Lars P. Syll

A couple of years ago, former chairman of the Fed, Alan Greenspan, wrote in an article in the Financial Times, re the increased demands for stronger regulation of banks and finance: Since the devastating Japanese earthquake and, earlier, the global financial tsunami, governments have been pressed to guarantee their populations against virtually all the risks exposed by those extremely low probability events. But should they? Guarantees require the building up of a buffer of...

What we do in life echoes in eternity In science, courage is to follow the motto of enlightenment and Kant’s dictum — Sapere Aude!  To use your own understanding, having the ​courage to think for yourself and question ‘received opinion,’ authority or orthodoxy. In our daily lives, courage is a capability to confront fear, as when in front of the powerful and mighty, not to step back, but stand up for one’s rights not to be humiliated or abused. As when...

MMT — the Wicksell connection Most mainstream economists seem to think the idea behind Modern Monetary Theory is something new that some wild heterodox economic cranks have come up with. New? Cranks? How about reading one of the great founders of neoclassical economics — Knut Wicksell. This is what Wicksell wrote in 1898 on ‘pure credit systems’ in Interest and Prices (Geldzins und Güterpreise): It is possible to go even further. There is no real need for...

Was als gerecht gilt Schreiber: Anstatt den Muslimen zu sagen: “Werdet Teil dieser Gesellschaft”, hieß es: “Haltet euch von der westlichen Lebensweise fern. Seid nicht mit Christen befreundet. Geht raus und versucht zu missionieren.” Das waren – vorsichtig ausgedrückt – die Aufforderungen. Besonders krass fand ich die Aussage: “Ihr könnt nicht Muslime und Demokraten zugleich sein.” Die Predigten, die wir angemeldet filmten, hatten eine moderatere Tonalität....

Deniz Yücel im Einzelinterview mit Maybrit Illner  [embedded content] Advertisements

Solow’s Nobel Prize lecture One of the achievements of growth theory was to relate equilibrium growth to asset pricing under tranquil conditions. The hard part of disequilibrium growth is that we do not have — and it may be impossible to have — a​ really good theory of asset valuation under turbulent conditions … One important tendency in contemporary macroeconomic theory evades this problem in an elegant but (to me) ultimately implausible way. The idea is...

Moments you never forget (personal) Courage is a capability to confront fear, as when in front of the powerful and mighty, not to step back, but stand up for one’s rights not to be humiliated or abused. Courage is to do the right thing in spite of danger and fear. To keep on even if opportunities to turn back are given. Dignity, a better life, or justice and rule of law, are things worth fighting for. Not to step back — in spite of confronting the mighty...

DSGE models — false by construction Advances in mathematical tools and in economic theory rapidly changed the landscape. From the perspective of macroeconomics, the streamlined DSGE models of the 1980s begot much richer models in the 1990s. One remarkably successful extension was the introduction​ of nominal and real rigidities, i.e., the conception that agents cannot immediately adjust to changes in the economic environment. In particular, many of the new...

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The Lucas critique comes back with a vengeance in DSGE models Both approaches to DSGE macroeconometrics (VAR and Bayesian) have evident vulnerabilities, which substantially derive from how parameters are handled in the technique. In brief, parameters from formally elegant models are calibrated in order to obtain simulated values that reproduce some stylized fact and/or some empirical data distribution, thus relating the underlying theoretical model and the...