science_&_technology  equilibrium  microfoundations  rational_expectations  mathematization  from instapaper
august 2015 by dunnettreader
Paul Newall interview with John Dupré: The Disunity of Science (2006) - The Galilean Library
John Dupré is a professor of philosophy of science in the Department of Sociology and Philosophy at Exeter University in the UK, and also the director of Egenis, the ESRC Centre for Genomics in Society. I was able to ask him about several keys areas of his work and relate it to contemporary issues in both science and the philosophy of science. -- Hits all my hot buttons. Anti mathematization of economics and its divorce from empiricism, disdainful of evo-devo psych, the Centre is part of a larger program looking at impacts of genetics and biology, from philosophy through sociology, economics, politics, art and humanities. Pal of Nancy Cartwright, Philip Kitcher and part of the "Stanford School". Author of Darwin's Legacy on Kindle -- downloaded page as pdf to Note
interview  philosophy_of_science  scientific_method  scientific_culture  scientism  methodology  laws_of_nature  empiricism  pragmatism  genetics  evolutionary_biology  molecular_biology  epigenetics  evo_psych  economic_models  mathematization  kindle  downloaded 
july 2015 by dunnettreader
B. Akitoby, Sanjeev Gupta, A. Senhadji - How fiscal policy can support medium- to long-term growth | VOX, CEPR’s Policy Portal - 18 July 2015
Bernardin Akitoby, Sanjeev Gupta, Abdelhak Senhadji -- IMF Research staff -- There has been a heated debate about the effectiveness of fiscal policy as a countercyclical tool but little evidence on how it can support growth. This column shows that fiscal policy can lift medium- and long-term growth in both advanced and developing economies. But all fiscal reforms are not equal in their growth dividend. Successful reforms are often part of a broader reform package and can balance the growth-equity trade-off.
Instapaper  fiscal_policy  fiscal_space  economic_theory  Keynesian  New_Keynesian  macroeconomics  economic_models  economic_growth  economic_policy  reform-economic  inequality  unemployment  countercyclical_policy  from instapaper
july 2015 by dunnettreader
Paul Frijters - An Economic Theory of Greed, Love, Groups, and Networks | Cambridge University Press - March 2013
PaperbackISBN: 9781107678941 $63.95 inc GST --;Why are people loyal? How do groups form and how do they create incentives for their members to abide by group norms? Until now, economics has only been able to partially answer these questions. In this groundbreaking work, Paul Frijters presents a new unified theory of human behaviour. To do so, he incorporates comprehensive yet tractable definitions of love and power, and the dynamics of groups and networks, into the traditional mainstream economic view. The result is an enhanced view of human societies that nevertheless retains the pursuit of self-interest at its core. This book provides a digestible but comprehensive theory of our socioeconomic system, which condenses its immense complexity into simplified representations. The result both illuminates humanity's history and suggests ways forward for policies today, in areas as diverse as poverty reduction and tax compliance.
books  economic_theory  economic_models  economic_sociology  utility  rationality-economics  behavioral_economics  networks  action-theory  self-interest  altruism  power  loyalty 
july 2015 by dunnettreader
Paul Beaudry, Dana Galizia, Franck Portier - The market economy’s stability | VOX, CEPR’s Policy Portal - 04 July 2015
Whereas some view the macroeconomy as overall stable and on a smooth long-run growth path, others argue it is unstable with repeated periods of booms and busts. This column suggests that the market economy is inherently unstable and booms and busts arise endogenously as the results of market incentives. Monetary policy is then perhaps not the right tool for addressing macroeconomic fluctuations. Instead, policies aimed at changing the incentives would be more appropriate.
macroeconomics  economic_models  economic_theory  business_cycles  monetary_policy  incentives  macroprudential_policies  non-linear_models  stability  downloaded 
july 2015 by dunnettreader
Markus Brückner, Daniel Lederman - Effects of income inequality on economic growth | VOX, CEPR’s Policy Portal - 07 July 2015
The relationship between aggregate output and income inequality is central in macroeconomics. This column argues that greater income inequality raises the economic growth of poor countries and decreases the growth of high- and middle-income countries. Human capital accumulation is an important channel through which income inequality affects growth.
economic_growth  economic_models  macroeconomics  inequality  inequality-wealth  trickle-down  LDCs  OECD_economies  human_capital 
july 2015 by dunnettreader
Werner Plumpe - The hour of the expert - economic expertise over 4 centuries - Eurozine - October 2012
What constitutes economic expertise? Looking at how European politics has answered this question over the last four centuries, Werner Plumpe argues that, at any given time, economic expertise is judged according to its coincidence with the conjuncture. -- Original in German -- Translation by Samuel Willcocks -- First published in Merkur 9-10/2012 (German version); Eurozine (English version) -- quite amusing, but nice overview that isn't excessively Anglo oriented
economic_history  economic_theory  expertise  sociology_of_knowledge  social_sciences  positivism  social_sciences-post-WWII  macroeconomics  economic_models  17thC  18thC  19thC  20thC  21stC  Europe-Early_Modern  intellectual_history  grand_narrative  narrative-contested  political_economy  economic_culture  economic_policy  capitalism  capitalism-varieties  capitalism-systemic_crisis  laisser-faire  cameralism  government-roles  business_cycles  business-and-politics  Keynesianism  neoclassical_economics  Austrian_economics  liberalism-19thC  finance_capital  bank_runs  financial_crisis  regulation  Marxism  public_enterprise  public_goods  infrastructure  market_fundamentalism  downloaded 
july 2015 by dunnettreader
Mark Buchanan - Paul Romer mis-handles atomic physics | Medium - June 2015
He thinks that some of the core mathematical models of modern economics are every bit as sound and scientific as Niels Bohr’s 1913 model of the atom. It’s not… The tale of Bohr's work within a community of theorists and experimental scientists trying to come up with an explanation for confounding experimental results of electron behavior is the exact opposite of the development of the Arrow-Debreu theorem, and the opposite of how the "midel" was subsequently used by theorists in the given domain. A perfect indictment of how "mathiness" has contaminated the entire field of macroeconomic theory.
Instapaper  scientific_method  physics  history_of_science  sociology_of_science_&_technology  sociology_of_knowledge  macroeconomics  economic_theory  economic_models  from instapaper
june 2015 by dunnettreader
Robert Waldmann - Angry Bear » What Remains of the Keynesian Revolution ? - February 2009
Robert Waldmann I like to criticize financies, financial regulators and fresh water economists. I should defend something for once. It is easy to criticize. So… -- with one outlier, the data still looking Keynesian
Instapaper  economic_theory  economic_models  macroeconomics  Great_Recession  Keynesianism  neoclassical_economics  RBC  rational_expectations  supply-side  demand-side  business_cycles  monetary_policy  fiscal_policy  from instapaper
june 2015 by dunnettreader
Paul Beaudry, Dana Galizia, Franck Portier - Reviving the Limit Cycle View of Macroeconomic Fluctuations | NBER - June 2015
NBER Working Paper No. 21241 --There is a long tradition in macroeconomics suggesting that market imperfections may explain why economies repeatedly go through periods of booms and busts, with booms sowing the seeds of the subsequent busts. This idea can be captured mathematically as a limit cycle. For several reasons, limit cycles play almost no role in current mainstream business cycle theory. In this paper we present both a general structure and a particular model with the aim of giving new life to this mostly dismissed view of fluctuations. We begin by showing why and when models with strategic complementarities—which are quite common in macroeconomics—give rise to unique equilibrium dynamics characterized by a limit cycle. We then develop and estimate a fully-specified dynamic general equilibrium model that embeds a demand complementarity to see whether the data favors a configuration supportive of a limit cycle. Booms and busts arise endogenously in our setting because agents want to concentrate their purchases of goods at times when purchases by others are high, since in such situations unemployment is low and therefore taking on debt is perceived as being less risky. A key feature of our approach is that we allow limit-cycle forces to compete with exogenous disturbances in explaining the data. Our estimation results indicate that US business cycle fluctuations in employment and output can be well explained by endogenous demand-driven cycles buffeted by technological disturbances that render those fluctuations irregular. -- Duh!
