Debunking Debunking Economics
Christopher Auld
These comments relate to the mathematical notes related to the "new
critiques" Steve Keen presents in his book:
http://www.debunking-economics.com/Maths/Present_for_Sraffa.htm
The short version is: What's good here is not new, and what is
new is not good.
1. Supply and demand analysis.
This is essentially an argument that partial equilibrium analysis can be
misleading, and is more likely to be misleading if the market is large
relative to the economy. This argument isn't wrong, but it is very well
known. The gist of point 1 would be a reasonable question for most any
introductory economics course's final exam.
2. Multiple equilibria...
An argument that when the market is small relative to the economy, the
supply curve is flat. In 1926 this may have been a point of much debate;
in 2002 it is very odd since we can estimate supply curves, and they
aren't generally flat. Even if it were true, it amounts to asserting a
special case of standard analysis, not a critique per se.
3. Constant returns....
We now get a long treatment of "mathematical flaws" in the canonical
theory of the firm. Very odd exposition, full of raw output from
Mathematica, follows. But the point is very simple and there is no need
for any even modestly complicated math to make it:
Perfect competition assumes firms are price takers. Firms
then set quantity such that MC=P. If firms are not
price takers, then that quantity is higher than the profit
maximizing quantity.
That's it; that's all the pages and pages of math show. But
showing this would be a perfectly reasonable question for
an intermediate micro midterm exam; it's trivial and obvious.
We are then treated to some silly conclusions. After demonstrating the
equally trivial point that reductions in one firm's output benefits other
firms under imperfect competition, Keen notes
Where will this process of output reduction stop? With the
standard assumptions of a downward sloping market demand
curve and diminishing marginal productivity, it will stop
at the same level of output as for a monopoly: where the
marginal revenue for each firm equals its marginal cost.
This is bizarre. First, Keen seems very confused over the MR=MC
condition, which is very general. The above amounts to an assertion that
the equilibrium of an n-firm quantity setting game is the monopoly output.
In 1838 Cournot derived the correct result (Keen doesn't appear to be
aware of any results in modern Industrial Organization). We then get:
The theory of perfect competition is therefore
fundamentally flawed. Far from being an ideal market
structure by which all other market types should be
judged, it is an illusion built upon fundamental
mathematical fallacies
Which is mathematical rubbish. As is well-known, perfect competition can
be rigorously derived as the limit point of many forms of imperfect
competition, or can be derived with a continuum of firms. Aumann 1964 is
a standard reference.
Finally and most strangely, we arrive at "Profit and time." Let's preface
with a note that dynamic analysis is extremely common in modern economics.
As a straight guess I'd say two-thirds of current theoretical economics is
explicitly dynamic, including almost all of modern macro. The key
mathematical methods used to solve dynamic problems, dynamic programming
and optimal control, are commonly taught at the undergraduate level.
Compare with this surreal rhetoric:
It is feasible to see Sraffa's critique as simply an attempt to take
seriously the limitations which Jevons, Walras, Marshall and Clarke all
acknowledged were endemic in using static methods to analyse what are
clearly dynamic problems. Their defence for the use of static tools was
the inherent difficulty of dynamic analysis, and the absence of suitable
tools. No such defence is available to modern economics, since dynamics
is now a far more developed field of analysis (in sciences other than
economics), and so many tools exist to analyse dynamic systems
dynamically. We can begin this process of recasting economics as a
dynamic science by taking Sraffa's critique to heart and drop altogether
the neoclassical treatment of time.
How anyone with any vague familiarity with modern economics could possibly
believe economists don't use dynamic models is a complete mystery to me.
Standard undergraduate level references include Kamien and Scwartz's
_Dynamic Optimization_ and Chiang's _Elements of Dynamic Optimization_.
Journal articles using such methods are very common: Open a random
journal, flip to a random theoretical paper, repeat if necessary. Use of
similar methods in some form in economics goes back a long way, at least
to Hotelling and Ramsey's work circa 1930, although Bellman's work in 1950s
paved the way for the explosion of dynamic analysis which followed over
the last four or five decades.
But Keen makes this bizarre error exponentially worse by providing his own
dynamic analysis, which any competent undergrad could tear to pieces as
mathematically incompetent:
First, it makes no sense to assert firms maximize the instantaneous rate
of growth of profit. Suppose, for instance, that this rate can be made
arbitrarily high over an arbitrarily short period, but that doing so comes
at great cost in the future. For example, a discrete increase of $1 at
point of time t makes this rate infinite. Suppose that $1 increase in
profits comes at a cost of losing $1,000,000,000,000,000 every moment
until the end of time. Keen's "solution" says the firm should set out to
earn that dollar.
So the objective function is clearly nonsense. It's also written to
depend directly on t, which only makes sense as a crude reduced form to an
interesting problem, and it's written such that it's seperable in time,
which assumes away any interesting dynamics so that static analysis is,
actually and ironically, correct. Keen then maximizes instanteous rate of
growth of profit with respect to quantity at some point in time,
subsituting a static solution to the dynamic problem, then further errs by
treating the rate of change of quantity as exogenous.
A correct dynamic analysis would first specify a sensible objective
function, such as the present value of profits. The maximization of this
functional over the function: quantity as a function of time, is then the
correct solution method. The solution, again ironically, asserts that
firms set quantity at any moment to equate marginal revenue and marginal
cost, keeping in mind that these are changes in the present value of
profits evaluated at the solution.
Finally, Keen references another "paper" purporting to show that
the standard comparison of monopoly and competition is invalid:
http://www.debunking-economics.com/Maths/pc_v_monopoly.htm
Which is also flat-out wrong. Consider an economy consisting
of n firms with convex technologies f_i(x_i), i=1,..n. Under
perfect competition we have df_i/dx_i = df_j/dx_j for all i
and j as a partial characterization of the solution. Now
suppose the industry is monopolized, by which we mean: Suppose
all n firms are run by a monopolist. Then the monopolist's
problem is to set {x_i} to maximize
p(\sum f(x_i))(\sum f(x_i)) - w \sum x_i
over all x_i, if $w$ is the unit price of x. A few manipulations
recovers df_i/dx_i = df_j/dx_j as partially characterizing
the solution, just as under competition. If Q* is aggregate
output under competition and the monopolist faced the constraint
Q>=Q*, he would set output across firms to exactly that under
perfect competion, and costs would be identical.
In words: since all firms face diminishing returns, a one unit
increase in total output will be "split" across firms, either
under perfect competition or monopoly. It will, in fact, be
"split" the same way under either market structure, because
the monopolist wants to minimize costs. The industry supply
curve and the monopolist's marginal cost curve are one and
the same.
Keen gets none of this right because he incorrectly interprets
the Econ 101 argument as: suppose one of the n firms with
technology f(x) is given a monopoly. That isn't the argument,
as the above should make clear, and when the argument is
presented correctly standard analysis is, of course, correct.
--
Chris Auld
Department of Economics
University of Calgary
au...@ucalgary.ca
jojo
"Christopher Auld" <au...@acs.ucalgary.ca> wrote in message
news:a5toma$2v...@acs1.acs.ucalgary.ca...
>
> These comments relate to the mathematical notes related to the "new
> critiques" Steve Keen presents in his book:
>
> http://www.debunking-economics.com/Maths/Present_for_Sraffa.htm
>
> The short version is: What's good here is not new, and what is
> new is not good.
>
somewhat odd, and maybe this is due to my layman's understanding of
economics, is the assertion that the consumer is always trying to maximze
his/her utility, i.e. always seeking a maxed out market basket or baskets,
with whatever they contain.
Mason Clark
>
>These comments relate to the mathematical notes related to the "new
>critiques" Steve Keen presents in his book:
>
>http://www.debunking-economics.com/Maths/Present_for_Sraffa.htm
>
The conclusion of which follows. And I chance for me to repeat, "rather than
theorize, why not just ask management how they actually make decisions?"
This would lead to a wordy, non-mathematical, but correct description of the
world, in the spirit of Adam Smith (and Coase?).
Mason C
---quote:
Conclusion
The above analysis supports Sraffa's call in 1926, by showing that the superficially
robust edifice of the microeconomics of production is in fact devoid of content. Its
canonical model, of perfect competition, is untenable, while its canonical insight, that
equating marginal cost and marginal revenue maximizes profit, is invalid in a dynamic
setting.[1] What then should economics do?
We would argue that microeconomics has to become an empirical discipline. Rather than
trying to prove results about firms and market structures from a priori reasoning,
microeconomics should instead be based in robust empirical research into how firms
actually behave, and how actual markets function over time. Economics has a tradition of
ignoring empirical work, on the grounds that, whatever firms might say they are doing,
their behaviour can be interpreted "as if" they are following neoclassical precepts. We
have shown that this cannot possibly be so, since the standard neoclassical a prioris are
in fact erroneous.
The very good empirical work that has been done (see Lee 1998 for an authoritative survey)
has generally found that the neoclassical concepts perfect competition, monopoly, marginal
cost and marginal revenue are regarded as meaningless concepts by factory managers--a
result that should no longer be surprising after the above. Instead, firms normally exist
in markets where there is a range of firms of different sizes, complex inter-relations
between them, price normally far exceeds marginal cost, and variable costs tend to fall as
production rises, rather than being U-shaped.
The apparently neat, self-contained visage of conventional neoclassical microeconomics
hides an empty soul. An empirical economics is bound not to have as tidy a visage, but it
will at least have content.
----end
Robert Vienneau
(Christopher Auld) wrote:
> These comments relate to the mathematical notes related to the "new
> critiques" Steve Keen presents in his book:
>
> http://www.debunking-economics.com/Maths/Present_for_Sraffa.htm
This is too narrow an orientation to debunk Keen's book. The book
is a popular presentation of various critiques that have been
developed in the advanced literature over decades. To refute
Keen, you need to develop some familiarity with this literature.
Then you can discuss whether his presentation of these arguments
is fair and whether these arguments are cogent. Many mainstream
economists have accepted the arguments that I familiar with.
> The short version is: What's good here is not new, and what is
> new is not good.
Keen's point throughout most of his book is not that he's presenting
new stuff (exception: part of his critique of the theory of the
firm). Nor is it even that this stuff is not taught (though some
of it clearly isn't). It's that if economists took their own
theory seriously, they would see that it is often logically
inconsistent.
