Paul Krugman — finally — admits he was wrong!

In a recent essay titled “What Economists (Including Me) Got Wrong About Globalization,” adapted from a forthcoming book on inequality, Krugman writes that he and other mainstream economists “missed a crucial part of the story” in failing to realize that globalization would lead to “hyperglobalization” and huge economic and social upheaval, particularly of the industrial middle class in America. And many of these working-class communities have been hit hard by Chinese competition, which economists made a “major mistake” in underestimating, Krugman says.
It was quite a “whoops” moment, considering all the ruined American communities and displaced millions of workers we’ve seen in the interim. And a newly

From Lars Syll
As long as reading is for us the instigator whose magic keys have opened the door to those dwelling-places deep within us that we would not have known how to enter, its role in our lives is salutary.  It becomes dangerous, on the other hand, when, instead of awakening us to the personal life of the mind, reading tends to take its place, when the truth no longer appears to us as an ideal which we can realize only by the intimate progress of our own thought and the efforts of our heart, but as something material, deposited between the leaves of books like a honey fully prepared by others and which we need only take the trouble to reach down from the shelves of libraries and then sample passively in a perfect repose of mind and body.

‘Severe tests’ of causal claims

For many questions in the social sciences, a research design guaranteeing the validity of causal inferences is difficult to obtain. When this is the case, researchers can attempt to defend hypothesized causal relationships by seeking data that subjects their theory to repeated falsification. Karl Popper famously argued that the degree to which we have confidence in a hypothesis is not necessarily a function of the number of tests it has withstood, but rather the severity of the tests to which the hypothesis has been subjected. A test of a hypothesis with a design susceptible to hidden bias is not particularly severe or determinative. If the implication is tested in many contexts, however, with different designs that have

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Radikala räntehöjningar får inte vår ekonomi i balans

En gång i tiden var ledstjärnan för den ekonomiska politiken att mildra konjunktur-svängningarna och kapa de djupa dalarna och höga topparna. Nu vill Riksbanken skapa en ekonomisk nedgång för att få ner inflationen samtidigt som finanspolitiken passivt ser på. Penningpolitiken ser ut att kunna sänka den svenska ekonomin. Riksbanken balanserar kort sagt på en knivsegg.
Konsensus grundar sig ofta på dogm. Inte sällan har de ekonomisk-politiska dogmerna tagit sig formen av ”sanningar” om penning- och valutapolitiken. Det fanns en tid då valutorna alltid skulle ha en koppling till priset på guld. För några decennier sedan var fasta växelkurser något politikerna till varje pris borde surra sig vid. 1992

Truth will prevail at last …

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Postmodernism — self-refuting nonsense

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MMT — Krugman still does not get it!

Krugman complains that Lerner was too “cavalier” in his discussion of monetary policy since he called for the interest rate to be set at the level that produces “the most desirable level of investment” without saying exactly what that rate should be.
It’s an odd critique, since Krugman himself subscribes to the idea that monetary policy should target an invisible “neutral rate,” a so-called r-star that exists when the economy is neither depressed nor overheating. For what it’s worth, research suggests the neutral rate “may be flat-out wrong” …
But Lerner wasn’t trying to use interest rates to optimize the economy. That was a job for fiscal policy. He argued that the government should be prepared to spend whatever is

Skicka Zlatanstatyn till Qatar!

Även i form av en staty ställer fotbollspelaren Zlatan Ibrahimovic till problem för sin omgivning.
Efter Zlatans senaste kärleksförklaring till diktaturen Qatar vågar nu inte ens Malmös ledande politiker ta i frågan om den nu tydligen reparerade statyn ska placeras på synbar plats eller inte.
De avböjer till och med att kommentera det problem som uppstått sedan Zlatan ställt sig i spetsen som Qatar-regimens kanske allra viktigaste PR-man.
Problemet är enkelt löst: skicka statyn till Doha …
Han jämförde diktaturen Qatar med demokratin Sverige och fann att den förra var att föredra.
“Qatar — jag tror det är ett system som fungerar”,  löd hans omdöme.
Nu jublar hela Mellanöstern över detta erkännande fran en av världens mest

My son David Syll was elected today as a Swedish Bar Association member.
I know your mother Kristina and grandpa Erik — if they had still been with us — would have been so immensely proud of you for keeping up the family tradition.
Congratulations David!

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From Lars Syll
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Absolutely lovely! Comedian and television host Jon Stewart turns out to know much more about real-world economics than mainstream Harvard economist Larry Summers. Don’t know why, but watching this interview/debate makes yours truly come to think about a famous H. C. Andersen tale …

An ongoing concern is that excessive focus on formal modeling and statistics can lead to neglect of practical issues and to overconfidence in formal results … Analysis interpretation depends on contextual judgments about how reality is to be mapped onto the model, and how the formal analysis results are to be mapped back into reality. But overconfidence in formal outputs is only to be expected when much labor has gone into deductive reasoning. First, there is a need to feel the labor was justified, and one way to do so is to believe the formal deduction produced important conclusions. Second, there seems to be a pervasive human aversion to uncertainty, and one way to reduce feelings of uncertainty is to invest faith in deduction as a sufficient guide to