paper  paywall  economic_theory  macroeconomics  neoclassical_economics  Keynesianism  economic_models  business_cycles  demand-side  credit  animal_spirits 
june 2015 by dunnettreader
Frank Hahn - Some Adjustment Problems | JSTOR - Econometrica, Vol. 38, No. 1 (Jan., 1970), pp. 1-17
Some Adjustment Problems, F. H. Hahn, Econometrica, Vol. 38, No. 1 (Jan., 1970), pp. 1-17 -- This paper first takes a rather pessimistic look at what has been accomplished in recent years in understanding the "price mechanism." It then takes up two points in some detail. First, it is shown that stationary expectations do not ensure the convergence of all equilibrium paths on to a steady state in a neoclassical model with heterogeneous capital goods (an appendix works an example). Secondly, a tatonnement process is outlined and discussed for an economy with constant returns to scale. -- via Lars Syll -- downloaded pdf to Note
article  jstor  economic_theory  prices  equilibrium  capital  investment  economic_models  macroeconomics  neoclassical_economics  downloaded 
june 2015 by dunnettreader
Magic, maths and money: Finance and Mathematics: where is the ethical malaise?
This is a draft of an article that has been accepted by The Mathematical Intelligencer and offers an argument very similar to Romer’s ‘mathiness’ argument as…
Instapaper  economic_theory  economic_models  mathematization  bad_economics  financial_economics  from instapaper
june 2015 by dunnettreader
Understanding the Modern Monetary System by Cullen O. Roche :: SSRN - revised April 1, 2013
Orcam Financial Group, LLC -- August 5, 2011 -- This paper provides a broad understanding of the workings of the modern fiat monetary system in the United States. The work is primarily descriptive in nature and takes an operational perspective of the modern fiat monetary system using the understandings of Monetary Realism. -- Pages in PDF File: 40 -- downloaded pdf to Note
macroeconomics  financial_economics  monetary_policy  monetary_theory  central_banks  banking  interest_rates  financial_system  financialization  demand-side  investment  economic_models  downloaded 
june 2015 by dunnettreader
Pedro Gurrola-Perez and David Murphy - :Filtered historical simulation Value-at-Risk models and their competitors | Bank of England - Working Paper No. 525 March 2015-
Financial institutions have for many years sought measures which cogently summarise the diverse market risks in portfolios of financial instruments. This quest led institutions to develop Value-at-Risk (VaR) models for their trading portfolios in the 1990s. Subsequently, so-called filtered historical simulation VaR models have become popular tools due to their ability to incorporate information on recent market returns and thus produce risk estimates conditional on them. These estimates are often superior to the unconditional ones produced by the first generation of VaR models. This paper explores the properties of various filtered historical simulation models. We explain how these models are constructed and illustrate their performance, examining in particular how filtering transforms various properties of return distribution. The procyclicality of filtered historical simulation models is also discussed and compared to that of unfiltered VaR. A key consideration in the design of risk management models is whether the model’s purpose is simply to estimate some percentile of the return distribution, or whether its aims are broader. We discuss this question and relate it to the design of the model testing framework. Finally, we discuss some recent developments in the filtered historical simulation paradigm and draw some conclusions about the use of models in this tradition for the estimation of initial margin requirements. -- downloaded pdf to Note
paper  financial_instiutions  risk  risk_management  financial_regulation  banking  business_cycles  capital_markets  capital_adequacy  NBFI  probability  economic_models  Basel  downloaded 
june 2015 by dunnettreader
K. Vela Velupillai - Conning Variations on the Theme of in :: SSRN - Journal of Economic Surveys, Vol. 21, Issue 3, pp. 466-505, July 2007
K. Vela Velupillai, National University of Ireland, Galway (NUIG) - Department of Economics; Università degli Studi di Trento - Department of Economics and Management. -- The mathematization of economics is almost exclusively in terms of the mathematics of real analysis which, in turn, is founded on set theory (and the axiom of choice) and orthodox mathematical logic. In this paper I try to point out that this kind of mathematization is replete with economic infelicities. The attempt to extract these infelicities is in terms of three main examples and one general discussion: dynamics, policy and rational expectations and learning are the examples; a game theory without subjectivism, based on the axiom of determinateness, is discussed in general terms. The focus is on the role and reliance of standard fixed-point theorems in orthodox mathematical economics. -- Pages in PDF File: 40 -- via Lars Syll -- didn't download -- added to My Briefcase
article  SSRN  philosophy_of_science  philosophy_of_social_science  mathematics  economic_theory  economic_models  deduction  rational_expectations  game_theory  mathematization 
june 2015 by dunnettreader
Ching-Wai (Jeremy) Chiu, Haroon Mumtaz and Gabor Pinter - Forecasting with VAR models: fat tails and stochastic volatility | Bank of England Working Paper No. 528: May 29 2015
In this paper, we provide evidence that fat tails and stochastic volatility can be important in improving in-sample fit and out-of-sample forecasting performance. Specifically, we construct a VAR model where the orthogonalised shocks feature Student’s t distribution and time-varying variance. We estimate this model using US data on output growth, inflation, interest rates and stock returns. In terms of in-sample fit, the VAR model featuring both stochastic volatility and t-distributed disturbances outperforms restricted alternatives that feature either attributes. The VAR model with t disturbances results in density forecasts for industrial production and stock returns that are superior to alternatives that assume Gaussianity, and this difference is especially stark over the recent Great Recession. Further international evidence confirms that accounting for both stochastic volatility and Student’s t-distributed disturbances may lead to improved forecast accuracy. -- didn't download
paper  macroeconomics  economic_models  financial_crisis  probability  Great_Recession 
may 2015 by dunnettreader
Zoltan Jakab and Michael Kumhof - Banks are not intermediaries of loanable funds - and why this matters - Zoltan Jakab and Michael Kumhof | Bank of England - Working Paper No. 529 - 29 May 2015
In the intermediation of loanable funds model of banking, banks accept deposits of pre-existing real resources from savers and then lend them to borrowers. In the real world, banks provide financing through money creation. That is they create deposits of new money through lending, and in doing so are mainly constrained by profitability and solvency considerations. This paper contrasts simple intermediation and financing models of banking. Compared to otherwise identical intermediation models, and following identical shocks, financing models predict changes in bank lending that are far larger, happen much faster, and have much greater effects on the real economy. -- downloaded pdf to Note
paper  banking  intermediation  macroeconomics  economic_models  economic_theory  financial_economics  financial_system  credit  loanable_funds  downloaded 
may 2015 by dunnettreader
Alan B. Krueger - The great utility of the Great Gatsby Curve | Brookings May 2015
Every so often an academic finding gets into the political bloodstream. A leading example is "The Great Gatsby Curve," describing an inverse relationship between income inequality and intergenerational mobility. Born in 2011, the Curve has attracted plaudits and opprobrium in almost equal measure. Over the next couple of weeks, Social Mobility Memos is airing opinions from both sides of the argument, starting today with Prof Alan Krueger, the man who made the Curve famous. -- Building on the work of Miles Corak, Anders Björklund, Markus Jantti, and others, I proposed the “Great Gatsby Curve” in a speech in January 2012. The idea is straightforward: greater income inequality in one generation amplifies the consequences of having rich or poor parents for the economic status of the next generation.