Here's an example:
Markets are supposed to bring in equilibrium individuals with
different preferences and endowments. But a standard assumption
is that all individuals have identical tastes, and that preferences
are homothetic - that is, the one identitical person would
consume the same proportion of commodities at twice, ten times, etc.
his income. "I want to be an individual, just like you." This is
a matter of the Sonnenschein-Mantel-Debreu results. Alan Kirman
has two interesting papers on these results:
A. P. Kirman, "The Intrinsic Limits of Modern Economic Theory:
The Emperor Has No Clothes". Economic Journal, V. 99, 1989.
A. P. Kirman, "Whom or What does the Representative Individual
Represent?" Journal of Economic Perspectives, V. 6, 1992.
(The four economists who I have just mentioned are mainstream, for
what it is worth.)
Teaching in economics, according to Keen, is presented in such a
way that by the time students learn about these matters, they
absorb the unwarranted opinion that this sort of thing is only a
technical detail that cannot overturn the general picture. Chris
Auld's post exemplifies this attitude. I believe Keen somewhere uses
the word "indoctrination". This orientation also explains Alan
Isaacs' carefully worded blurb somewhere - something about the book
being a critique of neoclassical PEDAGOGY. The mainstream presentation
of neoclassical theories seems to have consequences about beliefs
about policies.
> 1. Supply and demand analysis.
>
> This is essentially an argument that partial equilibrium analysis can be
> misleading, and is more likely to be misleading if the market is large
> relative to the economy. This argument isn't wrong, but it is very well
> known. The gist of point 1 would be a reasonable question for most any
> introductory economics course's final exam.
The above is an unfair and incorrect summary of Keen's presentation of
Sraffa's early work. Sraffa showed that Marshallian supply and demand
analysis is logically inconsistent unless factors are specialized
to individual markets. That is, there is not a kind of labor or
land or whatever that is used in the production of more than one
commodity. This objection is so whether or not the market is
large relative to the economy.
"What a cleaned-up version of Sraffa (1926) establishes is how
NEARLY empty are ALL of Marshall's partial equilibrium boxes. To
a logical purist of Wittgenstein and Sraffa class, the MARSHALLIAN
PARTIAL equilibrium box of CONSTANT cost is even more empty
than the box of INCREASING cost..."
--Paul A. Samuelson
The context is Samuelson arguing AGAINST Sraffians. Naturally, the
Sraffians kid Samuelson by contrasting his statements in this
context with what is taught in a certain introductory textbook.
> 2. Multiple equilibria...
>
> An argument that when the market is small relative to the economy, the
> supply curve is flat.
That's not what the argument is. The argument is about when a
industry uses either a large or small portion of a factor of
production, but not all of it. Neither alternative will yield
Marshallian U-shaped cost curves. This is a point of logic.
So the gist of this point is that almost any market you are likely
to encounter in practice is outside the domain of the introductory
theory most often taught in mainstream economics. Basically, firms
do not encounter U-shaped average cost curves. Since 1926, a lot
of empirical evidence has indicated an alternative theory is
better supported.
I've always liked this quote:
"I am trying to find what are the assumptions implicit in Marshall零
theory; if Mr Robertson regards them as extremely unreal, I
sympathise with him. We seem to be agreed that the theory cannot
be interpreted in a way which makes it logically self-consistent
and, at the same time, reconciles it with the facts it sets out to
explain. Mr Robertson零 remedy is to discard mathematics, and he
suggests that my remedy is to discard the facts; perhaps I ought to
have explained that, in the circumstances, I think it is Marshall零
theory that should be discarded." (Sraffa 1930: 93)
By the way, Sraffa's approach was not to develop neoclassical
general equilibrium theory after critiquing Marshallian theory.
As for the claim that Sraffa's early critique has long been absorbed:
"Despite the numerous advances made in microeconomic theory during
the twentieth century, the theory of the cost conditions of the
firm in a perfectly competitive industry remains mired in
contradictions. On some level, increasing, constant and decreasing
costs are all incompatible with a partial equilibrium analysis of
perfect competition. Although this incompatibility between perfect
competition and the entire range of cost functions was first
pointed out by Piero Sraffa in a famous 1926 paper entitled "The
Laws of Returns Under Competitive Conditions", the theory of perfect
competition persists. The purpose of the present paper is threefold:
to illustrate the contradictions that persist to this day in this
area, to trace those contradictions back to Sraffa's 1926 paper and
to suggest why the contradictions have remained unresolved."
-- A. J. Cohen, "The Laws Of Returns Under Competitive Conditions:
Progress in Microeconomic Since Sraffa (1926)?" Eastern
Economic Journal, V. 9, N. 3. July-September, 1983.
(Available somewhere on the web.)
Both Cohen (1983) and Sraffa (1926) are available somewhere on the
web.
I'm not sure what I think of the part of Keen's argument that is
new. I have noticed that he is basically saying Marshall was
incorrect in note XIV in his mathematical appendix. I go by
the 8th edition of Principles.
Keen also argues somewhere that contemporary economics has not
absorbed the complexity vision yet.
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau
Christopher Auld
o Picky points about the old arguments Keen presents.
Very dull.
o The always entertaining argument that education is
bad.
o Absolutely nothing about the bulk of the paper and
my post: The clearly and demonstrably wrong and
ignorant new "results" Keen presents in Why? Could
it be even Robert knows that Keen is wrong?
On the most glaringly weird and mistaken of Keen's
assertions: Would Robert care to defend either the
view that economists don't consider dynamic models,
or Keen's own, um, curious, dynamic analysis?
Mason Clark
> On the most glaringly weird and mistaken of Keen's
> assertions: Would Robert care to defend either the
> view that economists don't consider dynamic models,
> or Keen's own, um, curious, dynamic analysis?
Steve Keen's problem is that (to quote a quote from page 176
of his book):
"A typical macroeconomics textbook, for example, states
that 'the examination of the process of moving from one
equilibrium to another is important and is known as dynamic
analysis.' However, it then states that 'Throughout this book
we will assume that the economic system is stable and most
of the analysis will be conducted in the comparative static mode.'"
Most students, once brain-washed with equilibrium, never recover.
Actually, the economic system is *never* in equilibrium and I for
one hope it never gets there. One can *only* calculate transient
states and watch as they go by. Furthermore, the economy is
never *headed* toward *an* equilibrium -- the next "equilibrium
point" is only a point on the dynamic continuum. (work on that)
So while dynamic analysis may have pretense of making economics
scientific, it is in danger of only complicating the mysticism.
All this most emphatically does *not* mean that one should
not do both static (equilibrium) and dynamic analysis. It simply
means one should keep one's wit about one at all times -- a task
made difficult by the ideological teaching that Keen decries.
Mason C
Christopher Auld
>> On the most glaringly weird and mistaken of Keen's
>> assertions: Would Robert care to defend either the
>> view that economists don't consider dynamic models,
>> or Keen's own, um, curious, dynamic analysis?
>Steve Keen's problem is that (to quote a quote from page 176
>of his book):
>
>"A typical macroeconomics textbook, for example, states
>that 'the examination of the process of moving from one
>equilibrium to another is important and is known as dynamic
>analysis.'
Mason, this is one sort of "dynamic analysis." It too is
rather dated, and is usually called "disequilibrium analysis."
The type of "dynamic analysis" Steve Keen thinks economists
don't do is another. His example is of a firm which much
chooses quantity over time. He is wrong in asserting
economists don't undertake such analysis (it's actually very
common), and he solves his example incorrectly.
>Most students, once brain-washed with equilibrium, never recover.
Yes. Education is bad. We know, Mason, we know.
Mason Clark
>Mason Clark <mas...@ix.netcom.com> wrote:
>>au...@acs.ucalgary.ca (Christopher Auld) wrote:
>
>>> On the most glaringly weird and mistaken of Keen's
>>> assertions: Would Robert care to defend either the
>>> view that economists don't consider dynamic models,
>>> or Keen's own, um, curious, dynamic analysis?
>
>>Steve Keen's problem is that (to quote a quote from page 176
>>of his book):
>>
>>"A typical macroeconomics textbook, for example, states
>>that 'the examination of the process of moving from one
>>equilibrium to another is important and is known as dynamic
>>analysis.'
>
>Mason, this is one sort of "dynamic analysis." It too is
>rather dated, and is usually called "disequilibrium analysis."
>The type of "dynamic analysis" Steve Keen thinks economists
>don't do is another. His example is of a firm which much
>chooses quantity over time. He is wrong in asserting
>economists don't undertake such analysis (it's actually very
>common), and he solves his example incorrectly.
>
Chris, it would be helpful if you would give actual quotation and
page number.
>
>>Most students, once brain-washed with equilibrium, never recover.
>
>Yes. Education is bad. We know, Mason, we know.
No, Chris, education is *good*. It is bad education that is bad.
Mason C
Robert Vienneau
(Christopher Auld) wrote:
> Robert Vienneau <rv...@see.sig.com> wrote:
>
> o Picky points about the old arguments Keen presents.
> Very dull.
Ad hominem.
> o The always entertaining argument that education is
> bad.
Strawperson.
Christopher Auld
>Chris, it would be helpful if you would give actual quotation and
>page number.
Mason, I stated quite clearly I was commenting on the "papers"
Keen has on his web site (which he describes as "Some of the
mathematics behind the new critiques presented in the book.")
You can access them here
http://www.debunking-economics.com/Maths/index.htm
I was also quite clear on what I section of which paper I
was talking about, and provided an extensive quote on this
topic. Perhaps you should read my post again.
Christopher Auld
>(Christopher Auld) wrote:
>> o Picky points about the old arguments Keen presents.
>> Very dull.
>
>Ad hominem.
It is? Really?
>> o The always entertaining argument that education is
>> bad.
>
>Strawperson.
Really? I suppose I'm too brainwashed by all those years
in graduate school to see why.
Now, why is the third point I listed omitted? On that
point, I just glanced at another of Keen's "papers":
http://www.debunking-economics.com/Maths/margcost_avcost.htm
This isn't within miles of being remotely competent. It's just
sad.
John J. Weatherby
"Christopher Auld" <au...@acs.ucalgary.ca> wrote in message
news:a5toma$2v...@acs1.acs.ucalgary.ca...
> mathematical methods used to solve dynamic problems, dynamic programming
> and optimal control, are commonly taught at the undergraduate level.
