Lars P. Syll

The long run fallacy It appears to me that one great cause of our difference in opinion, on the subjects which we have so often discussed, is that you have always in your mind the immediate and temporary effects of particular changes—whereas I put these immediate and temporary effects quite aside, and fix my whole attention on the permanent state of things which will result from them. Letter from Ricardo to Malthus January 1817 On this issue Keynes agreed with Malthus, and it was probably...

Eric Schüldt — ett ljus i det musikaliska mörkret I dessa tider — när ljudrummet dränks i den kommersiella radions tyckmyckentrutade ordbajseri och fullständigt intetsägande pubertalflamsande tjafs — har man nästan gett upp. Men det finns ljus i mörkret! I radions P2 går varje lördagmorgon ett vederkvickelsens och den seriösa musikens Lördagsmorgon i P2. Och nu är även söndagarna räddade! I programmet Text och musik med Eric Schüldt — som sänds på söndagsförmiddagarna i P2 mellan klockan 11...

Top 10 Economics Books Karl Marx, Das Kapital (1867) John Maynard Keynes, General Theory (1936) Kenneth Arrow, Social Choice and Individual Values (1951) John Kenneth Galbraith, The Affluent Society (1958) Amartya Sen, Collective Choice and Social Welfare (1970) Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process (1971) Michal Kalecki, Selected Essays on the Dynamics of the Capitalist Economy (1971) Paul Davidson, Money and the Real World (1972) Hyman Minsky, John Maynard...

Price rigidities and unemployment There are unfortunately a lot of mainstream economists out there who still think that price and wage rigidities are the prime movers behind unemployment. What is even worse is that some of them even think that these rigidities are the reason John Maynard Keynes gave for the high unemployment of the Great Depression. This is of course pure nonsense. For although Keynes devoted substantial attention to the subject of wage and price rigidities in General...

DSGE models — a costly waste of time Commenting on the state of standard modern macroeconomics, Willem Buiter argues that neither New Classical nor New Keynesian microfounded DSGE macro models have helped us foresee, understand or craft solutions to the problems of today’s economies: The Monetary Policy Committee of the Bank of England I was privileged to be a ‘founder’ external member of during the years 1997-2000 contained, like its successor vintages of external and executive members,...

So by using a representative-agent, perfect-foresight, complete-markets model, David is ignoring a bunch of things that we know can totally change the answers to the exact policy questions David is thinking about. So what should we do instead? One problem is that models with things like heterogeneity, stochasticity, and imperfect markets are a lot more complicated, and therefore harder to apply in quick or casual way. If we insist on using models with those elements, then it’s going to be...

A moron courting other morons  [embedded content] Living in the U.S. you soon find out that it’s a country with exceptionally many gifted and bright people. But, unfortunately, it is also a country where a moron with lots of money may run for president — and where, sadly enough, a lot of other morons obviously will vote for him …

Krugman’s modeling flim flam Paul Krugman has a piece up on his blog this week arguing that the ‘discipline of modeling’ is a sine qua non for tackling politically and emotionally charged economic issues: You might say that the way to go about research is to approach issues with a pure heart and mind: seek the truth, and derive any policy conclusions afterwards. But that, I suspect, is rarely how things work. After all, the reason you study an issue at all is usually that you care about...

Taking part of the debate on microfoundations among macroeconomists these days, I wonder if Heinz-Peter Spahn isn’t more on the right track than those who desperately offer more or less contrived defenses of the microfoundationalist programme: The crucial point however is: market conditions, which are presupposed in the model of intertemporal choice, are not given in reality. Distributing consumption optimally over time depends on the possibility of individuals to lend money on their...

The money multiplier – neat, plausible, and utterly wrong The neoclassical textbook concept of money multiplier assumes that banks automatically expand the credit money supply to a multiple of their aggregate reserves.  If the required currency-deposit reserve ratio is 5%, the money supply should be about twenty times larger than the aggregate reserves of banks.  In this way the money multiplier concept assumes that the central bank controls the money supply by setting the required reserve...