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Lars Syll

Lars Syll

Lars Jörgen Pålsson Syll (born November 5, 1957) is a Swedish economist who is a Professor of Social Studies and Associate professor of Economic History at Malmö University College. Pålsson Syll has been a prominent contributor to the economic debate in Sweden over the global financial crisis that began in 2008.

Articles by Lars Syll

Economic models and reality

3 days ago

From Lars Syll
The abandonment of efforts to match real structures has led to disaster, as models of economic theory have grown progressively distant from reality. Attempts to fix the problem have failed to address the cause. Economists look at bad models, and say we should replace these by better models. But the process by which models are evaluated, the underlying methodology, is not examined. The real problem lies much deeper than bad models and ludicrous assumptions. Bad assumptions would quickly be replaced by better ones if the methodology insisted on correction of models to match reality. The real problem is the lack of a progressive methodology. When our mental models are attempts to approximate reality, then, when they fail, we try to improve the match to reality. Our models

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Rational choice theory — an abysmal failure

5 days ago

Lars Syll
Though an enthusiast of reason, I believe that rational choice theory has failed abysmally, and it saddens me that this failure has brought discredit upon the very enterprise of serious theorizing in the field of social study …
Rational choice theory is far too ambitious. In fact, it claims to explain everything social in terms of just three assumptions that would hold for all individuals in all social groups and in every historical period. But a Theory of Everything does not explain anything in particular … And being unable to account for differences among individuals and for the variety of social interactions, systems, processes, and institutions, the theory is bound to be unrealistic, i. e., false …
The reader may feel that my criticism is excessive: that I am throwing the

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Econometrics — a Keynesian perspective

8 days ago

From Lars Syll
It will be remembered that the seventy translators of the Septuagint were shut up in seventy separate rooms with the Hebrew text and brought out with them, when they emerged, seventy identical translations. Would the same miracle be vouchsafed if seventy multiple correlators were shut up with the same statistical material? And anyhow, I suppose, if each had a different economist perched on his a priori, that would make a difference to the outcome.
J M Keynes
Mainstream economists today usually subscribe to the idea that although mathematical-statistical models are not ‘always the right guide for policy,’ they are still somehow necessary for making policy recommendations. The models are supposed to supply us with a necessary ‘discipline of thinking.’
This emphasis on the

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How the model became the message in economics

10 days ago

From Lars Syll
In The World in the Model Mary Morgan gives a historical account of how the model became the message in economics. On the question of how the models provide a method of enquiry where they can function both as “objects to enquire into” and as “objects to enquire with”, Morgan argues that model reasoning involves a kind of experiment. She writes:
It may help to clarify my account of modelling as a double method of enquiry in economics if we compare it with two of the other reasoning styles … the method of mathematical postulation and proof and the method of laboratory experiment.
If we portray mathematical modelling as a version of the method of mathematical postulation and proof … models can indeed be truth-makers about that restricted and mathematical small world … But

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The representative agent — a theoretical cul-de-sac

12 days ago

From Lars Syll
Rigorous macroeconomics must therefore ground its analysis in individual behavior, recognize that only a few key variables carry over to the aggregate level, and generally posit distinct functional forms at the macro level. Keynes and Kalecki are eminent examples of this. Keynes builds his analysis of aggregate consumption on personal income and a variety of subjective and objective factors that influence individual savings (non-consumption) behavior. He is also careful to note that institutional and organizational factors play an important role. Despite all of this, he only requires that aggregate real consumption be a function of real income with the property that the marginal propensity to consume be less than one. Kalecki’s theory of price follows a similar path from

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Crazy econometricians

14 days ago

From Lars Syll
With a few notable exceptions, such as the planetary systems, our most beautiful and exact applications of the laws of physics are all within the entirely artificial and precisely constrained environment of the modern laboratory … Haavelmo remarks that physicists are very clever. They confine their predictions to the outcomes of their experiments. They do not try to predict the course of a rock in the mountains and trace the development of the avalanche. It is only the crazy econometrician who tries to do that, he says.

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The advantages and limitations of forecasting

17 days ago

From Lars Syll
In New York State, Section 899 of the Code of Criminal Procedure provides that persons “Pretending to Forecast the Future” shall be considered disorderly under subdivision 3, Section 901 of the Code and liable to a fine of $250 and/or six months in prison.
Although the law does not apply to “ecclesiastical bodies acting in good faith and without fees,” I’m not sure where that leaves econometricians and other forecasters …
I came to think about this nineteenth-century New York law the other day when interviewed by a journalist working on a series on Great Economic Thinkers. We were discussing the monumental failures of the predictions-and-forecasts-business. But — the journalist asked — if these cocksure economists with their ‘rigorous’ and ‘precise’

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Gary Becker’s big mistake

20 days ago

From Lars Syll
The econometrician Henri Theil once said “models are to be used but not to be believed.” I use the rational actor model for thinking about marginal changes but Gary Becker really believed the model. Once, at a dinner with Becker, I remarked that extreme punishment could lead to so much poverty and hatred that it could create blowback. Becker was having none of it. For every example that I raised of blowback, he responded with a demand for yet more punishment …
You can see the idea in his great paper, Crime and Punishment: An Economic Approach. In a famous section he argues that an optimal punishment system would combine a low probability of being punished with a high level of punishment if caught …
We have now tried that experiment and it didn’t work … Most

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Is economics — really — a science?