Not that this debunks any of the post but I am curious. Is it common
that universities teach optimal control and other dynamic programming
techniques at an undergrad level. I know my university did not. It was not
until grad. school that these were introduced. I have also noticed most new
grad. students do not know these methods. I think it would be a great idea
to have an undergraduate class teaching these methods. Granted at small
econ. deartments, like mine, it may be hard to find students to take the
class, very few if any in any given class plan to go on to grad. school.
Just curious if my experience was unusual.
> How anyone with any vague familiarity with modern economics could possibly
> believe economists don't use dynamic models is a complete mystery to me.
Me too, unless I just dreamed I had wrote two thirds of dissertation
using an endogenous growth model. I do find that a lot of applied micro
people do deal only with static models, ie. most labor models I see. Also
even up to 1987 it was rare to see people outside of macro using dynamic
analysis. Levin, Cohen, and Reiss avoided the issue in their firm size work
and this is in the I/O handbook, although the new addition may update this.
I do find that is a somewhat small portion of economist who deal with
dynamics. Unfortunately that can make getting comments on an endogenous
growth model difficult.
However I think the portion is getting larger. I know of a couple older
professor who have used dynamics extensively and a lot of younger game
theorists, I/O, and of course macro economist who are using dynamics quite
regularly.
John
John J. Weatherby
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-B086BB....@news.dreamscape.com...
> In article <a5toma$2v...@acs1.acs.ucalgary.ca>, au...@acs.ucalgary.ca
> (Christopher Auld) wrote:
>
>But a standard assumption
> is that all individuals have identical tastes, and that preferences
> are homothetic -
For the twentith millionth time this is a simplifying assumption used so
you can solve the bloody model. How else do you propose to compactly solve
the model and present the results in readable format? None the less the fact
that is not entirely realistic is presented throughly in Macro I courses,
those which use representive consumers the most. This even goes for Chicago.
> Teaching in economics, according to Keen, is presented in such a
> way that by the time students learn about these matters, they
> absorb the unwarranted opinion that this sort of thing is only a
> technical detail that cannot overturn the general picture.
It is a technical detail. Do you have a workable alternative?
>Chris
> Auld's post exemplifies this attitude. I believe Keen somewhere uses
> the word "indoctrination".
Oh here we go again, conspiracy again. Here we mainstream economist are
brainwashing students.
> The argument is about when a
> industry uses either a large or small portion of a factor of
> production, but not all of it. Neither alternative will yield
> Marshallian U-shaped cost curves. This is a point of logic.
hmmm interesting. If firms are allocating efficently they are not producing
at optimal points. Wow what a concept.
>On some level, increasing, constant and decreasing
> costs are all incompatible with a partial equilibrium analysis of
> perfect competition.
Wrong. Increasing cost industries work fine with perfect competition.
However there are rents to those who own the factors of production. Constant
cost industries are the textbook example of perfect competition. Decreasing
cost can lead to stable although strange equilibria. Even dynamic analysis
can be used to show this. See Nicholson's micro book.
John
John J. Weatherby
"Mason Clark" <mas...@ix.netcom.com> wrote in message
news:h3c68u042g9576dlj...@4ax.com...
> that 'the examination of the process of moving from one
> equilibrium to another is important and is known as dynamic
> analysis.' However, it then states that 'Throughout this book
> we will assume that the economic system is stable and most
> of the analysis will be conducted in the comparative static mode.'"
>
hmmm funny I don't see anything like this in Mankiw or Ruffin and Gregory
the two text I own. Of course there is no dominant text in the principles
market. Quite a few universities use text written by their professors. Funny
I remember just two weeks ago explaining the Solow model which involves
dynamic analysis and has an emphasis on transition paths. I also covered
some basics on human capital and R&D models. hmm I guess no dynamics there
either. Granted we have to spend a lot of time explaining this to an
undergrad who generally has only taken algebra. hmm could that be why
dynamics are not discussed much in principles. Just maybe.
> Most students, once brain-washed with equilibrium, never recover.
>
Please, markets tend to stable equilibria this is a basic first year
grad. exercise. Perhaps things are constantly changing this does not mean
that markets are not in equilibrium.
> Actually, the economic system is *never* in equilibrium and I for
> one hope it never gets there.
It is funny for some who seem to be arguing about micro analysis you
suddenly inject Keynes' notions into the argument. Keynes argued that in the
aggregate markets may not reach equilibrium. Even Keynes accepts that micro
markets reach equilibrium. This is the essence of his argument that the
Macro economy functions differently from the micro economy. Beside nominal
wage inflexibility and liquidity traps have never been empirically proven
and this is the basis to get Keynes' results.
>One can *only* calculate transient
> states and watch as they go by. Furthermore, the economy is
> never *headed* toward *an* equilibrium -- the next "equilibrium
> point" is only a point on the dynamic continuum. (work on that)
> So while dynamic analysis may have pretense of making economics
> scientific, it is in danger of only complicating the mysticism.
>
I would prefer you learn what you are talking about before you comment.
I suppose you would say an optimal control model is mystism. hmmm tell that
to NASA and Soviet scientist who have used this method to calculate how much
fuel is needed for a trip out of the atmosphere. I suppose they are mystics
too.
John
Christopher Auld
> Not that this debunks any of the post but I am curious. Is it common
>that universities teach optimal control and other dynamic programming
>techniques at an undergrad level.
Yes. Here at the U of C, for instance, the first undergrad
mathematical economics course teaches both discrete and
continuous time methods. This course is typically taken by
second or third year students. A few of the upper-year
field courses draw on these foundations. The U of C is a
reasonably good school, but we are rarely confused with MIT.
On the other hand, as an undergraduate in the late eighties
and early nineties I was only passingly exposed to dynamic
models, and like you only had to wade through them as a
grad student.
> Me too, unless I just dreamed I had wrote two thirds of dissertation
>using an endogenous growth model. I do find that a lot of applied micro
>people do deal only with static models, ie. most labor models I see.
Of course, adding dynamics makes models harder, so if you can
make your point with a static model that's the way to go. That
said, I find the assertion that labor economists don't commonly
consider dynamic models odd: Search theory, perhaps most notably,
is explicitly dynamic and is the basis for analysis of many
issues in labor economics.
> Also even up to 1987 it was rare to see people outside of macro using dynamic
>analysis.
I don't agree: For at least 30 years many fields have heavily used
dynamic models, including finance, environmental economics, health
economics, labor, anyone dealing with investment, IO, of course macro
as you note, etc. But disagreements, probably semantical, over how
prevalent such models are/were are beside the point: We agree Keen's
assertions are just apallingly ignorant.
Chasna1
>I was also quite clear on what I section of which paper I
>was talking about, and provided an extensive quote on this
>topic. Perhaps you should read my post again.
I've started reading the section on perfect competition and so far it reads
merely that the author is using special cases to refute other special cases. If
you look in any graduate level micro book you can find the assumptions behind
the standard model of perfect competition presented in a more articulated form.
Also, Stigler has a nice essay on the current history of the perfectly
competitive model. Most hacks fail to understand that the model as presented in
micro principles is really a very modern articulation of a market where firms
are entirely devoid of monopoly power.
Mason Clark
> I would prefer you learn what you are talking about before you comment.
>I suppose you would say an optimal control model is mystism. hmmm tell that
>to NASA and Soviet scientist who have used this method to calculate how much
>fuel is needed for a trip out of the atmosphere. I suppose they are mystics
>too.
>
Here lies the problem: treating the economic system as a physical system subject
to the laws of physics. Or its own laws sans homo sapiens.
The economic system has people in it. Greenspans, Gingriches, bin Ladens, ...
....... and unpredictable natural events.
Mason C
Mason Clark
>
> For the twentith millionth time this is a simplifying assumption used so
>you can solve the bloody model.
The science of economics: Fix the bloody model so it can be
solved -- never mind what world it applies to.
Mason C dis joint has too many targets
Tim Worstall
economics degree some years ago is not really equipping me for this
subject.
Lots of snipping, leaving just this paragraph from Robert that really
puzzles me.
> Markets are supposed to bring in equilibrium individuals with
> different preferences and endowments. But a standard assumption
> is that all individuals have identical tastes,
"and that preferences
> are homothetic - that is, the one identitical person would
> consume the same proportion of commodities at twice, ten times, etc.
> his income."
"I want to be an individual, just like you." This is
> a matter of the Sonnenschein-Mantel-Debreu results. Alan Kirman
> has two interesting papers on these results:
The bit that really puzzles me is this theory of ' homothetic tastes
'.
Is Robert really saying that someone on $ 10,000 a year spends the
same proportion of his income on food as someone on $ 100,000 a year ?
And is he also saying that this is a basic assumption in economics ? (
From personal knowledge I know this is not the case anyway. When you
get more money you don't buy more of what you already buy, you buy
more things ).
Have I simply misunderstood what Robert is saying ?
It seems grossly wrong for two reasons :
1) The flip side of this argument is that demand curves would be
straight lines. But it is quite obvious from a casual perusal of the
world that this is not so. Whether the item is apples, food, shelter
or whatever, demand curves are a ) curves, and b ) complex ones.
Whatever the cost, you will not be consuming 100 apples a day, 6 meals
might be an upper limit for food consumption, and while the rich do
have more than one house, I'm reasonably certian that they don't spend
the same portion of their income on shelter as those on minimum wage.
There are also those odd products like diamonds, which seem to have a
reverse demand curve, as with other objects of conspicuous
consumption.
The example I recall is water. One will pay very highly for that first
two litres a day, whatever your income, yet for higher levels of water
supply, like 5,000 litres a day through your living room, you will
gladly pay someone to take it away.
That, by the way, is not supposed to be a very detailed
example....just a way of showing that demand curves are not the simple
straight lines shown on many graphs.....they are highly complex
curves, and the demand curve is different for each product /
commodity.
I'm very happy for someone to point out an error in this scribbling,
but I assume that the complexity of demand curves means that '
homothetic tastes' is wrong.
2) Vast areas of economics are dedicated to studying consumption
patterns. ( I recall one big argument here about the Bush tax cuts.
Either that the rich do or do not spend / save their extra income, so
they shouldn't get the tax cuts. Whatever the argument was, it is an
implicit assumption of such an argument that those on different
incomes have different spending patterns ).
Now if in one area of economics we are assuming that different income
levels leads to different expenditure patterns, is Robert really right
in stating that this ' homothetic tastes ' means that in another area
we assume exactly the opposite ? Is economics really that badly
fragmented ?
