Lars P. Syll

The rational expectations hoax A lot of mainstream economists still stick with ‘rational expectations’ since they think it has not yet been disconfirmed. They are, of course, entitled to have whatever views they like — after all, it is, to say the least, difficult to empirically disconfirm the non-existence of Gods … But for the rest of us, let’s see how rational expectations really fare​ as an empirical assumption. Empirical efforts at testing the...

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“I never learned maths, so I had to think” Professors may find themselves ill-prepared for the macro classroom. To become academics they had to answer erudite questions posed by more senior members of the discipline. To become good teachers of introductory macro, they have to give clear answers to muddled students. That requires an intuitive feel for the subject. It is not enough to crank through the equations. Indeed, Mr Rowe attributes part of his...

Touring again. Regular blogging to be resumed during the weekend. Advertisements

Easterlin’s paradox or why economic growth does not make us happier In Easterlin’s (1974) seminal paper, he finds that within any one country, in cross sectional studies, there was a strong correlation between income and happiness. One would easily conclude that money can buy happiness. However, looking at a cross section of countries, one comes to a different conclusion … For 10 of the 14 countries surveyed, the happiness ranking is about the same, even...

So much for value-free economics Back in 1992, New Jersey raised the minimum wage by 18 per cent while its neighbour state, Pennsylvania, left its minimum wage unchanged. Unemployment in New Jersey should — according to mainstream economics textbooks — have increased relative to Pennsylvania. However, when economists David Card and Alan Krueger gathered information on fast food restaurants in the two states, it turned out that unemployment had actually...

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as...

Another cup of coffee At last (on Via Garibaldi, Genova) we found a cup big enough for the morning coffee needs of my better half … Being an economist, I, of course, came to think of a famous experiment involving coffee … Pros. Kahneman, Knetsch & Thaler conducted a study to see how the endowment effect influences our decision making. The scientists randomly divided participants into buyers and sellers and gave the sellers coffee mugs as a gift. They...

Mein Herr und mein Gott  [embedded content] Advertisements

Modern macro — a total waste​ of time While one can understand that some of the elements in DSGE models seem to appeal to Keynesians at first sight, after closer examination, these models are in fundamental contradiction to Post-Keynesian and even traditional Keynesian thinking. The DSGE model is a model in which output is determined in the labour market as in New Classical models and in which aggregate demand plays only a very secondary role, even in the...