Tag Archives: Economics

Dani Rodrik’s smorgasbord view of economic models Traveling by train to Stockholm during the weekend, yours truly had plenty of time to catch up on some reading. Dani Rodrik’s Economics Rules (Oxford University Press, 2015) is one of those rare examples where a mainstream economist — instead of just looking the other way — takes his time to ponder on the tough and deep science-theoretic and methodological questions that underpin the economics discipline. There’s much in the book I like and...

Yours truly och ekonomihistorikerna Lars Ahnland och Rodney Edvinsson hade i lördagens Svenska Dagbladet en artikel om behovet av en synvända i statskuldspolitiken: I normalfallet är det en risk att inflationen ökar om en stat finansierar sig genom att trycka pengar. Men i dag är högre inflationstakt inte ett hot, utan en välsignelse. Man kan likna inflationen i ekonomin vid blodomloppet hos en människa. Cirkulationen av pengar är det som håller den ekonomiska aktiviteten vid liv. Liksom...

The blatant absence of empirical fit of macroeconomic models Some months ago sorta-kinda ‘New Keynesian’ Paul Krugman argued on his blog that the problem with the academic profession is that some macroeconomists aren’t “bothered to actually figure out” how the ‘New Keynesian’ model with its Euler conditions — “based on the assumption that people have perfect access to capital markets, so that they can borrow and lend at the same rate” — really works. According to Krugman, this shouldn’t be...

The law of demand — a useless tautology immunized against empirical facts Mainstream economics is usually considered to be very ‘rigorous’ and ‘precise.’ And yes, indeed, it’s certainly full of ‘rigorous’ and ‘precise’ statements like “the state of the economy will remain the same as long as it doesn’t change.” Although ‘true,’ this is however — as most other analytical statements — neither particularly interesting nor informative. For the sphere of consumption goods, the law of demand is...

The real limit of public debt Everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes … What this means is that the real limit on the amount of money...

Bravest of the brave Edward Snowden and Daniel Ellsberg. Bravest of the brave. Never give in. Never give up. My friends — you bow to no one [embedded content]

The model of all economic models (wonkish) Economics is perhaps more than any other social science model-oriented. There are many reasons for this — the history of the discipline, having ideals coming from the natural sciences (especially physics), the search for universality (explaining as much as possible with as little as possible), rigour, precision, etc. Mainstream economists want to explain social phenomena, structures and patterns, based on the assumption that the agents are acting...

Three symptoms of the sorry state of economics 1. The best-selling economic book explains Sumo, but not economics. Freakonomics has sold more than 4 million copies making it one of the best-selling economic books in history. It tells us, for example, that Sumo wrestlers are likely to throw matches when their opponent is in danger of losing status with a loss. Freakonomics is, however, silent on monetary or fiscal policy. This is not negative statement about the book or the authors, but it...

One of my favourite classics (1)   An absolute must-read for every social scientist — but if you don’t have the time, here’s the crash course illustration of Schelling’s ‘critical mass’ models: [embedded content]

The limits of probabilistic reasoning Almost a hundred years after John Maynard Keynes wrote his seminal A Treatise on Probability (1921), it is still very difficult to find statistics books that seriously try to incorporate his far-reaching and incisive analysis of induction and evidential weight. The standard view in statistics – and the axiomatic probability theory underlying it – is to a large extent based on the rather simplistic idea that “more is better.” But as Keynes argues – “more...