I can see only three ways out of this :
1) Robert was wrong.
2) I am wrong, in that I have managed to misunderstand what Robert was
saying. But then I often have that problem with his posts :-)
3) Economics really does have completely opposing views of the income
variability of demand ( not that that is probably the right phrase )
depending on what particular thing we are trying to talk about.
Would the good Mr ( Dr ? Prof ? ) Auld care to put me straight ?
Tim Worstall
>
Chasna1
>Lots of snipping, leaving just this paragraph from Robert that really
>puzzles me.
>
>
>
>> Markets are supposed to bring in equilibrium individuals with
>> different preferences and endowments. But a standard assumption
>> is that all individuals have identical tastes,
>
The author is merely challenging what he perceives as the general case scenario
by coming up with special case scenarios that seem, in his mind, as
contradictions to the former. What he doesn't understand is that his
methodology is invalid. Economist fully understand that models are abstractions
based on heroic assumptions and that that methodology delivers the desired
result if the model is a good predictor.
I'm afraid the author has only proved his own theories to be invalid in the
sense that they fail to deliver his socalled debunking results.
Christopher Auld
>Is Robert really saying that someone on $ 10,000 a year spends the
>same proportion of his income on food as someone on $ 100,000 a year ?
Robert is, for some inexplicable reason, talking about what are
called "aggregation conditions." In economics, they arise
commonly in macroeconomics, and in some microeconomic
applications.
For example, suppose we wish to model consumption of some
commodity X. We might start by writing down a function X(P,Y)
which gives consumption of X as a function of its price P and
mean income Y. But that apparently straightforward first step
actually imposed some extremely strong conditions on how
individuals behave!
Notice that X(P,Y) must evaluate to the same number for any two
populations with the same mean income, all else equal. That
means that consumption of X cannot change if I take a dollar
from Fred and give it to Mary, preserving mean income but
changing the distribution of income across individuals. But
that only happens if Fred decreases his consumption of X by
the same number of units that Mary increases her consumption
of X. Technically, this holds only if preferences are
"quasi-homothetic." This leaves the analyst with two
unappetizing choices: Either make such strong assumptions, or
give up the idea of using simplifications such as X(P,Y) in
the model and stick with the much (often, much, much, much)
more difficult task of keeping track of the behavior of all
the agents in the model.
Mr. Vienneau, who has never taken a graduate economics course
much less given one, proceeds to argue that all of this means
that "neoclassical pedagogy" is "indoctrination." This is a
bizarre flight of fancy on Mr. Vienneau's part. The very
strong and unrealistic conditions required for aggregation are
commonly taught and discussed, appear in common, mainstream
textbooks, and many studies go to great lengths to avoid having
to employ them. What more can we do?
The attack "That model's no good because you made strong
assumptions just to make it tractable" is terribly naive. What
good is a model that can't be solved?
>Would the good Mr ( Dr ? Prof ? ) Auld care to put me straight ?
"Chris" is just fine with me.
ro...@telus.net
wrote:
>Tim Worstall <t...@2xtreme.net> wrote:
Why not assume a distribution, and observe how closely it matches
reality? The math will no longer be tractable, but that just means
you are no longer sacrificing accuracy to simplicity. One way
physical science progresses is by figuring out when a simplifying
assumption leads to useful results, and when it leads to results too
far from reality to be useful.
>Mr. Vienneau, who has never taken a graduate economics course
>much less given one,
Which would put him in the same company as Adam Smith, David
Ricardo....
>proceeds to argue that all of this means
>that "neoclassical pedagogy" is "indoctrination." This is a
>bizarre flight of fancy on Mr. Vienneau's part. The very
>strong and unrealistic conditions required for aggregation are
>commonly taught and discussed, appear in common, mainstream
>textbooks, and many studies go to great lengths to avoid having
>to employ them. What more can we do?
Learn from the example of phlogiston, and abandon them.
>The attack "That model's no good because you made strong
>assumptions just to make it tractable" is terribly naive. What
>good is a model that can't be solved?
It might be closer to the truth?
What good is solving a model that says nothing useful about the real
world?
-- Roy L
Mason Clark
>assumptions just to make it tractable" is terribly naive. What
>good is a model that can't be solved?
My mind so resists that I actually read this that I can't add it to
my collection of quotations. But I will. I'm flustered.
Mason C I must post my collection before it gets to large
Christopher Auld
>Why not assume a distribution, and observe how closely it matches
>reality?
Assume a distribution of what? What do you mean by "how
closely it matches reality?"
>Which would put him in the same company as Adam Smith, David
>Ricardo....
That's funny, I don't remember either of these gentlemen
writing polemic about the failures of graduate education
in economics in the early 21st century.
>>The attack "That model's no good because you made strong
>>assumptions just to make it tractable" is terribly naive. What
>>good is a model that can't be solved?
>It might be closer to the truth?
Sure. So? What good is it if it can't be solved? You
do understand that this issue comes up in every discipline,
not just economics, right?
>What good is solving a model that says nothing useful about the real
>world?
What models do you have in mind that "say nothing useful
about the real world?"
--
Christopher Auld
>>The attack "That model's no good because you made strong
>>assumptions just to make it tractable" is terribly naive. What
>>good is a model that can't be solved?
>My mind so resists that I actually read this that I can't add it to
>my collection of quotations. But I will. I'm flustered.
Out of curiousity: Mason, what good is a model that can't
be solved?
--
Mason Clark
>Mason Clark <mas...@ix.netcom.com> wrote:
>>au...@acs.ucalgary.ca (Christopher Auld) wrote:
>
>>>The attack "That model's no good because you made strong
>>>assumptions just to make it tractable" is terribly naive. What
>>>good is a model that can't be solved?
>
>>My mind so resists that I actually read this that I can't add it to
>>my collection of quotations. But I will. I'm flustered.
>
>Out of curiousity: Mason, what good is a model that can't
>be solved?
You're right Chris. We can only have fun with models that
can be solved. We have a nice one in physics:
There's this ball that has a negative mass of 4.5 kilograms.
It is thrown horizontally west from a height of 9,000 kilometers
in a wind having a velocity of 7,356 knots due north on a
planet that has a mass of 17 kilograms.
How far will the ball travel? I believe I've given all the
strong assumptions necessary for its solution, if not, ask.
By the way, the planet in question is inhabited by economists.
Mason C
Robert Vienneau
t...@2xtreme.net (Tim Worstall) wrote:
> > Markets are supposed to bring in equilibrium individuals with
> > different preferences and endowments. But a standard assumption
> > is that all individuals have identical tastes,
> > "and that preferences
> > are homothetic - that is, the one identitical person would
> > consume the same proportion of commodities at twice, ten times, etc.
> > his income."
> > "I want to be an individual, just like you." This is
> > a matter of the Sonnenschein-Mantel-Debreu results. Alan Kirman
> > has two interesting papers on these results:
> The bit that really puzzles me is this theory of 'homothetic
> tastes'.
> Is Robert really saying that someone on $ 10,000 a year spends the
> same proportion of his income on food as someone on $ 100,000 a year ?
No.
> And is he also saying that this is a basic assumption in economics ?
It is a common assumption in many areas of economics.
Neoclassical economics was supposed to procede by methodological
individualism, according to its proponents. The data consists
of tastes, endowments, and technology. Few a priori restrictions
were supposed to be imposed on the data. Individuals optimize, and
this has implications about theoretically observable patterns of
behavior for an individual. Regularities at the level of the market,
for example, for a specified commodity are supposed to be
capable of being explained, in the theory, by aggregating over
individuals. But the theory shows that this is not possible,
in general. The Sonnenschein-Mantel-Debreu results are about
microeconomics.
Macroeconomics is supposed to have microfoundations. A standard
assumption is that the macroeconomy acts as if a "representative"
individual is making optimizing decisions, including
intertemporally. This is not good microeconomic theory. It
requires some such assumption like I indicated.
So these research projects are failures. And they are failures
for theoretical reasons.
"The vast majority of economists believe that this high
caste, the mathematical economists, did their work properly,
and proved that the theory is internally consistent. The
caste has indeed done its work properly, BUT IT HAS PROVEN
PRECISELY THE OPPOSITE: that the theory is only internally
consistent under the most restrictive and specious of
assumptions."
-- Steve Keen
This is from the first non-introductory chapter in the book
referred to in the subject heading.
So how should theory be developed? Some have suggested that one
should make assumptions on distributions. I forget whether
these should be about tastes, endowments, or income. But the
point is they are, so to speak, macroeconomic assumptions.
Methodological individualism has failed, and microeconomics
needs macrofoundations. Perhaps we will end up with a
theory more like Adam Smith's, David Ricardo's, and there
modern-day followers - e.g., a theory in which consumption
patterns are assumed to vary among individuals in braod-
based groupings.
Agent-based simulation is thought by some to be a useful tool
for exploring these sort of issues.
Notice that the economists on this thread will not suggest why
the mainstream economist Alan Kirman subtitled one of his
explainations of these issues, "The Emperor Has No Clothes".
Notice that this argument is not about how the theory should be
simplified such that aggregated statistics can be applied to
test it. Nor is it about the "realism" of assumptions at that
stage. It is about what must be the case so that the theory,
considered as theory, is internally consistent.
Also note that I pointed out these elements of theory were
developed by mainstream economists. And I suggested that they
were taught.
I hope you notice the ad hominem and strawpersons elsewhere
on this thread. Why encourage those people?
> Have I simply misunderstood what Robert is saying ?
Yes. I was not making an empricial claim that the world works
as if individuals in actually existing industrialized
economies usually have homothetic preferences.
By the way, you should be interested in Engel curves, if you are
interested in what an assumption of homothetic preferences
is stating.
> Now if in one area of economics we are assuming that different income
> levels leads to different expenditure patterns, is Robert really right
> in stating that this ' homothetic tastes ' means that in another area
> we assume exactly the opposite ? Is economics really that badly
> fragmented ?
Yes.
"The great irony of this particular critique of economics is that
it was constructed by its supporters. There is, as a result, no
articulate rejoinder. Instead there are rationalisations like the
representative agent趴hich, as in Varian 1984, are often openly
described as such.
If a defence were to be given of this practice, it would probably be
what Samuelson termed 'the F-twist': that the assumptions of a
theory don靖 matter, instead all that counts is how accurately a
theory predicts reality. This popular but clearly invalid
methodological defence is debunked in Chapter 7."