The curve is predicted by economic theory…
US_economy  inequality  inheritance  inequality-opportunity  inequality-wealth  families  economic_sociology  economic_theory  economic_models  microeconomics  mobility  statistics  Instapaper  from instapaper
may 2015 by dunnettreader
Xavier Giroud, Holger M. Mueller - Firm Leverage and Unemployment during the Great Recession | NBER April 2015
NBER Working Paper No. 21076 -- We argue that firms’ balance sheets were instrumental in the propagation of shocks during the Great Recession. Using establishment-level data, we show that firms that tightened their debt capacity in the run-up (“high-leverage firms”) exhibit a significantly larger decline in employment in response to household demand shocks than firms that freed up debt capacity (“low-leverage firms”). In fact, all of the job losses associated with falling house prices during the Great Recession are concentrated among establishments of high-leverage firms. At the county level, we find that counties with a larger fraction of establishments belonging to high-leverage firms exhibit a significantly larger decline in employment in response to household demand shocks. Thus, firms’ balance sheets also matter for aggregate employment. -- paywall
paper  paywall  NBER  Great_Recession  financial_crisis  corporate_finance  leverage  unemployment  macroeconomics  economic_models  economic_shocks-propagation  networks-business  demand-side  housing  business_practices  business_cycles 
may 2015 by dunnettreader
Arnold C. Harberger - The Search for Relevance in Economics - The Richard Ely Lecture | JSTOR - The American Economic Review (May 1993)
Arnold C. Harberger, Professor of Economics, UCLA & Catholic University of Chile -- The American Economic Review, Vol. 83, No. 2, Papers and Proceedings of the Hundred and Fifth Annual Meeting of the American Economic Association (May, 1993), pp. 1-16 -- focus is on "practicing economists" (e.g, in central banks, IFIs, government departments and agencies, especially in developing countries) on analogy to "practitioners of medicine" within the medical profession. The medical profession is demonstrably better at both preparing their members in graduate school for what they will undertake in the real world, and in producing ongoing research, publications etc by academics that are relevant to practitioners. Follows on the heels of a high status Krueger Commission on Graduate Education, which reflected some of the problems he identifies, such as graduates with highly developed technical, principally math, skills, but little training in how to apply to real world problems that won't be framed in a way the technical skills can be readily applied. Lots of overlap from both the Commission and Harberger with the criticisms of economic education post the 2008 financial crisis. Although the sense that there was a consensus re the economic theories that needed to be taught seems to not have yet been challenged, at least to the same degree as 15 years later. The issue, rather, was "relevance" -- which doesn't seem to have improved in 15 years, but now made worse by challenges to the core content and failure to incorporate "specialties" like finance and agent-based modeling into the "core" or Kuhn's normal science. -- downloaded pdf to Note
article  jstor  economic_theory  economic_sociology  sociology_of_knowledge  professionalization  policy  economic_models  economic_policy  education-higher  policymaking  political_economy  development 
april 2015 by dunnettreader
Lars Syll - The Bernake-Summers Imbroglio | RWER April 2015
As no one interested in macroeconomics has failed to notice, Ben Bernanke is having a debate with Larry Summers on what’s behind the slow recovery of growth rates since the financial crisis of 2007. To Bernanke it’s basically a question of a savings glut. To Summers it’s basically a question of a secular decline in the level of investment. To me the debate is actually a non-starter, since they both rely on a loanable funds theory and a Wicksellian notion of a “natural” rate of interest — ideas that have been known to be dead wrong for at least 80 years … Let’s start with the Wicksellian connection and consider what Keynes wrote in General Theory: -- helpful re Keynes' rejection of "natural rate" (in effect there's a different natural rate for each level of employment - income, so it's comparative statics that blows up when savings or investment change, rather than being able to derive new equilibrium natural rate) -- and the problems with loanable funds theory - looks especially at Minsky and Kalecki - credit creation isn't result of increased savings but increased investment. Good snips and links -- saved to Pocket
economic_theory  macroeconomics  stagnation  savings_glut  global_imbalance  interest_rate-natural  monetary_policy  monetary_theory  central_banks  credit  financial_system  financial_economics  loanable_funds  investment  accounting_IDs  equilibrium  economic_models  Keynes  Minsky  Kalecki  links  Instapaper 
april 2015 by dunnettreader
Christopher Brown and Mark Thornton, How Entrepreneurship Theory Created Economics - Quarterly Journal of Austrian Economics (2013) | Mises Institute
Volume 16, No. 4 (Winter 2013) -- ABSTRACT: Richard Cantillon is credited with the discovery of economic theory and was the first to fully consider the critical role of entrepreneurship in the economy. Cantillon described entrepreneurship as pervasive and he casted the entrepreneur with a pivotal role in the economy. Using a sample of models from Cantillon’s Essai, we provide evidence that his theory of entrepreneurship was the fundamental tool by which he constructed economic theory and that absent his theory of entrepreneurship his theoretical constructions fail. We believe this discovery both highlights the importance of entrepreneurship and contributes to our understanding of the nature of economic theory. -- downloaded pdf to Note
article  intellectual_history  18thC  France  Cantillon  political_economy  economic_theory  economic_sociology  entrepreneurs  business_cycles  business_practices  systems-complex_adaptive  economic_models  downloaded 
march 2015 by dunnettreader
Rajiv Sethi: The Agent-Based Method - August 2014
It's nice to see some attention being paid to agent-based computational models on economics blogs, but Chris House has managed to misrepresent the methodology so completely that his post is likely to do more harm than good. -- Useful discussion of both DSGE and agent-based modeling approaches plus links. Chris House, for a highly touted "expert", keeps exposing his combination of ignorance and bias ("facts have a conservative bias"!!) Apparently since he already knows what the facts are going to tell him, he doesn't actually have to learn something about which he is ignorant but feels free to spout what "must" be the case. Extraordinary indictment of the upper levels of the economics professoriate. Seth's post is a fine description of what agent-based models are about, and the dilemmas of coming up with criteria for evaluating robustness of research results -- a problem which DSGE papers don't seem to have, apparently because of the agreed upon math and that most of the variables are exogenous chosen by the modeler, and theoretical papers which can be judged on the coherence of their mathematical logic. Links to some agent-based work - Seth himself working on market structure and trading practices (e.g. GFT) within a "market ecology" framework
economic_theory  macroeconomics  economic_models  rationality-economics  markets  markets-structure  ecology  ecology-economic  agent-based_models  evolution-as-model  evolution-social  links 
february 2015 by dunnettreader
Paul A. Lewis, review essay - Varieties of Emergence: Minds, Markets and Novelty (STUDIES IN EMERGENT ORDER, VOL 4 (2011): 170-192) :: SSRN
King's College London - Department of Political Economy -- This paper is an essay review of Richard Wagner's book, 'Mind, Society and Human Action'. It focuses on the ontological presuppositions of Wagner's account of of the social world (that is, on what Wanger's account presupposes about the nature of social reality). Issue discussed include the following: the nature of emergence and emergent properties; spontaneous order, and the shortcomings of Walrasian general equilibrium theory in modelling it; the significance of the impact of social interaction on peolpe's preferences and dispositions; and the role of novelty and innovation in Wagner's account of the market process. -- Number of Pages in PDF File: 23 -- Keywords: Emergence, complexity, Austrian Economics, ontology, spontaneous order, novelty -- downloaded pdf to Note
article  review  SSRN  philosophy_of_social_science  social_theory  ontology-social  mind  social_order  social_process  preferences  emergence  equilibrium  heterodox_economics  Innovation  complexity  economic_models  utility  behavioral_economics  markets-psychology  markets  methodology  methodology-qualitative  downloaded  EF-add 
february 2015 by dunnettreader
Paul A. Lewis - Certainly Not! A Critical Realist Recasting of Ludwig Von Mises’s Methodology of the Social Sciences (Journal of Economic Methodology (2010), 17(3): 277-99) :: SSRN
King's College London - Department of Political Economy -- This paper focuses on Ludwig von Mises methodological apriorism. It uses Wittgenstein’s private language argument as the basis for a critique of Mises’s claim to have found apodictically certain foundations for economic analysis. It is argued instead that Mises’s methodology is more fruitfully viewed as an exercise in social ontology, the objective of which is to outline key features of the socio-economic world that social scientific research ought to take into account if it is to be fruitful. The implications of this perspective for three key methodological issues, namely the relationship between theory and history, the possibility of naturalism, and the place of Austrian economics within the discipline of economics as a whole, are brought out. -- Number of Pages in PDF File: 22 -- Keywords: Austrian economics; Ludwig von Mises; praxeology; private language -- downloaded pdf to Note
