Tag Archives: Economics

Public debt and Keynes’ paradox of thrift For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums. Every such attempt to save more by reducing consumption will so affect incomes that the attempt necessarily defeats itself. It is, of course, just as impossible...

Stephanie Kelton i Stockholm När tankesmedjan Katalys nu firar tioårsjubileum har man passande nog valt att bjuda in författaren till en av årtiondet största megahits inom ekonomiområdet — Underskottsmyten — Stephanie Kelton. Har ni vägarna förbi Stockholm i morgon tycker jag definitivt ni ska lägga ett par timmar på att besöka ABF-huset! Yours truly har under flera års tid nu frågat sig varför vi i det här landet har  begåvats med regeringar som inte vågar...

Why MMT is needed Mainstream economists do not believe that “countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.” Looking at the result from a survey, not a single economist agreed with that statement. If these economists had been right, we would see lots of governments running out of money in 2020 and 2021. After all, tax revenues collapsed, government spending...

Attending economics seminars — a total waste of time! Visiting economics conferences and seminars, the sessions usually start with the presentation of mathematical-statistical models building on assumptions somewhat analogous to “let us assume that people are green and descending from Mars” — and then long technical discussions follow on how good these models are at making us better understand contemporary societies and economies. Yours truly finds it...

Mainstream economics — slipping from the model of reality to the reality of the model A couple of years ago, Paul Krugman had a piece up on his blog arguing that the ‘discipline of modelling’ is a sine qua non for tackling politically and emotionally charged economic issues: In my experience, modeling is a helpful tool (among others) in avoiding that trap, in being self-aware when you’re starting to let your desired conclusions dictate your analysis. Why?...

‘New Keynesian’ DSGE models — unparalleled spectacular failures The problem of the DSGE-models (and more generally of rational expectations macroeconomic models) is that they assume extraordinary cognitive capabilities of individual agents … The fact that the assumption of rational expectations is implausible does not necessarily mean that models using such an assumption cannot be powerful tools in making empirical predictions. The problem, however, is that...

Stephanie Kelton till Stockholm När tankesmedjan Katalys nu firar tioårsjubileum har man passande nog valt att bjuda in författaren till en av årtiondet största megahit inom ekonomiområdet — Underskottsmyten — Stephanie Kelton. Har ni vägarna förbi Stockholm den 6 maj tycker jag definitivt ni ska lägga ettpar timmar på att besöka ABF-huset! Yours truly har under flera års tid nu frågat sig varför vi i det här landet har  begåvats med regeringar som inte...

Why DSGE models are worse than useless The unsellability of DSGE models — private-sector firms do not pay lots of money to use DSGE models — is one strong argument against DSGE. But it is not the most damning critique of it. The most damning critiques that can be levelled against DSGE models are the following two: (1) DSGE models are unable to explain involuntary unemployment In the basic DSGE models the labour market is always cleared – responding to a...

Modelling by the construction of analogue economies is a widespread technique in economic theory nowadays … As Lucas urges, the important point about analogue economies is that everything is known about them … and within them the propositions we are interested in ‘can be formulated rigorously and shown to be valid’ … For these constructed economies, our views about what will happen are ‘statements of verifiable fact.’ The method of verification is deduction … We are, however,...

Dumb and Dumber — the Chicago economics version A couple of years ago, Robert Lucas gave an outline of what the new classical school of macroeconomics thought about the latest downturns in the US economy and its future prospects. After stating his view that the US recession that started in 2008 was basically caused by a run for liquidity, Lucas then goes on to discuss the prospect of recovery, maintaining that past experience would suggest an “automatic”...