-- Steve Keen
Christopher Auld
>>Out of curiousity: Mason, what good is a model that can't
>>be solved?
>You're right Chris. We can only have fun with models that
>can be solved. We have a nice one in physics:
Mason, here's an insightful critique:
This model assumes infinite-lived agents. The
prediction that the hazard rate out of employment
is constant is fragile to that assumption. I
haven't solved the more complex problem, but I'd
guess that that rate rises over time with
finite-lived agents.
Here's a stupid critique:
DUDE! PEOPLE DON'T LIVE FOREVER! CRAP, WHAT
PLANET DO YOU LIVE ON ANYWAYS!?!!?
As an exercise in self-awareness, Mason, you could
ask yourself which critique more closely resembles
the gist of a high percentage of the thousands upon
thousands of posts you've so generously shared with
the group.
Incidentally, even physicists make highly unrealistic
assumptions, and the "unrealism" of assumptions rises
with the degree of complexity of the domain of study
for reasons which should be obvious.
Christopher Auld
Robert Vienneau <rv...@see.sig.com> wrote:
...a rambling discourse on the state of economic theory. Recall
Robert claimed that the treatment of aggregation conditions in
graduate theory courses is an example of "indoctrination" in
economics. He is wrong on that point, and is no position to
argue one way or the other -- that he even holds an opinion on
the matter speaks volumes. Another poster asked why such conditions
are imposed; I explained; Robert responds with this... exercise.
I don't have the time or the inclination to go through Robert's
exagerations, misinterpretations, and unwarranted conclusions
point by point. A few observations:
- I am not interested in conspiracy theories.
- I do not recognize there exists a monolithic entity called
"neoclassical economics" which is felled by some results
in full-blown general equilibrium theory.
- Arguing about assumptions over preferences is, of course,
arguing over the realism of assumptions. It is also
in a sense arguing over "internal consistency," not unlike
debates in many branches of science, ranging from conflict
in quantum chemistry right up through the many strata of
aggregation ending at human societies. Pointing out
aggregation problems in macroeconomics is very, very dull.
- A person simultaneously claiming methodological individualism
is a failure and that agent-based simulation is the future of
economics is a very confused person.
It's very difficult to maintain any sort of discussion with
Robert on any of these issues because he doesn't actually read
economics, he reads books with titles like _Debunking Economics_.
It is not surprising he holds these quirky, negative views.
What is surprising is the startlingly arrogant tone he takes
when lecturing on what he's read in such sources. It grows
tiresome.
William F Hummel
Auld) wrote:
>It's very difficult to maintain any sort of discussion with
>Robert on any of these issues because he doesn't actually read
>economics, he reads books with titles like _Debunking Economics_.
>It is not surprising he holds these quirky, negative views.
>What is surprising is the startlingly arrogant tone he takes
>when lecturing on what he's read in such sources. It grows
>tiresome.
Not nearly as tiresome as the arrogant tone in your "holier than
thou" comments, following the best tradition of credentialism.
Quirky negative views are, of course, in the eye of the beholder.
What is lacking in much of academic economics today is any
serious attempt to study heterodox views. Learning some of the
shortcomings of mainstream economics instead of simply rising to
its defense is probably too much to expect of the academy. Mr.
Vienneau may not be credentialed but I suspect he has read much
more broadly than you.
WFH
Christopher Auld
> Learning some of the
>shortcomings of mainstream economics instead of simply rising to
>its defense is probably too much to expect of the academy.
> Mr.
>Vienneau may not be credentialed but I suspect he has read much
>more broadly than you.
Mr. Vienneau does seem to read a lot. He has unfortunately
concluded that Aristotle was Belgian.
It is interesting to note that it is in fact true that most of
what I read (professionally) never comes up on sci.econ. That's
because most of what I read is, first, heavily empirical, and
the fact that most economic research is largely statistical is
something one would never guess from reading sci.econ. Second,
most of what I read is not "big-think" meta-analysis, rather it's
applied economics. Today, for instance, while not wasting time
on the internet I will be reading up on nonparametric models of
labor supply in the presence of hours constraints. That these
sort of issues never come up on sci.econ is symptomatic of
what's wrong with this group.
Hummell, another economist-hating vocal member of the merry
sci.econ club, reiterates the wisdom that economists don't
worry about the limitations of their models, which is just
wrong. What is interesting to note is how lax the standards
are on the other side of the coin. It doesn't matter, at all,
how piss-poor a critique of mainstream economics is -- if
it's critical, it's worth repeating. The case in point is the
subject of this thread. Keen's "new critiques" are based on
Keen's misunderstandings of some shockingly elementary
economics, an appalling lack of familiarity with the
literature, and some mathematical errors. There are sound
critiques -- such as the Alan Kirman paper Robert cited --
and there are incompetent critiques. On sci.econ, it's all
good.
Mark Patrick Witte
>Auld) wrote:
>
>>It's very difficult to maintain any sort of discussion with
>>Robert on any of these issues because he doesn't actually read
>>economics, he reads books with titles like _Debunking Economics_.
>>It is not surprising he holds these quirky, negative views.
>>What is surprising is the startlingly arrogant tone he takes
>>when lecturing on what he's read in such sources. It grows
>>tiresome.
>
>Not nearly as tiresome as the arrogant tone in your "holier than
>thou" comments, following the best tradition of credentialism.
Where is Chris guilty of credentialism? For example, I've read quite
a few of his posts this past week where he repeatedly explained how differing
set-ups in game theory generated different results, and hence how some games
were PD and some where something else. It is true that he has considerable
credentials in the field but seems to be overly forthcoming in explaining
why he holds the views he favors.
>Quirky negative views are, of course, in the eye of the beholder.
Indeed.
>What is lacking in much of academic economics today is any
>serious attempt to study heterodox views.
What is the the current degree of effort in the field spent on
studying heterodox views, and what would be the optimal level? How does
this compare with other fields? OK, so my questions are facitious, but
your critique seems contentless. We've had debates where I've pointed out
that many people who did work that was viewed as strange and wrong by the
vast majority of the profession succeeded in winning their arguments and
establishing their approach as a useful in understanding the world. How is
it that some succeed in making their case and others do not? Could it
perhaps have something to do with the quality of the ideas or the strength
of the evidence?
>Learning some of the
>shortcomings of mainstream economics instead of simply rising to
>its defense is probably too much to expect of the academy. Mr.
>Vienneau may not be credentialed but I suspect he has read much
>more broadly than you.
No, that is not true. Certainly Mr. Vienneau has read certain
literatures very deeply, but it's clear that his focus has been extremely
narrow, as recent discussions of basic econometrics and game theory have
made clear. The mainstream journals are called that because many people
choose to read them, and they contain articles on a wide variety of topics.
This is the literature that Chris and I tend to read. They are full of
disagreements between authors and any modelling or empirical moment is fair
game if it allows a model to explain some aspect of reality better than
competing models. As such, what you refer to as the "mainstream" is a very
contentious group of rival scholars who don't bar any sort of literature
if mining it will give them the upper hand in finding results that match the
world we live in better than does the work of their competitors.
>
>WFH
William F Hummel
Auld) wrote:
>William F Hummel <wfhu...@attbi.com> wrote:
>
>> Learning some of the
>>shortcomings of mainstream economics instead of simply rising to
>>its defense is probably too much to expect of the academy.
>
>> Mr.
>>Vienneau may not be credentialed but I suspect he has read much
>>more broadly than you.
>
>Mr. Vienneau does seem to read a lot. He has unfortunately
>concluded that Aristotle was Belgian.
I thought Aristotle was Polish. But maybe I was thinking of
Shakespeare.
>
>It is interesting to note that it is in fact true that most of
>what I read (professionally) never comes up on sci.econ. That's
>because most of what I read is, first, heavily empirical, and
>the fact that most economic research is largely statistical is
>something one would never guess from reading sci.econ. Second,
>most of what I read is not "big-think" meta-analysis, rather it's
>applied economics. Today, for instance, while not wasting time
>on the internet I will be reading up on nonparametric models of
>labor supply in the presence of hours constraints. That these
>sort of issues never come up on sci.econ is symptomatic of
>what's wrong with this group.
I would be impressed with your heavy reading if it dealt with
some fundamental issues. Of course a young economist seeking
tenure must read everything in sight. The object is to get
himself published as often as possible in the right technical
journals and with a lot of whiz-bang econometrics. That's the
way system has evolved, handed down from one generation to the
next. The archives are filling up at a stupefying rate with more
and more about less and less.
Unfortunately the world has a plentiful supply of (professional)
economists who only speak to each other, but far too few of the
kind that matter.
>
>Hummell, another economist-hating vocal member of the merry
>sci.econ club, reiterates the wisdom that economists don't
>worry about the limitations of their models, which is just
>wrong.
The truth is that I have great respect for many economists, but
sadly they are not active on sci.econ. Also I have not commented
recently on the subject of models and their limitations, so you
struck out twice in one paragraph.
Your assertion that I am an economist-hater is the same sort of
stuff I see from another who frequently posts to sci.econ, and
whose blather completely discredits him as an "economist". Like
you, he is apparently not used to being challenged by one who
questions the "received doctrine."
>What is interesting to note is how lax the standards
>are on the other side of the coin. It doesn't matter, at all,
>how piss-poor a critique of mainstream economics is -- if
>it's critical, it's worth repeating. The case in point is the
>subject of this thread. Keen's "new critiques" are based on
>Keen's misunderstandings of some shockingly elementary
>economics, an appalling lack of familiarity with the
>literature, and some mathematical errors.
Most books written by an economist have some positive elements,
but one would never know it from your critique of Keen's book.
Your rush to judgement suggests that you are inclined to fire
away in defense of the orthodoxy without worrying too much about
author's context. Have you actually read the book?
WFH
susupply
"William F Hummel" <wfhu...@attbi.com> wrote in message
news:io3d8uckret0p4ia7...@4ax.com...
> Most books written by an economist have some positive elements,
> but one would never know it from your critique of Keen's book.
> Your rush to judgement suggests that you are inclined to fire
> away in defense of the orthodoxy without worrying too much about
> author's context. Have you actually read the book?
Have you actually read Chris's posts? How about:
>> The short version is: What's good here is not new, and what is
>> new is not good.
>> 1. Supply and demand analysis.