article  SSRN  philosophy_of_social_science  social_theory  ontology-social  Mises  apriori  Wittgenstein  philosophy_of_language  economic_theory  economic_models  heterodox_economics  Austrian_economics  methodology  downloaded  EF-add 
february 2015 by dunnettreader
Josh Bevins - Macroeconomic effects of regulatory changes in economies with large output gaps: The ‘toxics rule’ as an example | Economic Policy Institute - 2012
This paper uses the “toxics rule” issued by the Environmental Protection Agency (EPA) in December 2011 to sketch out a macroeconomic framework for thinking about the impact of regulatory changes on jobs. The paper’s major findings are: * (1) Even during normal economic times the effect of regulatory changes that increase the input cost of some businesses is most likely to shrink the measured “output gap” (the difference between what the economy is actually producing and what it could be producing if all resources were fully employed). * (2) During normal economic times, the effect of the downward pressure on output gaps will be fully offset by a Federal Reserve that is trying to maintain a constant inflation target. * (3) During times of significant economic slack, the downward pressure on the output gap caused by cost-raising regulatory changes is unlikely to be fully neutralized by a Federal Reserve that puts any weight at all on unemployment. * (4) When significant economic slack persists even when the interest rates controlled by the Federal Reserve are held at zero, the overall effect of cost-raising regulatory changes is almost surely expansionary. ... the list of neutral to benign macro effects continues -- downloaded pdf to Note
regulation-costs  regulation-environment  macroeconomics  monetary_policy  economic_growth  economic_models  unemployment  interest_rates  Fed  cost-benefit  downloaded  EF-add 
january 2015 by dunnettreader
Jonathan Nitzan - Global Capital: Political Economy of Capitalist Power (YorkU, Graduate Seminar, Fall Term, 2014-15) | bnarchives
The seminar has two related goals: substantive and pedagogical. The substantive purpose is to tackle the question of capital head on. The course explores a spectrum of liberal and Marxist theories, ideologies and dogmas – as well as a radical alternative to these views. The argument is developed theoretically, historically and empirically. The first part of the seminar provides a critical overview of political economy, examining its historical emergence, triumph and eventual demise. The second part deals with the two ‘materialistic’ schools of capital – the liberal theory of utility and the Marxist theory of labour time – dissecting their structure, strengths and limitations. The third part brings power back in: it analyses the relation between accumulation and sabotage, studies the institutions of the corporation and the state and introduces a new framework – the capitalist mode of power. The final part offers an alternative approach – the theory of capital as power – and illustrates how this approach can shed light on conflict-ridden processes such as corporate merger, stagflation, imperialism and Middle East wars. Pedagogically, the seminar seeks to prepare students toward conducting their own independent re-search. Students are introduced to various electronic data sources, instructed in different methods of analysis and tutored in developing their empirical research skills. As the seminar progresses, these skills are used both to assess various theories and to develop the students’ own theoretical/empirical research projects. -- Keywords: arms accumulation capital capitalism conflict corporation crisis distribution elite energy finance globalization growth imperialism GPE liberalism Marxism military Mumford national interest neoclassical neoliberalism oil ownership peace power profit ruling class security stagflation state stock market technology TNC Veblen violence war -- syllabus and session handouts downloaded pdf to Note
bibliography  syllabus  capital_as_power  international_political_economy  political_economy  economic_theory  liberalism  neoliberalism  neoclassical_economics  Keynesian  Marxist  capital  capitalism  social_theory  power-asymmetric  globalization  financial_system  financial_regulation  risk-systemic  international_finance  finance_capital  financialization  production  distribution-income  distribution-wealth  inequality  MNCs  corporations  corporate_finance  corporate_ownership  corporate_control_markets  economic_growth  economic_models  imperialism  military  military-industrial_complex  IR_theory  ruling_class  class_conflict  energy  energy-markets  MENA  accumulation  accumulation-differential  capital_markets  public_finance  profit  investment  technology  elite_culture  elites-self-destructive  capitalism-systemic_crisis  Veblen  Mumford  downloaded  EF-add 
october 2014 by dunnettreader
Nitzan, Jonathan - LSE Public Event: Can Capitalists Afford Recovery? -- Video and Paper (May 2014) | bnarchives
Presentation at the LSE Department of International Relations. 27 May 2014. -- Theorists and policymakers from all directions and of all persuasions remain obsessed with the prospect of recovery. For mainstream economists, the key question is how to bring about such a recovery. For heterodox political economists, the main issue is whether sustained growth is possible to start with. But there is a prior question that nobody seems to ask: can capitalists afford recovery in the first place? If we think of capital not as means of production but as a mode of power, we find that accumulation thrives not on growth and investment, but on unemployment and stagnation. And if accumulation depends on crisis, why should capitalists want to see a recovery? -- Video duration: 2:24 hours -- Keywords: crisis, differential accumulation, economic policy, economic theory, expectations, growth, income distribution, Keynesianism, Marxism, monetarism, neoclassical economics, profit, underconsumption -- Subjects: BN State & Government, BN Power, BN Region - North America, BN Business Enterprise, BN Value & Price, BN Crisis, BN Production, BN Macro, BN Conflict & Violence, BN Money & Finance, BN Ideology, BN Distribution, BN Methodology, BN Capital & Accumulation, BN Policy, BN Class, BN Labour, BN Growth -- links to LSE on YouTube -- downloaded pdf to Note
paper  video  Great_Recession  financial_crisis  economic_growth  capital_as_power  capitalism-systemic_crisis  economic_theory  economic_models  macroeconomics  neoclassical_economics  Keynesian  Marxist  monetarism  monetary_policy  fiscal_policy  austerity  sovereign_debt  public_finance  public_policy  productivity  production  consumer_demand  underconsumption  investment  profit  productivity-labor_share  distribution-income  distribution-wealth  finance_capital  financialization  capitalization  accumulation  accumulation-differential  elites-self-destructive  elite_culture  ruling_class  class_conflict  Labor_markets  inequality  unemployment 
october 2014 by dunnettreader
Michael T. Kiley - An Evaluation of the Inflationary Pressure Associated with Short- and Long-term Unemployment - FEDS 2014-28 | Federal Reserve Board
Abstract: In the years following 2009, long-term unemployment has been very elevated while inflation has fallen only moderately, raising the question of whether the long-term unemployed exert less downward pressure on prices than the short-term unemployed, perhaps because such potential workers are disconnected from the labor market. However, empirical evidence is mixed. This analysis demonstrates that the typical approach, using national data, is incapable of discriminating the inflationary pressure exerted by short and long-term unemployment because the series are highly correlated, making inference difficult given the short-span of data used in Phillips-curve estimation. However, application of more data, through the use of regional variation, can discriminate the independent influences of short-and long-term unemployment on price inflation. We present a model illustrating these issues and apply the model to data for U.S. metropolitan regions. We find that that short- and long-term unemployment exert equal downward pressure on price inflation. -- Keywords: Short-term unemployment, phillips curve -- didn't download
US_economy  Great_Recession  unemployment  inflation  prices  wages  macroeconomics  economic_models  statistics  Phillips_curve 
october 2014 by dunnettreader
Dan Davies -- Bedtime for market efficiency — Bull Market — Medium - October 2014
The temptation will be to try and avoid going “cold turkey” on efficient markets, by reducing the overarching claims, but hanging on to the general story that markets are “broadly efficient”. This won’t do either. Even with respect to some of the most liquid markets in the world (S&P500 equities) and with respect to the so-called “weak form” — the hypothesis that there is no information in the past history of share prices which can be used to predict the future -- it doesn’t work. This has been known to specialist financial econometricians for about 20 years now (“A Non-Random Walk Down Wall Street” by Lo & McKinlay was first published in 1999, summarising literature that had been in existence since the early 90s). Momentum effects exist and can’t be rationalised away as statistical noise; fund companies like AQR have been offering funds based on them, and generally outperforming, for ages. And when you get to anything stronger than the very-weak form versions, the performance is really quite embarrassing. Robert Shiller’s share of the Nobel Prize was for noticing that securities prices are, in general, much too volatile to make sense as forecasts of anything in the real world. DeLong, Summers, Shleifer & Waldmann have shown that there is no real theoretical basis to the idea that “traders competing against each other make markets efficient” — it’s just as likely that they create meaningless volatility. Market prices aren’t totally informative, as they are in some sense a weighted average of the views of a large group of well-resourced and intelligent people with an incentive to get things right. But nobody would build a theory of politics around the infallibility of opinion polls.
