Tag Archives: Economics

Ergodicity and the wrong way to calculate expectations (wonkish) If there was one thing I believed was a reasonable implicit assumption of economics, it was determining the expectation value upon which agents base their decisions as the “ensemble mean” of a large number of draws from a distribution … But now I’m not so sure … Rolling a dice is a good example. The expected distribution of outcomes from rolling a single dice in a 10,000 roll sequence is the...

Visiting one of Helsinki’s many nice cafés and restaurants the other day, I read the following inscription on a mirror and thought Keynes must have been here … Anyhow — slides from yours truly’s keynote presentation at the Kalevi Sorsa Foundation celebration of the 80th anniversary of Keynes’ General Theory is available here.

The Spirit of Tallis [embedded content] Heavenly beautiful!

The people inside the model have much more knowledge about the system they are operating in than is available to the economist or econometrician who is using the model to try to understand their behavior. In particular, an econometrician faces the problem of estimating probability distributions and laws of motion that the agents in the model are assumed to know. Further the formal estimation and inference procedures of rational expectations econometricians assumes that the...

Keynes’s revolution after 80 years British economist John Maynard Keynes published his General Theory on Employment, Interest and Money 80 years ago in 1936. Modern macroeconomics arose in the aftermath of its publishing, and Keynesian ideas also revolutionized economic policy making during the Bretton Woods era. Full employment became a central policy target for economists and governments. In the 1970s monetarism and rational expectations revolution...

Chicago economics — only for people unlucky when trying to think I ask myself what I could legitimately assume a person to have rational expectations about, the technical answer would be, I think, about the realization of a stationary stochastic process, such as the outcome of the toss of a coin or anything that can be modeled as the outcome of a random process that is stationary. If I don’t think that the economic implications of the outbreak of World war...

IMF economists admit — austerity hasn’t delivered! Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand — and thus worsen employment and unemployment.The notion that fiscal consolidations can be expansionary (that is, raise output and employment), in part by raising private sector confidence and investment, has been championed by, among others, Harvard economist Alberto Alesina in the academic...

Amartya Sen on austerity rat poison How was it possible, it has to be asked, for the basic Keynesian insights and analyses to be so badly lost in the making of European economic policies that imposed austerity? Some of the dominant figures in the financial world have had a long-standing scepticism of the economic relations on which Keynes focused which is being emended only now, with reality checks being made in observations of the penalty of the neglect of Keynesian relations … If failing...

Euro — the inevitable disaster If there were an economic and monetary union, in which the power to act independently had actually been abolished, ‘co-ordinated’ reflation of the kind which is so urgently needed now could only be undertaken by a federal European government. Without such an institution, EMU would prevent effective action by individual countries and put nothing in its place. Another important role which any central government must perform is to put a safety net under the...

Och i senaste numret av Ekonomisk Debatt skriver professor emeritus Harry Flam att vi inte har en bostadsbubbla i Sverige och att “bostadsrättspriserna bestäms av fundamentala faktorer och inte av överdrivna förväntningar om framtida kapitalvinster.” Hmm … Men vänta nu lite … Den minnesgode kanske erinrar sig att denne Flam är samma person som i boken Tillämpad makroekonomi (SNS, 2011) har ett kapitel som diskuterade huruvida Sverige skulle förlora eller vinna på att gå med i EMU....