>> This is essentially an argument that partial equilibrium analysis can be
>> misleading, and is more likely to be misleading if the market is large
>> relative to the economy. This argument isn't wrong, but it is very well
>> known. The gist of point 1 would be a reasonable question for most any
>> introductory economics course's final exam.
Or:
>> That's it; that's all the pages and pages of math show. But
>> showing this would be a perfectly reasonable question for
>> an intermediate micro midterm exam; it's trivial and obvious.
John J. Weatherby
> On Mon, 04 Mar 2002 22:58:57 GMT, "John J. Weatherby"
<jjwea...@earthlink.net> wrote:
> Here lies the problem: treating the economic system as a physical system
subject
> to the laws of physics. Or its own laws sans homo sapiens.
>
Rational Expectations
> The economic system has people in it. Greenspans, Gingriches, bin Ladens,
...
> ....... and unpredictable natural events.
>
Two more words
stochastic processes
John
John J. Weatherby
> John J. Weatherby <jjwea...@earthlink.net> wrote:
>
> Yes. Here at the U of C, for instance, the first undergrad
> mathematical economics course teaches both discrete and
> continuous time methods. This course is typically taken by
> second or third year students. A few of the upper-year
> field courses draw on these foundations. The U of C is a
> reasonably good school, but we are rarely confused with MIT.
I suppose this is the way it should be. I have noticed students who were
undergrads from even the lower portion of the top 30 schools genearly do not
have a lot of exposure to these models coming into grad. schools. But then
again my university is in the lower forty and although not a bad school we
definitely aren't confused with MIT or British Columbia either.
I think more schools should push more calculus techniques and dynamic
modeling to undergrads. My math econ course as an undergrad was really
pretty basic. It did help in the first year Micro course though.
John
John J. Weatherby
"William F Hummel" <wfhu...@attbi.com> wrote in message
news:io3d8uckret0p4ia7...@4ax.com...
> On 6 Mar 2002 12:10:24 -0700, au...@acs.ucalgary.ca (Christopher
> Auld) wrote:
>
> I would be impressed with your heavy reading if it dealt with
> some fundamental issues. Of course a young economist seeking
> tenure must read everything in sight. The object is to get
> himself published as often as possible in the right technical
> journals and with a lot of whiz-bang econometrics.
A. Reading everything is sight is never a good idea. You must know your
area. This is really why economist usually aren't on this list. What are we
worried, well how to deal with endogenity, what to do with the fact you know
you have measurement error in the data, how to use econometric results to
extend on a theory so that its predictions are closer what the data
predicts, etc. This silly musings like that the fact you have to make some
restrictive assumptions to be able to make a model tractable are not our
lives work. There are a few of who realize that people like Rob take this
small issues and try to convince people that are work is crap simply becuase
a representive agent model may not be the most realistic model. Frankly it
makes me a bit angry. Rob doesn't realize that these arguments apply to
basically two areas in economics, real business cycles and early growth
models. Now being that he thinks was Keynes was misrepresented and he knows
what the bumbling old fart really meant, Rob thinks these issues are
important so he push some crap that came out the confusion of Keynes'
ramblings. Somehow Rob hasn't figured out that models that many economist
use do not use aggregate production functions nor representive consumers. In
fact they don't aggregate anything.
B. There need be no whiz-bang fancy flashy econometrics to publish. It is
more important you know your field. Knowing your field allows you to
identify problem areas and this guides your research. Your research must be
done carefully and correctly and based on current important issues. In fact
I can name a few articles from prominent theorist that used only basic
econometrics in their studies. These are also very important papers in the
field of growth.
John
William F Hummel
Patrick Witte) wrote:
>In article <h8hc8uog6iq8hk5oi...@4ax.com>,
>William F Hummel <wfhu...@attbi.com> wrote:
>>On 6 Mar 2002 09:18:27 -0700, au...@acs.ucalgary.ca (Christopher
>>Auld) wrote:
>>
>>>It's very difficult to maintain any sort of discussion with
>>>Robert on any of these issues because he doesn't actually read
>>>economics, he reads books with titles like _Debunking Economics_.
>>>It is not surprising he holds these quirky, negative views.
>>>What is surprising is the startlingly arrogant tone he takes
>>>when lecturing on what he's read in such sources. It grows
>>>tiresome.
>>
>>Not nearly as tiresome as the arrogant tone in your "holier than
>>thou" comments, following the best tradition of credentialism.
>
> Where is Chris guilty of credentialism? For example, I've read quite
>a few of his posts this past week where he repeatedly explained how differing
>set-ups in game theory generated different results, and hence how some games
>were PD and some where something else. It is true that he has considerable
>credentials in the field but seems to be overly forthcoming in explaining
>why he holds the views he favors.
Credentialism does not have to be explicit. It is sometimes
implicit in the manner of expression. Auld accuses Vienneau of
an arrogant tone, yet seems to be unaware of his own. Auld has
been consistently disrespectful of Vienneau for months on end. I
don't save old posts so I can't point to examples, other than the
paragraph above.
There should be no doubt that Vienneau reads economics in
considerable depth, in spite of what Auld says. Economics just
happens to be an intellectual pastime for Vienneau rather than a
professional objective. It's worth noting that leaves him free
to shape his own views, perhaps not always right, but at least
more likely to find weaknesses in the conventional wisdom.
>>Quirky negative views are, of course, in the eye of the beholder.
>
> Indeed.
>
>>What is lacking in much of academic economics today is any
>>serious attempt to study heterodox views.
>
> What is the the current degree of effort in the field spent on
>studying heterodox views, and what would be the optimal level? How does
>this compare with other fields?
You should be in better position than I am to answer these
questions. My understanding is that very little time, if any, is
spent exposing students to heterodox views. Yet there are many
very bright heterodox economists, not all of whom could be
totally misguided.
>OK, so my questions are facitious, but
>your critique seems contentless. We've had debates where I've pointed out
>that many people who did work that was viewed as strange and wrong by the
>vast majority of the profession succeeded in winning their arguments and
>establishing their approach as a useful in understanding the world. How is
>it that some succeed in making their case and others do not? Could it
>perhaps have something to do with the quality of the ideas or the strength
>of the evidence?
The fact that certain ideas become the accepted wisdom does not
necessarily mean they are correct. Economics is a continually
evolving discipline. Many ideas, once widely accepted, have
fallen away. No doubt the same fate awaits many of today's
ideas. However humility has never been a strong point among
mainstream economists, so it always very difficult to get a
respectful hearing for heterodox economics.
>
>>Learning some of the
>>shortcomings of mainstream economics instead of simply rising to
>>its defense is probably too much to expect of the academy. Mr.
>>Vienneau may not be credentialed but I suspect he has read much
>>more broadly than you.
>
> No, that is not true. Certainly Mr. Vienneau has read certain
>literatures very deeply, but it's clear that his focus has been extremely
>narrow, as recent discussions of basic econometrics and game theory have
>made clear. The mainstream journals are called that because many people
>choose to read them, and they contain articles on a wide variety of topics.
>This is the literature that Chris and I tend to read. They are full of
>disagreements between authors and any modelling or empirical moment is fair
>game if it allows a model to explain some aspect of reality better than
>competing models. As such, what you refer to as the "mainstream" is a very
>contentious group of rival scholars who don't bar any sort of literature
>if mining it will give them the upper hand in finding results that match the
>world we live in better than does the work of their competitors.
>
The mainstream journals may be contentious, but they are out of
bounds to the heterodox economists. Peer reviews are an inbred
system guaranteed to take care of that. Sure, now and then
someone comes along with an irrefutable argument that upsets the
apple cart. But there is a class of economists who don't even
get a hearing because their "fundamentals" are so antithetical
that none in the mainstream take them seriously. So you are
really addressing the problem with your example.
WFH
Christopher Auld
>I would be impressed with your heavy reading if it dealt with
>some fundamental issues.
I think William and I might disagree on what constitutes
"fundamental issues." For example, I think one "fundamental
issue" is how to make causal inferences from observational
data. This particular issue has captured the interest of
quantitative researchers in various fields for fifty years.
I've never seen it even mentioned on sci.econ. On the other
hand, I don't think that the conditions that can or cannot
be imposed on excess demand functions in Arrow-Debreu general
equilibrium is a "fundamental issue" at all. But certain
posters steeped in meta-analysis seem to fervently believe
otherwise.
[ snip: miscellaneous run-of-mill sci.econ insults ]
>Your assertion that I am an economist-hater is
...based in no small part on the post to which I was
responding. Comments such as
>What is lacking in much of academic economics today is any
>serious attempt to study heterodox views. Learning some of the
>shortcomings of mainstream economics instead of simply rising to
>its defense is probably too much to expect of the academy.
are hard to reconcile with protestations of moderacy. I
believe most of William's posts are about monetary theory,
which I find uninteresting, don't know much about, and
therefore don't comment on (I know this will be an alien
concept to many of the gentle readers of sci.econ).
>Most books written by an economist have some positive elements,
>but one would never know it from your critique of Keen's book.
>Your rush to judgement suggests that you are inclined to fire
>away in defense of the orthodoxy without worrying too much about
>author's context. Have you actually read the book?
I have not, as I have clearly stated. It is entirely possible
that the unoriginal arguments rehashed in the book are rehashed
well, but I tend to doubt it after reading the stuff on Keen's
page. The "new critiques" are apparently presented in the book
sans formal presentation. Keen presents the formal ideas on his
web page, and, I said, they're just not right. In what "context"
do mistaken algebra and simply false assertions about the content
of the literature become valid?
Now, as I said, there are certainly thoughtful and valid
critiques of all sorts of economic thought, "mainstream"
(whatever exactly that may be) and otherwise. But Keen's
"new critiques" are not amongst them. What I find fascinating
about the jovial denizens of sci.econ is how quickly they
rush to promote the book. Pointing out the "new critiques"
are rubbish elicites responses such as "Your rush to
judgement suggests that you are inclined to fire away in
defense of the orthodoxy without worrying too much about
author's context." Another poster gave the exact cite to
Amazon, where people can buy this tome of "good economics,"
and yet another had the gall to recommend _Debunking Economics_
to someone who asked what a good primer on mathematical
finance might be. In short, it doesn't seem to matter whether
Keen makes the slightest bit of sense; he wrote a book with
the spiffy title _Debunking Economics_. What more do we
need to know?
Christopher Auld
>Credentialism does not have to be explicit. It is sometimes
>implicit in the manner of expression.
