Tag Archives: Economics

Neo-Ricardian economics — rigorous and totally irrelevant I claim that Sraffian economics, however rigorous in its use of the simultaneous equations method … is irrelevant to our understanding of the real world and, judging by its failure to draw any policy implications, is largely irrelevant to the major concerns of modern economists … This is not a judgment based simply on my opinion, which is ultimately no better than yours. Relevance is not a matter for...

The general equilibrium fixation As already stated, it is a complete misnomer to call the conditions under which the general economic equilibrium is discussed “free” or “perfect competition” … My quarrel is, however, not primarily with the word “competition,” but rather with the concentration on that largely irrelevant subject matter, whatever name is given to it. It is hard to explain the persistence of this fixation; perhaps it is the silent recognition...

If the social sciences are useless, why do we study them? The thing about social science is that it hasn’t produced much. We social scientists don’t have an inferiority complex; we really are inferior. Physics has produced locomotives, semiconductors, and the atomic bomb. Chemistry has produced amazing new materials. Biology has produced the coronavirus vaccine, and lots more. Social science has produced . . . what, exactly? A method of evaluating...

Agent-based modelling in economics I DSGE sono i modelli più diffusi in accademia e nei dipartimenti di ricerca delle banche centrali. Anche prima della Grande Recessione, dovuta, secondo la vulgata, alle banche. Il modello è spesso rimproverato per non aver previsto la crisi, ma il problema è diverso. Come vedremo nel prossimo capitolo, e già si intuisce dal problema delle nonlinearità, la disciplina economica non può prevedere: il vero problema è che non...

Inflationary pressures can originate from the demand side or the supply side of the economy. Demand-side inflation, known as demand-pull inflation, becomes increasingly likely as the economy nears full capacity. Inflation driven from the supply side, referred to as cost-push inflation, is possible in the absence of any excess demand for goods and services. A supply shock can cause one-off price hikes, independently of demand conditions, but for the one-off effect to act as a catalyst...

There really is something about the way macroeconomists construct their models nowadays that obviously doesn’t sit right. In mainstream economic theory models largely function as a substitute for empirical evidence. One might have hoped that humbled by the manifest failure of its theoretical pretences during the latest economic-financial crises, the one-sided, almost religious, insistence on axiomatic-deductivist modelling as the only scientific activity worthy of pursuing in...

P-hacking & HARKing — fragwürdige statistische Methoden .[embedded content]

The problem of reductionism in economics The kinds of laws and relations that economics has established, are laws and relations about entities in models that presuppose causal mechanisms being atomistic and additive. When causal mechanisms operate in the real world they only do it in ever-changing and unstable combinations where the whole is more than a mechanical sum of parts. If economic regularities obtain they do it (as a rule) only because we...

The permanent income hypothesis Almost all mainstream macroeconomic theories are based on Milton Friedman’s permanent income hypothesis (PIH). It is mostly used in formulating the consumption Euler equations that make up a vital part of ‘modern’ New Classical and ‘New Keynesian’ macro models. So, what’s the problem with PIH? Well, only that empirical evidence have — again and again — falsified it! One implication of PIH is that current consumption is...

When I read in the 70s the publications of Sonnenschein, Mantel and Debreu I was deeply concerned. Up to thetime I had the naive illusion that the microeconomic foundation of the GE model, which I had admired so much,does not only allow us to prove that the model and the concept of equilibrium are logically consistent (thatequilibrium exists), but also allow us to show that the equilibrium is well determined (unique and stable). Thisillusion, or should I rather say, this...