25 days ago

From Lars Syll
As yours truly has reported repeatedly during the last couple of years, university students all over Europe are increasingly beginning to question if the kind of economics they are taught — mainstream economics — really is of any value. Some have even started to question if economics is a science.
At least two Nobel laureates in economics have tried to respond.
This is Robert Shiller‘s answer:
Critics of “economic sciences” sometimes refer to the development of a “pseudoscience” of economics, arguing that it uses the trappings of science, like dense mathematics, but only for show …
My belief is that economics is somewhat more vulnerable than the physical sciences to models whose validity will never be clear, because the necessity for approximation is much stronger than

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Haavelmo and modern probabilistic econometrics — a critical-realist perspective (wonkish)

April 27, 2020

From Lars Syll
Mainstream economists often hold the view that criticisms of econometrics are the conclusions of sadly misinformed and misguided people who dislike and do not understand much of it. This is a gross misapprehension. To be careful and cautious is not equivalent to dislike.
The ordinary deductivist ‘textbook approach’ to econometrics views the modelling process as foremost an estimation problem since one (at least implicitly) assumes that the model provided by economic theory is a well-specified and ‘true’ model. The more empiricist, general-to-specific-methodology (often identified as the ‘LSE approach’) on the other hand views models as theoretically and empirically adequate representations (approximations) of a data generating process (DGP). Diagnostics tests (mostly

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Lucas’ Copernican revolution

April 24, 2020

From Lars Syll
In Michel De Vroey’s version of the history of macroeconomics, Robert Lucas’ declaration of the need for macroeconomics to be pursued only within ‘equilibrium discipline’ and declaring equilibrium to exist as a postulate, is hailed as a ‘Copernican revolution.’ Equilibrium is not to be considered something that characterises real economies, but rather “a property of the way we look at things.” De Vroey, approvingly, notices that this — as well as Lucas’ banning of disequilibrium as referring to ‘unintelligible behaviour’ — “amounts to shrinking the pretence of equilibrium theory.”
Mirabile dictu!
Is it really a feasible methodology for economists to make a sharp divide between theory and reality, and then — like De Vroey and Lucas — treat the divide as something

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The ‘laws of economics’

April 19, 2020

From Lars Syll
What we discover is that the cash value of these laws lies beneath the surface — in the extent to which they approximate the behaviour of real gases or substances, since such substances do not exist in the world …
Notice that we are here regarding it as grounds for complaint that such claims are ‘reduced to the status of definitions’ … Their truth is obtained at a price, namely that they cease to tell us about this particular world and start telling us about the meaning of words instead …
The ultimate reduction to triviality makes the claim definitionally true, and obviously so, in which case it’s worth nothing to those who already know the language …
Michael Scriven
One of the main cruxes of economics laws — and regularities — is that they only hold ceteris paribus.

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Jalāl ad-Dīn Muhammad Rūmī

April 19, 2020

From Lars Syll
[embedded content]
O day, arise! The atoms are dancing.
Thanks to Him the universe is dancing.
The souls are dancing, overcome with ecstasy.
I’ll whisper in your ear where their dance is taking them.
All the atoms in the air and in the desert know well, they seem insane.
Every single atom, happy or miserable,
Becomes enamoured of the sun, of which nothing can be said.
Jalāl ad-Dīn Muhammad Rūmī (1207-1273)

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What’s the use of economic models?

April 16, 2020

From Lars Syll
Getting it right about the causal structure of a real system in front of us is often a matter of great importance. It is not appropriate to offer the authority of formalism over serious consideration of what are the best assumptions to make about the structure at hand …
Where we don’t know, we don’t know. When we have to proceed with little information we should make the best evaluation we can for the case at hand — and hedge our bets heavily; we should not proceed with false con-fidence having plumped either for or against some specific hypothesis … for how the given system works when we really have no idea.
Trying to get around this lack of knowledge, mainstream economists in their quest for deductive certainty in their models, standardly assume things like

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‘Doctor, it hurts when I p’

April 14, 2020

From Lars Syll
A low-powered study is only going to be able to see a pretty big effect. But sometimes you know that the effect, if it exists, is small. In other words, a study that accurately measures the effect … is likely to be rejected as statistically insignificant, while any result that passes the p < .05 test is either a false positive or a true positive that massively overstates the … effect.