That's a new one. I think "credentialism" might be an
assertion such as, "Graduate training in economics is
brainwashing,indoctrination." I think this "reverse"
credentialism is the only form of that logical error
that's appeared in this thread. Here's another example
of this form of credentialism:
>There should be no doubt that Vienneau reads economics in
>considerable depth, in spite of what Auld says. Economics just
>happens to be an intellectual pastime for Vienneau rather than a
>professional objective. It's worth noting that leaves him free
>to shape his own views, perhaps not always right, but at least
>more likely to find weaknesses in the conventional wisdom.
It is certainly good that William agrees that such assertions
are both insulting and do not form components of logical
arguments.
>Auld has been consistently disrespectful of Vienneau for
>months on end.
Oh yes, poor innocent, disrespected Mr. Vienneau.
Poor Chris Auld
[ Stupidities deleted. ]
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ro...@telus.net
wrote:
><ro...@telus.net> wrote:
>
>>Why not assume a distribution, and observe how closely it matches
>>reality?
>
>Assume a distribution of what?
Whatever factor is assumed to be uniform. In the example (snipped),
IIRC, it would be the demand for X under different income
distributions.
>What do you mean by "how
>closely it matches reality?"
How well it "predicts" actual data, including historical data.
>>Which would put him in the same company as Adam Smith, David
>>Ricardo....
>
>That's funny, I don't remember either of these gentlemen
>writing polemic about the failures of graduate education
>in economics in the early 21st century.
<yawn> They both expressed great dissatisfaction with the orthodoxies
of their day.
>>>The attack "That model's no good because you made strong
>>>assumptions just to make it tractable" is terribly naive. What
>>>good is a model that can't be solved?
>
>>It might be closer to the truth?
>
>Sure. So?
Thank you for providing such an eloquent debunking of economics....
>What good is it if it can't be solved?
It will be less useful in justifying destructive and evil policies.
>You
>do understand that this issue comes up in every discipline,
>not just economics, right?
Yes, but economics is the only discipline where the vital interests of
the most powerful interests in society may be -- and, in fact, are --
seriously jeopardized by too much truth.
>>What good is solving a model that says nothing useful about the real
>>world?
>
>What models do you have in mind that "say nothing useful
>about the real world?"
See the "Coase Theorem" thread.
-- Roy L
ro...@telus.net
wrote:
>- I am not interested in conspiracy theories.
How convenient for conspirators that such attitudes are widespread...
>Pointing out
> aggregation problems in macroeconomics is very, very dull.
I'm sure the credentialed authorities said similar things when cranks
and malcontents expressed "quirky negative views" about aggregation of
elements into earth, air, fire and water.
>- A person simultaneously claiming methodological individualism
> is a failure and that agent-based simulation is the future of
> economics is a very confused person.
Or perhaps one who is using "failure" in a somewhat different sense
from yours.
-- Roy L
ro...@telus.net
Witte) wrote:
>We've had debates where I've pointed out
>that many people who did work that was viewed as strange and wrong by the
>vast majority of the profession succeeded in winning their arguments and
>establishing their approach as a useful in understanding the world. How is
>it that some succeed in making their case and others do not? Could it
>perhaps have something to do with the quality of the ideas or the strength
>of the evidence?
Or the congeniality of their ideas to the interests of the
powerful...?
>The mainstream journals are called that because many people
>choose to read them, and they contain articles on a wide variety of topics.
>This is the literature that Chris and I tend to read. They are full of
>disagreements between authors and any modelling or empirical moment is fair
>game if it allows a model to explain some aspect of reality better than
>competing models. As such, what you refer to as the "mainstream" is a very
>contentious group of rival scholars who don't bar any sort of literature
>if mining it will give them the upper hand in finding results that match the
>world we live in better than does the work of their competitors.
Maybe you could explain to Chris what "match the world we live in"
means?
-- Roy L
William F Hummel
Auld) wrote:
>William F Hummel <wfhu...@attbi.com> wrote:
>
>>Credentialism does not have to be explicit. It is sometimes
>>implicit in the manner of expression.
>
>That's a new one. I think "credentialism" might be an
>assertion such as, "Graduate training in economics is
>brainwashing,indoctrination." I think this "reverse"
>credentialism is the only form of that logical error
>that's appeared in this thread. Here's another example
>of this form of credentialism:
I've spent more years than you've been alive working with PhD
engineers from top universities who were secure enough in their
professional capabilities to need no display of their academic
credentials. I notice that doesn't generally apply amongst
economists. In any case I don't think you really need a
clarification of the term "credentialism".
>
>>Auld has been consistently disrespectful of Vienneau for
>>months on end.
>
>Oh yes, poor innocent, disrespected Mr. Vienneau.
>
> Poor Chris Auld
> [ Stupidities deleted. ]
> [ Silliness deleted. ]
Chris Auld conveniently ignores his taunting and insulting Mr.
Vienneau well before Mr Vienneau lost his patience.
WFH
William F Hummel
Auld) wrote:
>William F Hummel <wfhu...@attbi.com> wrote:
>
>>I would be impressed with your heavy reading if it dealt with
>>some fundamental issues.
>
>I think William and I might disagree on what constitutes
>"fundamental issues." For example, I think one "fundamental
>issue" is how to make causal inferences from observational
>data. This particular issue has captured the interest of
>quantitative researchers in various fields for fifty years.
>I've never seen it even mentioned on sci.econ.
Well you haven't been looking then. Causal inferences of course
depend on how the system is defined, as any systems engineer will
explain. But defining the system is arbitrary, so causal
inferences are ultimately a matter of definition.
>Comments such as:
>
>>What is lacking in much of academic economics today is any
>>serious attempt to study heterodox views. Learning some of the
>>shortcomings of mainstream economics instead of simply rising to
>>its defense is probably too much to expect of the academy.
>are hard to reconcile with protestations of moderacy. I
>believe most of William's posts are about monetary theory,
>which I find uninteresting, don't know much about, and
>therefore don't comment on (I know this will be an alien
>concept to many of the gentle readers of sci.econ).
>
This is a most surprising admission. One who finds monetary
theory uninteresting and not worth bothering with should not be
dealing with macroeconomics.
Money and credit are the lubricant that allows a modern economy
to run. The lack of sufficient credit in the economy can stall
it out independent of mainstream theory. Macro models that
ignore the financial institutions of an economy are pretty much
worthless. In fact the amount and quality of credit market debt
is a good measure of the size and vitality of a nation's economy.
>
>>Most books written by an economist have some positive elements,
>>but one would never know it from your critique of Keen's book.
>>Your rush to judgement suggests that you are inclined to fire
>>away in defense of the orthodoxy without worrying too much about
>>author's context. Have you actually read the book?
>
>I have not, as I have clearly stated. It is entirely possible
>that the unoriginal arguments rehashed in the book are rehashed
>well, but I tend to doubt it after reading the stuff on Keen's
>page. The "new critiques" are apparently presented in the book
>sans formal presentation. Keen presents the formal ideas on his
>web page, and, I said, they're just not right. In what "context"
>do mistaken algebra and simply false assertions about the content
>of the literature become valid?
Whether Keen offered original arguments or not is hardly the
point. How many original arguments will you find in most college
text books?
>
>Now, as I said, there are certainly thoughtful and valid
>critiques of all sorts of economic thought, "mainstream"
>(whatever exactly that may be) and otherwise. But Keen's
>"new critiques" are not amongst them. What I find fascinating
>about the jovial denizens of sci.econ is how quickly they
>rush to promote the book. Pointing out the "new critiques"
>are rubbish elicites responses such as "Your rush to
>judgement suggests that you are inclined to fire away in
>defense of the orthodoxy without worrying too much about
>author's context." Another poster gave the exact cite to
>Amazon, where people can buy this tome of "good economics,"
>and yet another had the gall to recommend _Debunking Economics_
>to someone who asked what a good primer on mathematical
>finance might be. In short, it doesn't seem to matter whether
>Keen makes the slightest bit of sense; he wrote a book with
>the spiffy title _Debunking Economics_. What more do we
>need to know?
Ah, so it's really the title that bugs you. As you say, "What
more do we need to know?" I imagine the title alone disqualifies
the book amongst the mainstream economists. You might have said
so at the outset. But it would have been nice if you had read
most of the book before doing a simple hatchet job on the few
parts you did read.
WFH
Christopher Auld
>Whatever factor is assumed to be uniform. In the example (snipped),
>IIRC, it would be the demand for X under different income
>distributions.
Well, in some contexts that sort of thing is possible,
and is done. In other it's impossible. Sometimes,
for example, calculating the desired predictions from
the model for a single agent may require weeks of
computer time running sophisticated numerical algorithms.
It may simply be impossible to calculate outcomes for
multi-agent (with one such case being a continuum)
economies.
>>What do you mean by "how closely it matches reality?"
>How well it "predicts" actual data, including historical data.
The metric for judging macroeconomic models is how closely
they can mimic the moments of macroeconomic data. Much
research goes into figuring out how the baseline model has
to be changed such that it is able to predict these
processes.
Whether this is particularly productive line of research
remains in doubt. Personally, I tend to think of such
models more as convenient systems of stochastic equations
amenable to representing macroeconomic time series than
structural economic models. Many would disagree.
><yawn> They both expressed great dissatisfaction with the orthodoxies
>of their day.
Criticising current thought on some subject is not the
even the same type of discourse as alleging that professors
deliberately "indoctrinate" and "brainwash" their students.
>>>>The attack "That model's no good because you made strong
>>>>assumptions just to make it tractable" is terribly naive. What
>>>>good is a model that can't be solved?
>>>It might be closer to the truth?
>>Sure. So?
>Thank you for providing such an eloquent debunking of economics....
And, I suppose, every other quantitative discipline. There
is always an untractable generalization of the model in
question that is "closer to the truth." So what? If it
can't be solved, it can't say anything about the world,
and obviously can't help us.
>>What good is it if it can't be solved?
>It will be less useful in justifying destructive and evil policies.
I can't even parse this:
[Models which can't be solved] will be less useful in
justifying destructive and evil policies.
Since when have models which can't be solved been
useful in justifying any policies of any sort?
>Yes, but economics is the only discipline where the vital interests of
>the most powerful interests in society may be -- and, in fact, are --
>seriously jeopardized by too much truth.
Oh, another conspiracy theorist. Dull.
