Tag Archives: Economics

Fact and fiction in economics The idea that we can safely neglect the aggregate demand function is fundamental to [classical] economics … But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction has greatly impaired, in the course of time, the prestige of its practitioners.For professional economists, after Malthus, were apparently unmoved by the lack of...

Economics departments need to install smoke detectors … Balliol Croft, Cambridge 27. ii. 06 My dear Bowley … I know I had a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules — (1) Use mathematics as a short-hand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3)...

Olivier Blanchard’s second thoughts Olivier Blanchard has had some Further Thoughts on DSGE Models and now comes up with the view that Macroeconomics is about general equilibrium … The specific role of DSGEs in the panoply of general equilibrium models is to provide a basic macroeconomic Meccano set, i.e. a formal, analytical platform for discussion and integration of new elements … The only way in which DSGEs can play this role is if they are built on...

Economics — a contested space Neoliberals try to close down the space of political debate and social possibility by excluding all except neoliberal ideas. The tragedy of the past 40 years is they have been succeeding. In the academy there is a neoclassical monopoly, and in politics Labor and Social Democratic parties have been captured by the Trojan horse of the Third Way, creating a neoliberal political monopoly. Reversing this state of affairs is a...

I received an e-mail from an undergraduate economics student who was curious about economic policy in Washington, DC. His question says a lot about the current state of affairs. Here it is with my reply. From: Xxxxxxx Xxxxxxx [mailto:[email protected]] Sent: Saturday, October 1, 2016 10:56 AM To: mail Subject: Question from an undergraduate Dear Dr. Palley, I am [...]

My favourite girls (personal) Hedda (3), Linnea (17), and Tora (23)

Why economists are useless at forecasting We forget – or willfully ignore – that our models are simplifications of the world … One of the pervasive risks that we face in the information age … is that even if the amount of knowledge in the world is increasing, the gap between what we know and what we think we know may be widening. This syndrome is often associated with very precise-seeming predictions that are not at all accurate … This is like claiming you...

‘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...

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.