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from Lars Syll Professors Lucas and Sargent … have a proposal for constructive research that I find hard to talk about sympathetically. They call it equilibrium business cycle theory, and they say very firmly that it is based on two terribly important postulates — optimizing behavior and perpetual market clearing. When you read closely, they seem to regard the postulate of optimizing behavior as self-evident and the postulate of market-clearing behavior as essentially meaningless. I think...

from Ken Zimmerman In 1798, just before the beginning of the industrial revolution in the UK, Robert Malthus published “An Essay on the Principle of Population as it Affects the Future Improvement of Society, with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other Writers.” The thesis for the book was simple. The natural human urge to reproduce increases human population geometrically (1, 2, 4, 16, 32, 64, 128, 256, etc.). However, food supply, at most, can only increase...

from Blair Fix, Jonathan Nitzan and Shimshon Bichler    To reiterate, the base-year problem leads to uncertainty in the calculation of real GDP. But instead of openly reporting this uncertainty, government economists have devised a “fix”. Rather than using a single base year, they “chain” together many adjacent base years. This is a bit like a moving average. They calculate the growth of real GDP between consecutive years, using the first year in each pair as the base, and then “chain”...

from Richard Vahrenkamp Since 1945, the United States had experienced a unique innovation push with the computer, the nuclear weapon, new air combat weapons and the transistor within just a few years. These innovations were accompanied by Game Theory and Operations Research in the academic field. Widely–held is the view that computers supplemented the mathematical concepts of Game Theory and Operations Research and gave these fields a fresh impulse. Together, they established the view of...

from Lars Syll Asset price distributions are of great practical significance for portfolio managers. Standard finance theory assumes that asset price changes follow a normal distribution—the well-known bell curve. That this assumption is roughly accurate most of the time allows analysts to use very robust probability statistics. For example, for a sample that follows a normal distribution, you can identify the population average and characterize the likelihood of variance from that...

from Asad Zaman Excerpt from:  Real Statistics (3/4) Statistics as Rhetoric  {Preliminary material explains that conventional approach statistics separates theory and application — the job of ths statistician is to analyze numbers – without knowing where the come from. The job of the Field Expert is to use objective statistical analysis of numbers to get better understanding of the realities which generate the numbers. In “Real Statistics”, we assert that these two tasks cannot be...

Origin of the 2 Percent Inflation Target I have made most of these comments as comments on Econbrowser and Angry Bear (an excellent post by Robert Waldman), as well as on Econbrowser in response to a serious post by Jeffrey Frankel. I note that pgl has added useful comments on this matter in the other blogs. So it was 1990 that the New Zealand central bank became the first in the world to impose an inflation target of 0-0.002.  It worked out pretty...

One of the vanished joys of academic life is the experience, after publishing an article, of getting a bundle of 25 or 50 reprints in the mail, to be distributed to friends and colleagues, or mailed out in response to requests from faraway places (if you live in Australia, everywhere is faraway), often coming on little postcards. Everything is much more efficient nowadays, and I just finished throwing away my remaining collection of reprints. But now, an electronic ghost of the reprint...

from Lars Syll There’s a huge debate going on in social science right now. The question is simple, and strikes near the heart of all research: What counts as solid evidence? … Prominent statisticians, psychologists, economists, sociologists, political scientists, biomedical researchers, and others … argue that results should only be deemed “statistically significant” if they pass a higher threshold. “We propose a change to P< 0.005,” the authors write. “This simple step would...