How to cope with the behavioural challenge How would you react if a renowned physicist, say, Richard Feynman, was telling you that sometimes force is proportional to acceleration and at other times it is proportional to acceleration squared? I guess you would be unimpressed. But actually, what most mainstream economists do amounts to the same strange thing when it comes to theory development and model modification. In mainstream economic theory,...
Read More »Alan Kirman on why modern economics is of so little use
Alan Kirman on why modern economics is of so little use [embedded content] Almost a century and a half after Léon Walras founded general equilibrium theory, economists still have not been able to show that markets lead economies to equilibria. We do know that — under very restrictive assumptions — equilibria do exist, are unique and are Pareto-efficient. But what good does that do? As long as we cannot show that there are convincing reasons to suppose...
Read More »After the crisis — business as usual
After the crisis — business as usual In contrast to the experience of the Great Depression, which led to the emergence and acceptance of novel theoretical concepts on a large scale, the financial crisis and its consequences have, by and large, been rationalized with reference to existing theoretical concepts. Although we do observe a slight shift away from the idea that financial markets are efficient by default and prices only follow random walks, the...
Read More »When did you last hear an economist say something like this?
When did you last hear an economist say something like this? If the observations of the red shift in the spectra of massive stars don’t come out quantitatively in accordance with the principles of general relativity, then my theory will be dust and ashes. Albert Einstein (1920) Advertisements
Read More »The calibration hoax
There are many kinds of useless economics held in high regard within mainstream economics establishment today. Few — if any — are less deserved than the macroeconomic theory/method — mostly connected with Nobel laureates Finn Kydland, Robert Lucas, Edward Prescott and Thomas Sargent — called calibration. In physics, it may possibly not be straining credulity too much to model processes as ergodic – where time and history do not really matter – but in social and historical...
Read More »You Have Questions About Textbook Prices, I Have Answers…
[unable to retrieve full-text content]You Have Questions About Textbook Prices, I Have Answers…: An explainer, just in time for students who are pissed off about textbook prices…
Read More »You Have Questions About Textbook Prices, I Have Answers…
[unable to retrieve full-text content]You Have Questions About Textbook Prices, I Have Answers…: An explainer, just in time for students who are pissed off about textbook prices…
Read More »Modern economics — a severe case of model Platonism
Modern economics — a severe case of model Platonism That is the great thing about abstraction. Working with what can be called ‘flex price’ models does not imply that you think price rigidity is unimportant, but instead that it can often be ignored if you want to focus on other processes. Simon Wren-Lewis When applying deductivist thinking to economics, mainstream economists like Wren-Lewis usually set up ‘as if’ models based on a set of tight axiomatic...
Read More »Technobabble economics
Deductivist modeling endeavours and an overly simplistic use of statistical and econometric tools are sure signs of the explanatory hubris that still haunts mainstream economics. In an interview Robert Lucas says the evidence on postwar recessions … overwhelmingly supports the dominant importance of real shocks. So, according to Lucas, changes in tastes and technologies should be able to explain the main fluctuations in e.g. the unemployment that we have seen during the last...
Read More »IPA’s weekly links
Guest post by Jeff Mosenkis of Innovations for Poverty Action. This blog’s landlord, Chris Blattman, was on the Economic Rockstar podcast talking about Crime, Cocaine, Chicago Gangs, and the Colombia Mafia. (iTunes) And if you liked those projects, IPA has a job posting to work on projects like those with Chris and others in Colombia. This was fun – the Development Aid Project Jargon-ator is supposed to come up with nonsense development project titles, but so far all of mine sound pretty...
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