Tag Archives: Economics

Economists’ infatuation with immense assumptions Peter Dorman is one of those rare economists that it is always a pleasure to read. Here his critical eye is focussed on economists’ infatuation with homogeneity and averages: You may feel a gnawing discomfort with the way economists use statistical techniques. Ostensibly they focus on the difference between people, countries or whatever the units of observation happen to be, but they nevertheless seem to...

Lazy theorizing and useless macroeconomics In a new, extremely well-written, brave, and interesting article, Paul Romer goes to frontal attack on the theories that has put macroeconomics on a path of ‘intellectual regress’ for three decades now: Macroeconomists got comfortable with the idea that fluctuations in macroeconomic aggregates are caused by imaginary shocks, instead of actions that people take, after Kydland and Prescott (1982) launched the real...

Proper use of math Balliol Croft, Cambridge 27. ii. 06 My dear Bowley, I have not been able to lay my hands on any notes as to Mathematico-economics that would be of any use to you: and I have very indistinct memories of what I used to think on the subject. I never read mathematics now: in fact I have forgotten even how to integrate a good many things. But I know I had a growing feeling in the later years of my work at the subject that a good mathematical...

Has economics — really — become more empirical? In Economics Rules (OUP 2015), Dani Rodrik maintains that ‘imaginative empirical methods’ — such as game theoretical applications, natural experiments, field experiments, lab experiments, RCTs — can help us to answer questions conerning the external validity of economic models. In Rodrik’s view they are more or less tests of ‘an underlying economic model’ and enable economists to make the right selection from...

Dark age of macroeconomics In his 1936 “The General Theory of Employment, Interest and Money”, John Maynard Keynes already recognized that the idea that savings finance investments is wrong. Savings equal investment indeed, which is written as S=I. However, the way that this identity (roughly: definition in the form of an equation) holds is exactly the opposite … “Income is created by the value in excess of user cost which the producer obtains for the...

After more than 7 years of economic recovery, the Federal Reserve is positioning itself to tighten monetary policy by raising interest rates. In light of the wobbly reaction in financial markets, an important question that must be asked is whether raising interest rates is the right tool. It could well be that the world’s leading central [...]

But not as wrong as Paul Krugman … In his review of Mervyn King’s The End of Alchemy: Money, Banking, and the Future of the Global Economy Krugman writes: Is this argument right, analytically? I’d like to see King lay out a specific model for his claims, because I suspect that this is exactly the kind of situation in which words alone can create an illusion of logical coherence that dissipates when you try to do the math. Also, it’s unclear what this has to...

The Bourbaki-Debreu delusion of axiomatic economics By the time that we have arrived at the peak first climbed by Arrow and Debreu, the central question boils down to something rather simple. We can phrase the question in the context of an exchange economy, but producers can be, and are, incorporated in the model. There is a rather arid economic environment referred to as a purely competitive market in which individuals receive signals as to the prices of...

Reepalus utredning om vinster i välfärden I november presenteras utredningen om vinster i välfärden som Ilmar Reepalu (S) är ordförande för. Men redan nu har nyhetsmedier tagit del av förslag från utredningen om hur en vinstbegräsning skulle kunna se ut. SVT rapporterade i förra veckan att Joachim Landström, doktor i företagsekonomi vid Uppsala universitet, har tagit fram ett förslag till utredningen. Lite förenklat innebär den en begränsning på vinster på...

It’s back to school time, so I’ve been pondering what might be helpful for students. In particular, I’ve becomine sort of obsessed withthe distinctions among “price floors,” “quantity ceilings,” and “price supports,” especially since we’ve seen a few (misguided?) examples of each as of late. So here is what you need to know about price supports in order to ponder their potential reasonableness.