economic_theory  economic_models  EMH  markets  capital_markets 
october 2014 by dunnettreader
Joseph E. Stiglitz - Reconstructing Macroeconomic Theory to Manage Economic Policy | NBER - September 2014
Macroeconomics has not done well in recent years: The standard models didn't predict the Great Recession; and even said it couldn't happen. After the bubble burst, the models did not predict the full consequences. The paper traces the failures to the attempts, beginning in the 1970s, to reconcile macro and microeconomics, by making the former adopt the standard competitive micro-models that were under attack even then, from theories of imperfect and asymmetric information, game theory, and behavioral economics. The paper argues that any theory of deep downturns has to answer these questions: What is the source of the disturbances? Why do seemingly small shocks have such large effects? Why do deep downturns last so long? Why is there such persistence, when we have the same human, physical, and natural resources today as we had before the crisis? The paper presents a variety of hypotheses which provide answers to these questions, and argues that models based on these alternative assumptions have markedly different policy implications, including large multipliers. It explains why the apparent liquidity trap today is markedly different from that envisioned by Keynes in the Great Depression, and why the Zero Lower Bound is not the central impediment to the effectiveness of monetary policy in restoring the economy to full employment. -- paywall
paper  paywall  macroeconomics  microfoundations  economic_theory  economic_models  Great_Recession  monetary_policy  Keynes  liquidity  fiscal_policy  Stiglitz 
september 2014 by dunnettreader
Stephen Nash and Liza Rybak - On Logical Difficulties, Philosophy, and the T.C.E. Explanation of the Firm | JSTOR: Review of Social Economy, Vol. 68, No. 3 (SEPTEMBER 2010), pp. 339-363
By exploring the implications of the linkage between Knight and Pragmatism, some non-trivial implications can be argued to exist. Specifically, section 2 outlines the T. C. E. literature, and how it exists in an atmosphere mixed with Marshallian competition and Knightian uncertainty. Section 3 then considers the disparate philosophical positions behind the work of Knight and Marshall. Knight's critique of Marshall is seminal, not because of any trivial technical innovations that Knight may have inspired within economic theory, but because Knight grounds his work on a philosophical viewpoint that effectively devastated Hegelian philosophy: American Pragmatism. Section 4 then links together the previous two sections by considering how the T. C. E. literature exhibits a dependency on both Pragmatism and Hegelian philosophy. The non-trivial implications of understanding the T. C. E. literature as a branch of Marshallian economics, which recognises Knightian uncertainty, are developed in section 5. Possible conclusions and a summary of the argument are provided in section 6. -- over 100 references from Kant through the pragmatists, Knight and 20thC economics, variants of neoclassical, and empirical evidence including probability and uncertainty in econometrics with heavy emphasis on theories of the firm, transaction cost analysis, Coase and Williamson, markets and hierarchies-- downloaded pdf to Note
article  jstor  intellectual_history  19thC  20thC  economic_theory  economic_models  macroeconomics  neoclassical_economics  econometrics  probability  risk  certainty  uncertainty  Kant  Hegel  Hegelian  Marshall  transaction_costs  markets  markets-structure  firms-theory  organizations  hierarchy  management  Knight  Coase  Williamson_O  pragmatism  Peirce  Dewey  economic_sociology  economic_culture  evolution-social  competition  bibliography  downloaded  EF-add 
september 2014 by dunnettreader
Roy H. Grieve, ‘Right back where we started from’ | Real-World Economics Review Blog September 2014
Roy H. Grieve, “‘Right back where we started from’: from ‘the Classics’ to Keynes, and back again”, real-world economics review, issue no. 68, 21 August 2014, pp. 41-61, http://www.paecon.net/PAEReview/issue68/Grieve68.pdf -- We have indeed come round in a circle. The whole vision of the working of the macrosystem presented, in terms of the AD/AS model, by far too many contemporary textbooks, is essentially pre-Keynesian. Monetary spending may fluctuate, but whether or not such fluctuations affect employment and output is said to depend on reactions affecting real wages. Slow adjustment of money wages to price changes is held to account for cyclical variations in employment and output. With respect to the longer term, it is presumed that real wages return to their proper full-employment level. There are then no obstacles on the side of demand to prevent re-establishment of the ‘natural’ (full employment) level of activity. The pale shadow of Keynesian theory in the ADAS model – the AD curve – has nothing to do with the values of output and employment at equilibrium, only with the price level. -- downloaded pdf to Note
paper  economic_theory  economic_models  macroeconomics  neoclassical_economics  Keynes  Keynesianism  Labor_markets  wages  unemployment  prices  inflation  deflation  real_economy  economic_growth  business_cycles  equilibrium  downloaded  EF-add 
september 2014 by dunnettreader
Giancarlo Bertocco - Some Observations about the Loanable Funds Theory (2006)
(Department of Economics, University of Insubria, Italy) The objective of this paper is to highlight the limits of the Loanable Funds Theory based on the arguments used by Keynes to respond to the criticism levelled by Ohlin and Robertson at the keynesian interest rate theory. I believe that these arguments make it possible to elaborate a keynesian theory of credit that is capable of highlighting aspects of the non-neutrality of money that do not emerge from the General Theory, which is focused on the liquidity preference theory. The work is divided into five parts. In the first part the most important aspects of the LFT are described, while in the second one Keynes’s criticism of the LFT is set out. The third part critically analyses Tsiang’s view that supports the validity of Robertson’s position over that of Keynes; the last two sections contain a description of the characteristics of a monetary economy elaborated on the basis of Keynes’s critique of the LFT. - via Naked Keynesianism - downloaded pdf to Note
macroeconomics  economic_theory  economic_models  money  money_market  central_banks  liquidity  interest_rates  banking  credit  Keynes  New_Keynesian  downloaded  EF-add 
september 2014 by dunnettreader
Lance Taylor - Maynard's Revenge: The Collapse of Free Market Macroeconomics (2011) | Harvard University Press
Taylor argues that the ideas of J.M. Keynes and others provide a more useful framework both for understanding the crisis and for dealing with it effectively. Keynes’s basic points were fundamental uncertainty and the absence of Say’s Law. He set up machinery to analyze the macro economy under such circumstances, including the principle of effective demand, liquidity preference, different rules for determining commodity and asset prices, distinct behavioral patterns of different collective actors, and the importance of thinking in terms of complete macro accounting schemes. Economists working in this tradition also worked out growth and cycle models. Employing these ideas throughout Maynard’s Revenge, Taylor provides an analytical narrative about the causes of the crisis, and suggestions for dealing with it. 1. Macroeconomics. 2. Macroeconomic Thought during the Long 19thC. 3. Gold Standard, Reparations, Mania, Crash, and Depression. 4. Maynard Ascendant. 5. Keynesian Growth, Cycles, and Crisis. 6. The Counterrevolution. 7. Finance. 8. The International Dimension. 9. Keynesianism and the
