Lars P. Syll

If contributions made by statisticians to the understanding of causation are to be taken over with advantage in any specific field of inquiry, then what is crucial is that the right relationship should exist between statistical and subject-matter concerns … Where the ultimate aim of research is not prediction per se but rather causal explanation, an idea of causation that is expressed in terms of predictive power — as, for example, ‘Granger’ causation — is likely to be found...

James Tobin explains why real business cycle theory and microfounded DSGE models are such a waste of time — thirty years before Paul Romer. Maybe one should start teaching some history of economic thought at economics departments again? Just a thought … They try to explain business cycles solely as problems of information, such as asymmetries and imperfections in the information agents have. Those assumptions are just as arbitrary as the institutional rigidities and inertia...

The best advice you will get this year Getting it right about the causal structure of a real system in front of us is often a matter of great importance. It is not appropriate to offer the authority of formalism over serious consideration of what are the best assumptions to make about the structure at hand … Where we don’t know, we don’t know. When we have to proceed with little information we should make the best evaluation we can for the case at hand —...

The best economics article of 2016 The best economics article of 2016 in my opinion was Paul Romer’s extremely well-written and brave frontal attack on the theories that has put macroeconomics on a path of ‘intellectual regress’ for three decades now: Macroeconomists got comfortable with the idea that fluctuations in macroeconomic aggregates are caused by imaginary shocks, instead of actions that people take, after Kydland and Prescott (1982) launched the...

This is a book about human limitations and the difficulty of gaining true insight into the world around us. There is, in truth, no way of separating these two things from one other. To try to discuss economics without understanding the difficulty applying it to the real world is to consign oneself to dealing with pure makings of our imaginations. Much of economics at the time of writing is of this sort, although it is unclear such modes of thought should be called ‘economics’...

Con te partirò (personal) Living next to an Opera house sure has its benefits if you love opera. Just twenty minutes ago two lovely opera singers performed Con te partirò on the little piazza in front of my house. Awesome! This version is pretty good too … [embedded content]

For-profit schools — a total disaster To make education more like a private good, [voucher advocates] tried to change the conditions of both supply and demand. On the demand side, the central proposal was that of education ‘vouchers’, put forward most notably by Nobel Prizewinning economist at the University of Chicago, Milton Friedman. The idea was that, rather than funding schools, government should provide funding directly parents in the form of vouchers...

New study shows marginal productivity theory has only a ‘negligible’ link to reality The correlation between high executive pay and good performance is “negligible”, a new academic study has found, providing reformers with fresh evidence that a shake-up of Britain’s corporate remuneration systems is overdue. Although big company bosses enjoyed pay rises of more than 80 per cent in a decade, performance as measured by economic returns on invested capital...

Observational studies vs. RCTs  [embedded content]

Murray Rothbard on Adam Smith Adam Smith (1723-90) is a mystery in a puzzle wrapped in an enigma. The mystery is the enormous and unprecedented gap between Smith’s exalted reputation and the reality of his dubious contribution to economic thought … The problem is not simply that Smith was not the founder of economics. The problem is that he originated nothing that was true, and that whatever he originated was wrong; that, even in an age that had fewer...