Lars P. Syll

‘Rational expectations’ is wrong Lynn Parramore: It seems obvious that both fundamentals and psychology matter. Why haven’t economists developed an approach to modeling stock-price movements that incorporates both? Roman Frydman: It took a while to realize that the reason is relatively straightforward. Economists have relied on models that assume away unforeseeable change. As different as they are, rational expectations and behavioral-finance models...

Methodological terrorism and the replication crisis in science Psychology professor Susan Fiske doesn’t like when people use social media to publish negative comments on published research. She’s implicitly following what I’ve sometimes called the research incumbency rule: that, once an article is published in some approved venue, it should be taken as truth. I’ve written elsewhere on my problems with this attitude — in short, (a) many published papers are...

Karl Gunnar Persson In Memoriam (personal) Like a bolt out of the blue, sad, sad, news reached us today that my dear old teacher, colleague, and neighbour — Karl Gunnar Persson — has died of a heart attack while on a bicycling tour in Sinea, Italy. Among his foremost works are An Economic History of Europe, Knowledge, Institutions and Growth, 600 to the Present (Cambridge University Press 2014), Grain markets in Europe 1500–1900, Integration and...

In issue no. 76 of real-world economics review — published today — yours truly has an article on Paul Romer’s frontal attack on the New Classical and ‘New Keynesian’ theories that has put macroeconomics on a path of intellectual regress for more than two decades now.

The fundamental flaw of econometrics It is often said that the error term in a regression equation represents the effect of the variables that were omitted from the equation. This is unsatisfactory … There is no easy way out of the difficulty. The conventional interpretation for error terms needs to be reconsidered. At a minimum, something like this would need to be said: The error term represents the combined effect of the omitted variables, assuming that...

Price stickiness is NOT the problem ‘New Keynesian’ macroeconomists have for years been arguing (e.g. here) about the importance of the New Classical Counter Revolution in economics. ‘Helping’ to change the way macroeconomics is done today — with rational expectations, Euler equations, intertemporal optimization and microfoundations — their main critique of New Classical macroeconomics is that it didn’t incorporate price stickiness into the Real Business...

After almost forty years in Lund, yours truly has returned to the town where he was born and bred — Malmö. Living on the top floor of this grandiose building — next to The Magistrate’s Park, and with The Opera and The Municipal Art Gallery just across the street — makes it easy to convince me returning was a good decision …

My philosophy of economics A critique yours truly sometimes encounters is that as long as I cannot come up with some own alternative to the failing mainstream theory, I shouldn’t expect people to pay attention. This is however to totally and utterly misunderstand the role of philosophy and methodology of economics! As John Locke wrote in An Essay Concerning Human Understanding: The Commonwealth of Learning is not at this time without Master-Builders, whose...

New Classical macroeconomics — elegant fantasies The crucial issue of macroeconomic theory today is the same as it was sixty years ago when John Maynard Keynes revolted against what he called the “classical” orthodoxy of his day. It is a shame that there are still “schools” of economic doctrine, but perhaps controversies are inevitable when the issues involve policy, politics, and ideology and elude decisive controlled experiments. As a lifelong Keynesian,...

The Nobel factor — the prize in economics that spearheaded the neoliberal revolution The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, usually — incorrectly — referred to as the Nobel Prize in Economics, is an award for outstanding contributions to the field of economics. The Prize in Economics was established and endowed by Sweden’s central bank Sveriges Riksbank in 1968 on the occasion of the bank’s 300th anniversary. The first...