books  intellectual_history  economic_theory  economic_history  economic_models  18thC  19thC  20thC  social_sciences-post-WWII  entre_deux_guerres  political_economy  macroeconomics  classical_economics  neoclassical_economics  Keynes  Keynesianism  Post-Keynesian  finance_capital  financial_economics  microfoundations  EMH  rational_expectations  rationality-economics  rationality-bounded  behavioral_economics  business_cycles  Great_Depression  Great_Recession  financial_crisis  gold_standard  economic_growth  international_monetary_system  balance_of_payments  FX  uncertainty  liquidity  savings  Labor_markets  wages 
september 2014 by dunnettreader
JW Mason - The Slack Wire: Piketty and the Money View - September 2014
All the empirical material in the book relates to stocks and flows of money. But when he turns to explain the patterns he finds in this data, he does it in terms of physical inputs to physical production. The money wealth present in a country is assumed to correspond to the physical capital goods, somehow converted to a scalar quantity. And the incomes received by wealth owners is assumed to correspond to a physical product somehow attributable to these capital goods. But the production processes that are supposed to explain these shifts are described without any data at all, purely deductively. You would think that if Piketty believed that the share of property income in total income depends on physical production technologies, returns to scale, depreciation, etc., then at least half the book would be taken up with technological history. In fact, of course, these topics are not discussed at all. Terms like “production” and “depreciation” are black boxes, pure mathematical formalism. -- Unfortunately, discussion of the book has been almost entirely about the irrelevant formalism. I think that is why the conversation has been so noisy yet advanced so little. -- the disconnect between the two different Pikettys shows, in a negative way, why what I've been calling the money view is so important. The historical data assembled in Capital in the 21st Century is a magnificent accomplishment and will be drawn on by economic historians for years to come. Many of the concrete observations he makes about this material are original and insightful. But all of this is lost when translated into Piketty's preferred theoretical framework. To make sense of the historical evolution of money payments and claims, we need an approach that takes those payments and claims as objects of study in themselves.
books  Piketty  wealth  capitalism  capital  macroeconomics  economic_theory  economic_models  economic_growth  money  investment  investors  profit  technology  production  productivity  political_economy  financial_economics  financial_system  EF-add 
september 2014 by dunnettreader
Squarely Rooted - I Wrote Way Too Much About “Capital in the Twenty-First Century” — Medium - July 2014
Very thought provoking re changes in the composition and returns to capital -- Depreciation is the great systemic regulator — absent productivity/technology growth, depreciation is an absolute limit on our ability to accumulate capital ad infinitum. Or is it? Depreciation is a law of the physical world, and therefore a limit on the accumulation of physical capital, which many people intensely associate with “capital” in their minds. But it is extremely important not to do so in this context, as Piketty uses capital synonymously with all wealth. And the nature of capital itself is changing What does this mean? It means that the focus on capital as stuff is fundamentally off-base — capital, at least as defined by Piketty, is at least to some degree detached from stuff. This makes more sense when you look at the Q-ratio of many of today’s most valuable firms [Apple et al]. These are all vastly above not just the current national average but the highest the national average has ever been, and by an astonishing amount. But investors believe that these tech companies, which have rapidly become a vast part of the economy, are worth way, way more than the sum of their parts. -- ... all these claims [against assets] are, on a fundamental level, determined by legal and political systems that are mutable by humans. They are not laws of nature. This is most clear in Piketty’s discussion of “Rhenish capitalism,” specifically in the curious phenomenon of the relatively-low levels of German capital relative to income - which vanishes when you compare book value instead of market value of capital - overwhelmingly a Tobin’s Q issue. -- Land, in fact, may be the key to explaining why the returns to capital decline much more slowly than models with traditional assumptions would predict. If you confuse “capital” as Piketty defines it with “machines,” even subconsciously, this would make much less sense. -- Oh, and one last thing — land doesn’t depreciate.
books  reviews  Piketty  economic_history  economic_theory  economic_models  economic_growth  investment  profit  capitalism  inequality  rentiers  landowners  capital  wealth  sovereign_wealth_funds  plutocracy  1-percent  capital_markets  investors  manufacturing  technology  EF-add 
september 2014 by dunnettreader
Blogging Steve Keen's "Debunking Economics" | Unlearning Economics (posts from 2012)
Chapter by chapter commentary - Keen takes on fallacies or weaknesses in (mostly) neoclassical economics one by one - so may in one chapter accept as a necessary assumption to the principle or method he's debunking, something he's debunked in another chapter. So the chapter by chapter approach fits with examining Keen's points. Keen's own models focus on endogenous money in a credit based market, heavily influenced by Minsky.
intellectual_history  20thC  social_sciences-post-WWII  economic_theory  economic_models  macroeconomics  neoclassical_economics  microeconomics  Minsky  Great_Depression  Great_Recession  banking  financial_system  financial_crisis  debt  credit  money  money_supply  central_banks  demand  economic_growth  EF-add 
august 2014 by dunnettreader
Brad DeLong - The Four Big Valid Issues People Have with Thomas Piketty's Grand Argument: Friday Focus for June 27, 2014 (Brad DeLong's Grasping Reality...)
I think there are four big valid issues with Thomas Piketty's grand argument: [they're all pretty feeble or wishful thinking unfortunately - DeLong puts too heavy a weight on several of them, producing a guesstimate of 50:50 we will have Piketty world if things left on autopilot] -- see comments, especially Dan Kervick who once again challenges Piketty critics for not reading the last chapters (which don't readily translate into mainstream macro models, so their criticism is generally nonresponsive to Piketty’s historical data and explanations)
Piketty  economic_history  economic_theory  economic_models  capital  wealth  profit  savings  charity  1-percent  economic_culture  status  elite_culture  inequality  political_culture  political_economy  moral_economy  capitalism 
june 2014 by dunnettreader
Warren J. Samuels - Markets and Their Social Construction | JSTOR: Social Research, Vol. 71, No. 2 (SUMMER 2004), pp. 357-370
In the special Heilbroner issue - Samuels says it's a model, not a theory he's presenting -- short but looks handy -- downloaded pdf to Note
article  jstor  economic_theory  economic_models  markets  constructivism  downloaded  EF-add 
june 2014 by dunnettreader
David F. Hendry, Grayham E. Mizon - Why standard macro DSGE models fail in crises | vox 18 June 2014
Many central banks rely on dynamic stochastic general equilibrium models – known as DSGEs to cognoscenti. This column – which is more technical than most Vox columns – argues that the models’ mathematical basis fails when crises shift the underlying distributions of shocks. Specifically, the linchpin ‘law of iterated expectations’ fails, so economic analyses involving conditional expectations and inter-temporal derivations also fail. Like a fire station that automatically burns down whenever a big fire starts, DSGEs become unreliable when they are most needed.
