Lars P. Syll

Why all models are wrong Models share three common characteristics: First, they simplify, stripping away unnecessary details, abstracting from reality, or creating anew from whole cloth. Second, they formalize, making precise definitions. Models use mathematics, not words … Models create structures within which we can think logically … But the logic comes at a cost, which leads to their third characteristic: all models are wrong … Models are wrong because...

Empirical efforts at testing the correctness of the rational expectations hypothesis have resulted in a series of empirical studies that have more or less concluded that it is not consistent with the facts. In one of the more well-known and highly respected evaluation reviews made, Michael Lovell (1986) concluded: it seems to me that the weight of empirical evidence is sufficiently strong to compel us to suspend belief in the hypothesis of rational expectations, pending the...

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Econometrics — analysis with incredible​ certitude​ There have been over four decades of econometric research on business cycles … But the significance of the formalization becomes more difficult to identify when it is assessed from the applied perspective … The wide conviction of the superiority of the methods of the science has converted the econometric community largely to a group of fundamentalist guards of mathematical rigour … So much so that the...

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Wynne Godley on what it means for a nation not to have its own currency If a government stops having its own currency, it doesn’t just give up “control over monetary policy” as normally understood; its spending powers also become constrained in an entirely new way. If a government does not have its own central bank on which it can draw cheques freely, its expenditures can be financed only by borrowing in the open market in competition with businesses, and...

Comment les discriminations minent la cohésion sociale Vous (l’économiste Stéphane Carcillo) avez publié, avec l’économiste Marie-Anne Valfort, un ouvrage sur les discriminations dans le monde du travail qui montre qu’il y a une corrélation entre les discriminations et la confiance dans les relations ­sociales. Comment fonctionne ce lien ? Le politiste américain Robert Putnam est le premier à avoir identifié, au début des années 2000, un lien entre la...

Den sista grisen — Horace Engdahl Ibland säger en boktitel mer än tusen ord … Advertisements

Wynne Godley — the man who saw through the euro If there were an economic and monetary union, in which the power to act independently had actually been abolished, ‘co-ordinated’ reflation of the kind which is so urgently needed now could only be undertaken by a federal European government. Without such an institution, EMU would prevent effective action by individual countries and put nothing in its place … What happens if a whole country – a potential...