Tag Archives: Economics

Getting the rabbit into the neoclassical hat In public, including in the training of economists, Neoclassical economics usually reads its models backwards. This gives the illusion that they show the behaviour of individual economic units determining sets of equilibrium values for markets and for whole economies. It hides the fact that these models have been constructed not by investigating the behaviour of individual agents, but rather by analysing the...

Getting the rabbit into the neoclassical​ hat In public, including in the training of economists, Neoclassical economics usually reads its models backwards. This gives the illusion that they show the behaviour of individual economic units determining sets of equilibrium values for markets and for whole economies. It hides the fact that these models have been constructed not by investigating the behaviour of individual agents, but rather by analysing the...

On Econs and Humans Many years ago, Thaler was hosting dinner for some guests (other then-young economists) and put out a large bowl of cashew nuts to nibble on with the first bottle of wine. Within a few minutes it became clear that the bowl of nuts was going to be consumed in its entirety, and that the guests might lack sufficient appetite to enjoy all the food that was to follow. Leaping into action, Thaler grabbed the bowl of nuts, and (while sneaking a...

The atomic hypothesis and the limits of econometrics Our admiration for technical virtuosity should never blind us to the fact that we have to have a cautious attitude towards probabilistic inferences in economic contexts. Science should help us disclose causal forces behind apparent ‘facts.’ We should look out for causal relations, but econometrics can never be more than a starting point in that endeavour since econometric (statistical) explanations are...

Guest post by Jeff Mosenkis of Innovations for Poverty Action. South Africans, trying to come to grips with the astonishing scale of the crisis, have adopted a once-obscure political science term, “state capture,” as a staple of even casual conversation … Yet previous examples of state capture have almost always involved a broad cast of protagonists: an entire industry, for example, or wealthy businessmen as a group. In South Africa, it may have been pulled off by a single family....

Guest post by Jeff Mosenkis of Innovations for Poverty Action. South Africans, trying to come to grips with the astonishing scale of the crisis, have adopted a once-obscure political science term, “state capture,” as a staple of even casual conversation … Yet previous examples of state capture have almost always involved a broad cast of protagonists: an entire industry, for example, or wealthy businessmen as a group. In South Africa, it may have been pulled off by a single family....

Guest post by Jeff Mosenkis of Innovations for Poverty Action. South Africans, trying to come to grips with the astonishing scale of the crisis, have adopted a once-obscure political science term, “state capture,” as a staple of even casual conversation … Yet previous examples of state capture have almost always involved a broad cast of protagonists: an entire industry, for example, or wealthy businessmen as a group. In South Africa, it may have been pulled off by a single...

Macroeconomics — religion or science? Macroeconomists build theories codified by systems of equations. We use those equations to explain patterns in economic data. Unlike experimental sciences, chemistry and physics for example, macroeconomists cannot easily experiment. That does not mean that we cannot challenge existing theories, but it makes it much harder. Like astronomers waiting for the next supernova to explode; macroeconomists must wait for big...

Big — and not so big — ideas in macroeconomics In Athreya’s world, and that of a large part of the academic macroeconomics profession, macroeconomics does indeed begin with Walras, and the first modern development in the field was the formalization of Walras’ model by the economic theorists Arrow, Debreu and MacKenzie in the 1950s. The big subsequent development is the integration of growth theory into the static ADM framework to generate the modern dynamic...

The ‘tiny little problem’ with Chicago economics Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This form of “crowding out” is just accounting, and doesn’t rest on any perceptions or behavioral assumptions. John...