economic_theory  economic_models  macroeconomics  neoclassical_economics  financial_crisis  central_banks 
june 2014 by dunnettreader
JW Mason - The Slack Wire: Mehrling on Black on Capital - June 2014
From Mehrking - downloaded pdf to Note -- Black’s emphasis is on the market value of wealth calculated as the expected present value of future income flows, rather than on the quantity of wealth calculated as the historical accumulation of savings minus depreciation. This allows Black to treat knowledge and technology as forms of capital, since their expected effects are included when we measure capital at market value. For Black, the standard aggregative neoclassical production function is inadequate because it obscures sectoral and temporal detail by attributing current output to current inputs of capital and labor, -- It’s familiar math, but the meaning it expresses remains very far from familiar to the trained economist. For one, the labor input has been replaced by human capital so there is no fixed factor. For another, both physical and human capital are measured at market values, and so are supposed to include technological change. This means that the A coefficient is not the usual technology shift factor (the familiar “Solow residual”) but only a multiplier, indeed a kind of inverse price earnings ratio, that converts the stock of effective composite capital into a flow of composite output. -- In retrospect, the most fundamental source of misunderstanding came (and comes still) from the difference between an economics and a finance vision of the nature of the economy. The classical economists habitually thought of the present as determined by the past. The financial point of view, by contrast, sees the present as determined by the future, or rather by our ideas about the future...and the quantity of capital can therefore change without prior saving.
economic_theory  economic_models  economic_growth  macroeconomics  Piketty  neoclassical_economics  financial_economics  capital  wealth  investment  savings  interest_rates  profit  productivity  human_capital  technology  labor  downloaded  EF-add 
june 2014 by dunnettreader
Matthijs Lof, Tuomas Malinen - The growth and sovereign debt correlation | vox , 25 May 2014
Rogoff and Reinhart not only invented the tipping point, they got the causality backwards so not just no justification for austerity, the case for stimulus is stronger -- Public debt and economic growth are historically negatively correlated. This column discusses new evidence that rejects the debt-to-growth causality. After estimating the effects between debt and growth in both directions, there is no evidence that high indebtedness suppresses economic growth. The effect of growth on debt is the main driver of the negative correlation
paper  economic_theory  economic_models  macroeconomics  econometrics  sovereign_debt  public_finance  economic_growth  austerity  causation  EF-add 
june 2014 by dunnettreader
Per Krusell, Tony Smith - Piketty’s ‘Second Law of Capitalism’ vs. standard macro theory | vox , 1 June 2014
Thomas Piketty’s new book has been widely praised for its empirical contribution, but his prediction of rising inequality rests on economic theory. This column argues that Piketty’s pessimistic forecast is based on an extreme – and unrealistic – assumption about households’ saving behaviour. According to standard theory, the wealth–income ratio would increase only modestly as growth falls, so declining growth would not be a powerful force for generating high inequality. -- my 1st Q does standard theory adequately separate the savings patterns of those with extreme wealth before the advent of slower growth? 2nd Q are they assuming wealth = capital?
Piketty  economic_growth  economic_theory  economic_models  macroeconomics  wealth  savings  profit  inequality  wages 
june 2014 by dunnettreader
Paul Beaudry, Dana Galizia, Franck Portier - Reconciling Hayek's and Keynes' views of recessions | vox , 1 June 2014
Stating the obvious but they've got a model with numbers and charts -- Hayek viewed recessions as working out excessive investments; Keynes viewed them as demand shortages. This column argues that they may not be as mutually exclusive as many think. Recessions may reflect periods of liquidation but this may be associated with inefficient adjustment involving unemployment and precautionary savings. Simulative policy may be desirable even if it delays the full recovery.
paper  economic_theory  economic_models  macroeconomics  economic_growth  investment  credit  Great_Recession  unemployment  Keynes  Hayek  downloaded 
june 2014 by dunnettreader
Roger E. A. Farmer Farewell to the natural rate: Why unemployment persists | vox , 6 January 2010
Most policymakers subscribe to the existence of a natural rate of unemployment. This column provides a visual history of unemployment, vacancies, and inflation in the US and says there is no natural rate. It suggests the economy can rest in any equilibrium on the Beveridge curve, as decided by the confidence of households and firms that pins down asset values.
paper  economic_theory  economic_models  macroeconomics  unemployment  equilibrium  Great_Recession 
june 2014 by dunnettreader
Thomas Palley » The flimflam defense of mainstream economics - May 2014
The teaching of economics has recently been in the news. One reason is the activities of Manchester University undergraduates who have formed the Post-Crash Economics Society -- 2nd is criticism of the neoclassical reasoning in Piketty’s runaway best seller. This criticism and calls for including heterodox economic theory in the curriculum have prompted a defense of mainstream economics from Krugman and Wren-Lewis. -- let us be clear there is near-uniform agreement among the critics that Piketty’s book makes a huge constructive contribution to exposing the scale of today’s inequality. However, the books’ mainstream theoretical foundation is subject to legitimate critique. First, it makes a very big difference for politics and policy if extreme inequality is explained as the result of the technical marginal productivity conditions of production versus economic and political power determining ownership patterns and capital’s share of total income. Second, the marginal productivity approach to income distribution is subject to a host of objections that, collectively, show mainstream theory is logically flawed and implausible as a description of reality. This critique of Piketty feeds into a much more important and fundamental critique of mainstream economics that has existed for years but has only gained traction following the global economic crisis of 2008. It is that larger critique which is the focus of the Manchester students
economic_theory  economic_models  macroeconomics  neoclassical_economics  Keynesianism  New_Keynesian  heterodox_economics  productivity  marginalists  Piketty  political_economy  Leftist 
june 2014 by dunnettreader
Thomas Palley » The accidental controversialist: deeper reflections on Thomas Piketty’s “Capital” - April 2014
Using a conventional marginal productivity framework, Piketty provides an explanation of rising inequality based on increases in the gap between the marginal product of capital, which determines the rate of profit (r), and the rate of growth (g). Because capital ownership is so concentrated, a higher profit rate or slower growth rate increases inequality as the incomes of the wealthy grow faster than the overall economy. The conventional character of Piketty’s theoretical thinking rears its head in his policy prescriptions. -- Mainstream economists will assert the conventional story about the profit rate being technologically determined. However, as Piketty occasionally hints, in reality the profit rate is politically and socially determined by factors influencing the distribution of economic and political power. Growth is also influenced by policy and institutional choices. That is the place to push the argument....My prediction is “r minus g” arithmetic will make its way into the curriculum, with the profit rate explained as the marginal product of capital; Chicago School economists will counter the economy has mechanisms limiting prolonged wide divergence of r and g; and Harvard and MIT graduate students will have opportunities to do market failure research arguing the opposite. The net result is economics will be left essentially unchanged and even more difficult to change.
books  reviews  Piketty  economic_theory  economic_models  macroeconomics  neoclassical_economics  productivity  capital  labor  technology  inequality  wealth  political_economy  profit  capitalism  institutional_economics  laisser-faire  information-asymmetric  competition  education-higher  economic_culture  sociology_of_knowledge  heterodox_economics  EF-add 
june 2014 by dunnettreader
Seth Ackerman - Piketty’s Fair-Weather Friends | Jacobin May 2014
Re Piketty not fitting in MIT-liberal economics -- Piketty “misreads the literature by conflating gross and net returns to capital,” Summers wrote. “I know of no study suggesting that measuring output in net terms, the elasticity of substitution is greater than 1, and I know of quite a few suggesting the contrary.” A reader at this point could be forgiven for feeling confused. Didn’t Piketty gather his own data? He did, of course. --As Piketty makes clear, those data — which he’s made freely available on the internet for anyone to check — are indeed “explained” by a net elasticity of 1.3-1.6, which would indicate an extremely weak force of diminishing returns to capital. Yet it’s also true that this figure is far higher than any found in the existing literature — probably more than twice as high as the highest typical estimates. -- Piketty’s estimate of the elasticity of substitution can’t really be compared with those in the literature. His is based on economy-wide data covering decades and centuries while estimates in the literature typically cover only a few years, and often just a few industries. Moreover, his pertain to all private wealth, while the literature focuses narrowly on production capital. -- But most importantly, given the flawed marginalist theory behind it, and its even more flawed basis of measurement... the elasticity of substitution simply cannot be regarded as a meaningful measure of an economy’s technology (or anything else), or as providing any clue to its future. What’s essential, rather, is Piketty’s empirical demonstration that the rate of return on wealth has been remarkably stable over centuries — and, contra Summers, with no visible tendency to vary in any consistent way against the “supply of capital.”