On the benefits — and dangers — of reading

As long as reading is for us the instigator whose magic keys have opened the door to those dwelling-places deep within us that we would not have known how to enter, its role in our lives is salutary.  It becomes dangerous, on the other hand, when, instead of awakening us to the personal life of the mind, reading tends to take its place, when the truth no longer appears to us as an ideal which we can realize only by the intimate progress of our own thought and the efforts of our heart, but as something material, deposited between the leaves of books like a honey fully prepared by others and which we need only take the trouble to reach down from the shelves of libraries and then sample passively in a perfect

Using counterfactuals in causal inference

I have argued that there are four major problems in the way of using the counterfactual account for causal inference. Of the four, I argued that the fourth — the problem of indeterminacy — is likely to be the most damaging: To the extent that some of the causal principles that connect counterfactual antecedent and consequent are genuinely indeterministic, the counterfactual will be of the “might have been” and not the “would have been” kind …
The causal principles describing a situation of interest must be weak enough — that is, contain genuinely indeterministic relations so that the counterfactual antecedent can be implemented … At the same time, the principles must be strong enough — that is, contain enough

On the limited value of randomization

In Social Science and Medicine (December 2017), Angus Deaton & Nancy Cartwright argue that Randomized Controlled Trials (RCTs) do not have any warranted special status. They are, simply, far from being the ‘gold standard’ they are usually portrayed as:
Contrary to frequent claims in the applied literature, randomization does not equalize everything other than the treatment in the treatment and control groups, it does not automatically deliver a precise estimate of the average treatment effect (ATE), and it does not relieve us of the need to think about (observed or unobserved) covariates. Finding out whether an estimate was generated by chance is more difficult than commonly believed. At best, an RCT yields an

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Absolutely lovely! Comedian and television host Jon Stewart turns out to know much more about real-world economics than mainstream Harvard economist Larry Summers. Don’t know why, but watching this interview/debate makes yours truly come to think about a famous H. C. Andersen tale …

Greatest intro in pop history

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Norman Whitfield’s instrumental arrangement to this 1972 ‘psychedelic soul’ hit is still unparalleled.

Physics envy — a sure way to make economics useless

From Lars Syll

The theory is a vending machine: you feed it input in certain prescribed forms for the desired output; it gurgitates for a while; then it drops out the sought-for representation, plonk, on the tray, fully formed, as Athena from the brain of Zeus. This image of the relation of theory to the models we use to represent the world is hard to fit with what we know of how science works.
When applying deductivist thinking to economics, economists usually set up ‘as if” models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The beauty of this procedure is of course that if the axiomatic premises are true, the conclusions necessarily follow. The snag is that if the models are to be relevant, we also have to argue that their

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Does randomization control for ‘lack of balance’?

Mike Clarke, the Director of the Cochrane Centre in the UK, for example, states on the Centre’s Web site: ‘In a randomized trial, the only difference between the two groups being compared is that of most interest: the intervention under investigation’.
This seems clearly to constitute a categorical assertion that by randomizing, all other factors — both known and unknown — are equalized between the experimental and control groups; hence the only remaining difference is exactly that one group has been given the treatment under test, while the other has been given either a placebo or conventional therapy; and hence any observed difference in outcome between the two groups in a randomized trial (but only in

In The World in the Model, Mary Morgan characterizes the modelling tradition of economics as one concerned with “thin men acting in small worlds” and writes:
Strangely perhaps, the most obvious element in the inference gap for models … lies in the validity of any inference between two such different media – forward from the real world to the artificial world of the mathematical model and back again from the model experiment to the real material of the economic world. The model is at most a parallel world. The parallel quality does not seem to bother economists. But materials do matter: it matters that economic models are only representations of things in the economy, not the things themselves.
Now, a salient feature of modern mainstream economics is the idea of science

The insufficiency of validity

Mainstream economics is at its core in the story-telling business whereby economic theorists create make-believe analogue models of the target system – usually conceived as the real economic system. This modelling activity is considered useful and essential. Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to substitute experimenting with something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models and make things happen in these “analogue-economy models” rather than engineering things happening in real economies.
Formalistic deductive

Mainstream economics — a vending machine view

The theory is a vending machine: you feed it input in certain prescribed forms for the desired output; it gurgitates for a while; then it drops out the sought-for representation, plonk, on the tray, fully formed, as Athena from the brain of Zeus. This image of the relation of theory to the models we use to represent the world is hard to fit with what we know of how science works.
When applying deductivist thinking to economics, economists usually set up ‘as if” models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The beauty of this procedure is of course that if the axiomatic premises are true, the conclusions necessarily follow. The snag is that if the

Don’t let me be misunderstood

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Feynman’s integral trick (student stuff)

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I had learned to do integrals by various methods shown in a book that my high
school physics teacher Mr. Bader had given me. [It] showed how to differentiate
parameters under the integral sign – it’s a certain operation. It turns out that’s not taught very much in the universities; they don’t emphasize it. But I caught on how to use that method, and I used that one damn tool again and again. [If] guys at MIT or Princeton had trouble doing a certain integral, [then] I come along and try differentiating under the integral sign, and often it worked. So I got a great reputation for doing integrals, only because my box of tools was different from everybody else’s, and they had tried all their tools

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