A conventional boundary, obeyed long enough, can be easily mistaken for an actual thing in the world. Imagine if we talked about the state of the economy this way! Economists have a formal definition of a ‘recession,’ which depends on arbitrary thresholds just as ‘statistical significance’ does. One doesn’t say, ‘I don’t care about the unemployment rate, or housing starts, or the

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Coronavirus pandemic cripples U.S. economy

April 11, 2020

From Lars Syll
The economic toll tied to the coronavirus pandemic intensifies. Over the last three weeks, more than 16 million Americans have made unemployment claims. The unemployment rate is now over 10%. In the coming weeks, more people will face income and job losses.
So how do we get out of this unprecedented crisis?
To both Keynes and Lerner, it was evident that the state has the ability to promote full employment and a stable price level — and that it should use its powers to do so. If that means that it has to take on debt and (more or less temporarily) underbalance its budget — so let it be! Public debt is neither good nor bad. It is a means to achieve two over-arching macroeconomic goals — full employment and price stability. What is sacred is not to have a balanced budget or

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What’s the problem with economic models?

April 9, 2020

From Lars Syll
Some critics of economics appear to believe that the root of the alleged problems lies in models, or the method of modelling in general. On this view, modelling just is not an appropriate way of acquiring knowledge about the social world. No (simple) model can do epistemic justice to the (complex) world, so there cannot be a proper use of models that would make the method of modelling justified. Models are the problem. Models distort the world, not people using them. This would be analogous to claiming that guns kill people. Just as a gun-free world would be a better world, a model-free economics would be better economics. This is not Rodrik’s line. He believes the problem is not with models but with their bad use …
Restrict the availability of guns – this is the

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Dumb and Dumber — the Chicago version

April 5, 2020

From Lars Syll
A couple of years ago, in a lecture on the US recession, Robert Lucas gave an outline of what the New Classical school of macroeconomics today thinks on the latest downturns in the US economy and its future prospects.
Lucas starts by showing that real US GDP has grown at an average yearly rate of 3 per cent since 1870, with one big dip during the Depression of the 1930s and a big – but smaller – dip in the recent recession.
After stating his view that the US recession that started in 2008 was basically caused by a run for liquidity, Lucas then goes on to discuss the prospect of recovery from where the US economy is today, maintaining that past experience would suggest an “automatic” recovery, if the free market system is left to repair itself to equilibrium unimpeded by

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Maths and economics

April 4, 2020

From Lars Syll
Many American undergraduates in Economics interested in doing a Ph.D. are surprised to learn that the first year of an Econ Ph.D. feels much more like entering a Ph.D. in solving mathematical models by hand than it does with learning economics. Typically, there is very little reading or writing involved, but loads and loads of fast algebra is required. Why is it like this? …
One reason to use math is that it is easy to use math to trick people. Often, if you make your assumptions in plain English, they will sound ridiculous. But if you couch them in terms of equations, integrals, and matrices, they will appear more sophisticated, and the unrealism of the assumptions may not be obvious, even to people with Ph.D.’s from places like Harvard and Stanford, or to editors at

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Good reasons to become a Keynesian

April 3, 2020

From Lars Syll
Until [2008], when the banking industry came crashing down and depression loomed for the first time in my lifetime, I had never thought to read The General Theory of Employment, Interest, and Money, despite my interest in economics … I had heard that it was a very difficult book and that the book had been refuted by Milton Friedman, though he admired Keynes’s earlier work on monetarism. I would not have been surprised by, or inclined to challenge, the claim made in 1992 by Gregory Mankiw, a prominent macroeconomist at Harvard, that “after fifty years of additional progress in economic science, The General Theory is an outdated book. . . . We are in a much better position than Keynes was to figure out how the economy works.”
We have learned since [2008] that the present

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Chicago economics — in praise of superficiality

April 2, 2020

From Lars Syll
To observe that economics is based on a superficial view of individual and social behaviour does not seem to me to be much of an insight. I think it is exactly this superficiality that gives economics much of the power that it has. Its ability to predict human behaviour without knowing very much about the make up and lives of the people whose behaviour we are trying to understand.
Robert Lucas
The purported strength of Chicago — New Classical — macroeconomics is that it has firm anchorage in preference-based microeconomics, and especially that the decisions are taken by inter-temporal utility maximizing ‘forward-looking’ individuals.
To some of us, however, this has come at too high a price. The almost quasi-religious insistence that macroeconomics has to have

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Covid-19 and the magic money tree