books  reviews  Piketty  economic_history  economic_theory  economic_models  macroeconomics  heterodox_economics  productivity  capital  labor  profit  wages  technology  economic_growth  savings  inheritance  1-percent  inequality  meritocracy  wealth  supermanagers  corporate_governance  corporate_finance  political_economy  economic_culture  economic_sociology  EF-add 
june 2014 by dunnettreader
Jesus Felipe, John S.L. McCombie - The Aggregate Production Function And The Measurement Of Technical Change (2013) - Edward Elgar Publishing
Prologue: ‘Not Even Wrong’ *-* Introduction 1. Some Problems with the APF *-* 2. The APF: Behavioural Relationship or Accounting Identity? *-* 3. Simulation Studies, the APF and the Accounting Identity *-* 4. ‘Are There Laws of Production?’ The Work of Cobb and Douglas and its Early Reception *-* 5. Solow’s ‘Technical Change and the APF’, and the Accounting Identity *-* 6. What does Total Factor Productivity Actually Measure? Further Observations on the Solow Model *-* 7. Why Are Some Countries Richer than Others? A Sceptical View of Mankiw–Romer–Weil’s Test of the Neoclassical Growth Model *-* 8. Some Problems with the Neoclassical Dual-Sector Growth Model *-* 9. Is Capital Special? The Role of the Growth of Capital and its Externality Effect in Economic Growth *-* 10. Problems Posed by the Accounting Identity for the Estimation of the Degree of Market Power and the Mark-up *-* 11. Are Estimates of Labour Demand Functions Mere Statistical Artefacts? *-* 12. Why Have the Criticisms of the APF Generally Been Ignored? On Further Misunderstandings and Misinterpretations of the Implications of the Accounting Identity --- Felipe and McCombie have gathered all of the compelling arguments denying the existence of APFs and showing that econometric estimates based on these fail to measure what they purport to quantify: they are artefacts. Their critique, which ought to be read by any economist doing empirical work, is destructive of nearly all that is important to mainstream economics: NAIRU and potential output measures, measures of wage elasticities, of output elasticities and of total factor productivity growth.– Marc Lavoie, University of Ottawa, Canada
books  kindle-available  economic_theory  economic_models  macroeconomics  neoclassical_economics  productivity  capital  labor  technology  prices  firms-theory  economic_growth  econometrics 
june 2014 by dunnettreader
Suresh Naidu - Capital Eats the World | Jacobin May 2014
A first step could be a multisector model with both a productive sector and an extractive, rent-seeking outlet for investment, so that the rate of return on capital has the potential to be unanchored from the growth of the economy. This model could potentially do a better job of explaining r > g in a world where capital has highly profitable opportunities in rent-seeking ....More fundamentally, a model that started with the financial and firm-level institutions underneath the supply and demand curves for capital, rather than blackboxing them in production and utility functions, could illuminate complementarities among the host of other political demands that would claw back the share taken by capital and lower the amount paid out as profits before the fiscal system gets its take. This is putting meat on what Brad Delong calls the “wedge” between the actual and warranted rate of profit. -- We need even more and even better economics to figure out which of these may get undone via market responses and which won’t, and to think about them jointly with the politics that make each feasible or not. While Piketty’s book diagnoses the problem of capital’s voracious appetite, it would require a different kind of model to take our focus off the nominal quantities registered by state fiscal systems, and instead onto the broader distribution of political power in the world economy.
books  reviews  kindle-available  Piketty  political_economy  economic_theory  heterodox_economics  neoclassical_economics  economic_models  economic_growth  wealth  capital  finance_capital  capitalism  labor  Labor_markets  unemployment  markets_in_everything  tax_havens  investment  investors  savings  inheritance  profit  corporate_governance  corporate_citizenship  inequality  technology  1-percent  rent-seeking  rentiers  class_conflict  oligarchy  taxes  productivity  corporate_finance  property  property_rights  neoliberalism 
june 2014 by dunnettreader
Chris Dillow - Stumbling and Mumbling: What can economics explain? - May 2014
The death of Gary Becker, the father of the "economics of everything" set me wondering: could it be that basic neoclassical economics does a better job of explaining "non-economic" behaviour than it does of economic phenomena? Take three examples where basic neoclassical is, at best, questionable: - A theory of distribution. The idea that wages are equal to workers' marginal product is deeply questionable. .. And the idea of a marginal product of capital is just close to meaningless, which gives neoclassical economics little idea of where profits come from. - The Solow-Swan growth model found that most economic growth was due to exogenous technical progress, which is pretty much no explanation of growth at all... - The neoclassical explanation of unemployment stresses wage inflexibility and "rigidities". But this fails to account for why unemployment was high in the 19th century. By contrast, Beckerian economics has given us some useful insights into crime, family life (pdf) and racial discrimination. There might be good reasons for this difference. Matters of individual choice are often more tractable in the "non-economic" than economic arena. -- as usual Chris provides gobs of links
economic_theory  economic_growth  economic_models  neoclassical_economics  behavioral_economics  rational_choice  rationality-economics  social_theory  links  EF-add 
may 2014 by dunnettreader
Washington Equitable Center for Growth | The Honest Broker: Mr. Piketty and the “Neoclassicists”: A Suggested Interpretation: For the Week of May 17, 2014
An important, sprawling book of economic analysis. A complex and nonobvious relationship to a previous economics literature. Large political economy and policy stakes at hazard. Is this John Maynard Keynes’s General Theory of Employment, Interest, and Money? Or is this Thomas Piketty’s Capital in the Twenty-First Century? I find the parallels intriguing. And so I am taking my task to be the task that John Hicks took upon himself back in 1937 with his “Mr. Keynes and the ‘Classics’: A Suggested Interpretation”: to build a bridge between Piketty’s formulations of the big issues and other, previous formulations that may be more standard and more familiar. Like Hicks’s, this bridge-building is immensely powerful but also immensely limited. My reference is meant both as an endorsement of the power of the Hicks (1937) research project and as a recognition of its limitations. But to those who say they do not like the architecture of my bridge, I say: go build your own.
economic_history  political_economy  economic_theory  economic_models  macroeconomics  Piketty  inequality  EF-add 
may 2014 by dunnettreader
Matt Bruening - What Larry Summers Gets Wrong On Piketty's 'Capital' | Demos May 15 2014
Does Piketty argue that if r > g , then the wealth-to-income ratio will rise? Or does Piketty argue that the wealth-to-income ratio moves towards s/g (savings rate divided by the growth rate)? Summers has him saying both! Despite Summers' first sentence, Piketty does not use "r > g" to explain the wealth-to-income ratio. He explains the wealth-to-income ratio solely by s/g. If the savings rate of an economy is 5% and the growth rate is 1%, then the wealth-to-income ratio will go to 5-to-1 and stay there at equilibrium. This is true whether r > g or not. Piketty does claim that the wealth-to-income ratio will increase, but it is based on this s/g logic. More specifically, he thinks the savings rate will probably stay where it is and growth will decline, and this will therefore cause s/g to get bigger.
capital  savings  economic_growth  investment  economic_models  Piketty  inequality  EF-add 
may 2014 by dunnettreader
Steve Randy Waldman - interfluidity » Should markets clear? - May 2014
Microeconomic analysis, whenever it escapes the elegance of theorem and proof and is applied to the actual world, always makes assumptions about the macroeconomy. One very common assumption microeconomists frequently forget that they are making is an assumption of rough distributional equality. Once that goes away, even such basic conclusions like “markets should clear” go away as well.
economic_theory  economic_models  microeconomics  markets  inequality  efficiency  EF-add 
may 2014 by dunnettreader
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