Lars P. Syll

Take your epsilon and shove it! Given that a normative theory is defined as a theory prescribing how a rational agent should act, neoclassical economic theory certainly has to be considered a normative theory. The problem is — besides that it standardly assumes not only rationality and selfishness, but also e. g. common knowledge of people’s utility functions — that loads of research show that people almost never act in accordance with the theory: There is...

The inequality gap — five sickening facts 1 Just eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity. Although some of them have earned their fortune through talent or hard work, over half the world’s billionaires either inherited their wealth or accumulated it through industries prone to corruption and cronyism. 2 Seven out of 10 people live in a country that has seen a rise in inequality in the last 30 years. 3...

January 20, 2017 — a date that will live in infamy How do you grieve for a nation? I don’t know. But one thing I do know is that January 20 will be one of the saddest days I and all my American friends have ever experienced. That a country that has given us presidents like George Washington, Thomas Jefferson, Abraham Lincoln, and Franklin D. Roosevelt, is going to be run by a witless clown like Donald Trump is an absolute disgrace....

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Keynes’ critique of econometrics — as valid today as it was in 1939 Renowned ‘error-statistician’ Aris Spanos maintains — in a comment on this blog a couple of weeks ago — that Keynes’ critique of econometrics and the reliability of inferences made when it is applied, “have been addressed or answered.” One could, of course, say that, but the valuation of the statement hinges completely on what we mean by a question or critique being ‘addressed’ or...

Thus your standard New Keynesian model will use Calvo pricing and model the current inflation rate as tightly coupled to the present value of expected future output gaps. Is this a requirement anyone really wants to put on the model intended to help us understand the world that actually exists out there? Thus your standard New Keynesian model will calculate the expected path of consumption as the solution to some Euler equation plus an intertemporal budget constraint, with...

On the non-validity of incremental validity A common goal of statistical analysis in the social sciences is to draw inferences about the relative contributions of different variables to some outcome variable. When regressing academic performance, political affiliation, or vocabulary growth on other variables, researchers often wish to determine which variables matter to the prediction and which do not—typically by considering whether each variable’s...

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A philosophical look at economics Owing to the elegance of explanations in natural science, scientists in other disciplines are likely to be tempted to emulate this success. While that is a good thing in the sense of striving to observe the four criteria or coherence, correspondence, practicality and economy, it is not a good thing if scientists doing life or social science become unmindful of the limitations imposed by the subject matter of their...

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. It is often the case that mathemical rigour is held as the dominant goal and the criterion for research topic choice as well as research evaluation, so much so that the relevance of the research to business cycles is reduced to empirical illustrations. To that extent, probabilistic formalization has...