March 31, 2020

From Lars Syll
What will be the lasting effects of the covid-19 pandemic? Start with the size of the state. Over the next year government debt will rise sharply, as spending jumps and tax revenues collapse. When the economy recovers, attention will turn to paying it down. “Capital and Ideology”, a new book by Thomas Piketty, shows that after the first and second world wars many governments in the West turned to heavier taxation of the incomes and wealth of the richest to achieve that goal …
Central banks’ innovations will also have lasting consequences. Few economists believe that the explicit co-operation between the fiscal and monetary authorities risks creating runaway inflation … However, just as the use of quantitative easing in 2008-09 opened the door to more of the same down the

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On the non-neutrality of money

March 28, 2020

From Lars Syll
Paul Krugman has repeatedly over the years argued that we should continue to use neoclassical hobby horses like IS-LM and Aggregate Supply-Aggregate Demand models. Here’s one example:
So why do AS-AD? … We do want, somewhere along the way, to get across the notion of the self-correcting economy, the notion that in the long run, we may all be dead, but that we also have a tendency to return to full employment via price flexibility. Or to put it differently, you do want somehow to make clear the notion (which even fairly Keynesian guys like me share) that money is neutral in the long run.
I doubt that Keynes would have been impressed by having his theory being characterized with catchwords like “tendency to return to full employment” and “money is neutral in the long

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Econometric modelling as junk science

March 27, 2020

From Lars Syll
Do you believe that 10 to 20% of the decline in crime in the 1990s was caused by an increase in abortions in the 1970s? Or that the murder rate would have increased by 250% since 1974 if the United States had not built so many new prisons? Did you believe predictions that the welfare reform of the 1990s would force 1,100,000 children into poverty?
If you were misled by any of these studies, you may have fallen for a pernicious form of junk science: the use of mathematical modeling to evaluate the impact of social policies. These studies are superficially impressive. Produced by reputable social scientists from prestigious institutions, they are often published in peer reviewed scientific journals. They are filled with statistical calculations too complex for anyone but

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Econometric testing

March 24, 2020

From Lars Syll
Debating econometrics and its short-comings yours truly often gets the response from econometricians that “ok, maybe econometrics isn’t perfect, but you have to admit that it is a great technique for empirical testing of economic hypotheses.”
But is econometrics — really — such a great testing instrument?
Econometrics is supposed to be able to test economic theories but to serve as a testing device you have to make many assumptions, many of which themselves cannot be tested or verified. To make things worse, there are also only rarely strong and reliable ways of telling us which set of assumptions is to be preferred. Trying to test and infer causality from (non-experimental) data you have to rely on assumptions such as disturbance terms being ‘independent and identically

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Economics beyond neoliberalism

March 22, 2020

From Lars Syll
We welcome Naidu, Rodrik, and Zucman’s contribution and the debate it has inspired. We share much of their agenda for an economics “beyond neoliberalism” …
Nonetheless, we believe that Naidu, Rodrik, and Zucman do not go far enough in their calls for reform. The vision they paint is still focused on the discipline of economics and anchored in the core ideas of neoclassical theory that dominated the field in the twentieth century …
The behavioral economics critique of the rational actor model has become mainstream. Yet despite this, much economic modeling, including much policy modeling, continues to use rational choice assumptions. There remains a perception that rational choice is a “good enough approximation” and that there is no acceptable alternative model … But if

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Ergodicity: a primer

March 18, 2020

From Lars Syll
Why are election polls often inaccurate? Why is racism wrong? Why are your assumptions often mistaken? The answers to all these questions and to many others have a lot to do with the non-ergodicity of human ensembles. Many scientists agree that ergodicity is one of the most important concepts in statistics. So, what is it?
Suppose you are concerned with determining what the most visited parks in a city are. One idea is to take a momentary snapshot: to see how many people are this moment in park A, how many are in park B and so on. Another idea is to look at one individual (or few of them) and to follow him for a certain period of time, e.g. a year. Then, you observe how often the individual is going to park A, how often he is going to park B and so on.
Thus, you obtain

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Machine learning — puzzling ‘big data’ nonsense

March 16, 2020

From Lars Syll
If we wanted highly probable claims, scientists would stick to​​ low-level observables and not seek generalizations, much less theories with high explanatory content. In this day​ of fascination with Big data’s ability to predict​ what book I’ll buy next, a healthy Popperian reminder is due: humans also want to understand and to explain. We want bold ‘improbable’ theories. I’m a little puzzled when I hear leading machine learners praise Popper, a realist, while proclaiming themselves fervid instrumentalists. That is, they hold the view that theories, rather than aiming at truth, are just instruments for organizing and predicting observable facts. It follows from the success of machine learning, Vladimir Cherkassy avers, that​ “realism is not possible.” This is very quick

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