>>What models do you have in mind that "say nothing useful
>>about the real world?"
>See the "Coase Theorem" thread.
The Coase Theorem says many useful things about the
world. Let me guess: You're responding to some
misinterpretation of the Theorem (perhaps "The
Theorem says we don't have to worry about pollution!"
or some variant), not what Coase actually wrote.
Christopher Auld
>>- I am not interested in conspiracy theories.
>How convenient for conspirators that such attitudes are widespread...
Whatever you say friend.
[ Backs away slowly. ]
Christopher Auld
>Maybe you could explain to Chris what "match the world we live in"
>means?
Maybe someone should explain to Roy that there is no unambiguous
meaning to the phrase "match the world we live in." What is
to be measured, how it is to be measured, in what sense we mean
"match," and how differences between what the model predicts
and the data will be weighted have to be specified by the
researcher.
In the example we were discussing, we might have data on mean
incomes and mean consumption of X, and we might think of
"matching" in terms of an L2 loss function. Or we might have
data on individual's consumptions of X and their income, but
still wish to estimate how the conditional mean of X varies
with income in an "average" sense, or not. Or we might wish
to match the variances and covariances of time series on X
and income in a calibration sense. Or that X(p,Y) function
may be some building block in a model of some tangentially
related process, not of interest in and of itself.
What we mean by "match the world we live in" differs in each
case. Whether it would make sense, given the goal of the
researcher, to "assume a distribution" of some parameter(s)
in the model also depends on context.
Christopher Auld
>Well you haven't been looking then. Causal inferences of course
Perhaps you could point out some of the many discussions on
this topic I've missed.
>> In what "context"
>>do mistaken algebra and simply false assertions about the content
>>of the literature become valid?
>Whether Keen offered original arguments or not is hardly the
>point. How many original arguments will you find in most college
>text books?
You're right, it isn't the point. The point is immediately
above your quoted text.
>>finance might be. In short, it doesn't seem to matter whether
>>Keen makes the slightest bit of sense; he wrote a book with
>>the spiffy title _Debunking Economics_. What more do we
>>need to know?
>Ah, so it's really the title that bugs you.
Well, no, I'm amused by the reaction of the usual gang
to the title. I think the book itself could be filled
with photocopies of old Archie comic books and it'd
still be getting enthusiastic thumbs up on sci.econ.
>so at the outset. But it would have been nice if you had read
>most of the book before doing a simple hatchet job on the few
>parts you did read.
By "the few parts I did read" you mean "the formal
presentation of the `new critiques' presented in the
book?" I am content to merely claim that these are
rubbish, and they seem to constitute significant
portions of the book. As I said, perhaps the old
arguments are presented in an acceptable manner.
Christopher Auld
>I've spent more years than you've been alive working with PhD
>engineers from top universities who were secure enough in their
>professional capabilities to need no display of their academic
>credentials. I notice that doesn't generally apply amongst
>economists.
It doesn't? I don't display mine, except on my C.V.
The people most fond of displaying their credentials
are, in my experience, medical professionals. Professionals
in general, certainly including engineers, seem to be
more prone to displaying credentials than academics of
any stripe.
I am not sure, however, what this point has to do with the
thread.
>>Oh yes, poor innocent, disrespected Mr. Vienneau.
>> Poor Chris Auld
>> [ Stupidities deleted. ]
>> [ Silliness deleted. ]
>Chris Auld conveniently ignores his taunting and insulting Mr.
>Vienneau well before Mr Vienneau lost his patience.
Does Google go back to 1993 yet?
Why am I even having this discussion? All that William
Hummell has done so far in this wee subthread is insult
me. He then has the audacity to complain about
"disrespecting" Vienneau, who can't go a post without
insults and who has spent almost a decade on this group
regaling us with his overall thesis that economists
are brainwashed, indoctrinated, evil, incompetent,
and conspiring. Give me a break.
Mark Patrick Witte
>On 6 Mar 2002 20:59:57 GMT, mwi...@merle.acns.nwu.edu (Mark Patrick
>Witte) wrote:
>
>>We've had debates where I've pointed out
>>that many people who did work that was viewed as strange and wrong by the
>>vast majority of the profession succeeded in winning their arguments and
>>establishing their approach as a useful in understanding the world. How is
>>it that some succeed in making their case and others do not? Could it
>>perhaps have something to do with the quality of the ideas or the strength
>>of the evidence?
>
>Or the congeniality of their ideas to the interests of the
>powerful...?
Certainly "the powerful" within the world of economics were greatly
annoyed by the work of Robert Lucas. Right now "the powerful" in the world
of development economics would like to see William Easterly strung up on a
pole.
>>The mainstream journals are called that because many people
>>choose to read them, and they contain articles on a wide variety of topics.
>>This is the literature that Chris and I tend to read. They are full of
>>disagreements between authors and any modelling or empirical moment is fair
>>game if it allows a model to explain some aspect of reality better than
>>competing models. As such, what you refer to as the "mainstream" is a very
>>contentious group of rival scholars who don't bar any sort of literature
>>if mining it will give them the upper hand in finding results that match the
>>world we live in better than does the work of their competitors.
>
>Maybe you could explain to Chris what "match the world we live in"
>means?
He's an applied econometrician, so that would be a laugh for me to
presume to tell him jack about that. Plus my head is still spinning after
listening to a talk today about the magical powers of the bootstrap.
>
>-- Roy L
Mark Patrick Witte
William F Hummel <wfhu...@attbi.com> wrote:
>On 6 Mar 2002 19:23:57 -0700, au...@acs.ucalgary.ca (Christopher
>Auld) wrote:
>
>>William F Hummel <wfhu...@attbi.com> wrote:
>>
>>>I would be impressed with your heavy reading if it dealt with
>>>some fundamental issues.
Who is to judge what constitutes a "fundamental issue?"
Perhaps Mr. Hummel could pick up a recent edition of the Journal of
Political Economy or the like and tell us which articles deal with
fundamenal issues, and which don't?
>>are hard to reconcile with protestations of moderacy. I
>>believe most of William's posts are about monetary theory,
>>which I find uninteresting, don't know much about, and
>>therefore don't comment on (I know this will be an alien
>>concept to many of the gentle readers of sci.econ).
>>
>This is a most surprising admission. One who finds monetary
>theory uninteresting and not worth bothering with should not be
>dealing with macroeconomics.
I don't really see Chris responding much to macro issues, but am I
to learn here that the only intersting macro questions are money questions?
Has David been joined on this group by his father Milton?
>Money and credit are the lubricant that allows a modern economy
>to run. The lack of sufficient credit in the economy can stall
>it out independent of mainstream theory. Macro models that
>ignore the financial institutions of an economy are pretty much
>worthless. In fact the amount and quality of credit market debt
>is a good measure of the size and vitality of a nation's economy.
Ah, but which is the tail, and which is the dog? I feel that for
many questions, financial issues are very important, but that this set
hardly contains all the interesting questions.
>Whether Keen offered original arguments or not is hardly the
>point. How many original arguments will you find in most college
>text books?
Does Keen consider his book to be a textbook? I think not. Texts
generally exist to codify respected research papers into a form that is more
easily taken in by students. It seems to me that Keen feels that he is
presenting some original critiques, and suffers some degree of the frequent
fate of those who strive for originality, which is error.
>Ah, so it's really the title that bugs you. As you say, "What
>more do we need to know?" I imagine the title alone disqualifies
>the book amongst the mainstream economists. You might have said
Ah yes, the mainstream...of competing egos and intellects, each of
whom wishes to collect the scalps of his (or occasionally her) more famous
peers by superceding their research.
>so at the outset. But it would have been nice if you had read
>most of the book before doing a simple hatchet job on the few
>parts you did read.
Did you miss the long post were Chris wrote out his explicit
critiques of portions of the book?
>
>WFH
Grinch
<wfhu...@attbi.com> wrote:
>On 6 Mar 2002 19:38:37 -0700, au...@acs.ucalgary.ca (Christopher
>Auld) wrote:
>
>>William F Hummel <wfhu...@attbi.com> wrote:
>>
>>>Credentialism does not have to be explicit.
"Credentialism" means giving undue weight to credentials as being
determinative in argument (in lieu of facts or reason) or in
establishing social standing.
That's what it means.
In the five or so years I've been in this group, I don't recall *any*
of the professionals who have frequented here *ever* having done that.
None have ever referred to their credentials and said that made them
right, in my memory.
It seems rather facile to accuse others of engaging in credentialism
*without* referring to their credentials.
>>>It is sometimes
>>>implicit in the manner of expression.
Ah, so it's not credentialism at all, it's manners and attitude.
Yes, professionals often have the attitude that they know more about
their field than amateurs do. Because, what the heck, they do. And
if challenged they often have the ill manners to go on and demonstrate
it too.
No doubt that can be frustrating and unpleasant for people who try to
argue with them and end up demonstrating less knowledge and
understanding in the process.
But it is the very *opposite* of credentialism -- which is invoking
one's credentials in argument as a *substitute* for facts and reason.
>>That's a new one. I think "credentialism" might be an
>>assertion such as, "Graduate training in economics is
>>brainwashing,indoctrination." I think this "reverse"
>>credentialism is the only form of that logical error
>>that's appeared in this thread.
But of course one can see this every day in sci.physics, sci.medicine,
sci.whatever.
The amateurs who are so eager to point out the *obvious* things that
the professionals have been too dumb to notice for 100 years, 200
years, get beat up in argument just because they don't have equal
mastery of facts and references. That's unfair.
Their conclusion is inevitable: Professional education is bad,
brainwashing, and a tool for suppressing those who are freed by their
lack of education to have original insights professionals can't
handle.
Visit www.crank.net for their collected web sites.
>I've spent more years than you've been alive working with PhD
>engineers from top universities who were secure enough in their
>professional capabilities to need no display of their academic
>credentials.
OK.
So just who are these economists who have ever "displayed their
academic credentials" in this group? Those are your words, and you
obviously feel strongly about it, so it must have happened.
Say who's done it, who has *displayed their credentials*, rather than
make a superior show of knowledge that has proved awkward for some,
and I'll be with you as far as that goes.
If you can't, then we'll be left with an odd situation where you say
people who never invoke their credentials are credentialists, while
those who constantly insult those with credentials ("brainwashed",
"indoctrinators", "suppressors of dissent", etc.) aren't practicing
any kind of nasty anti-credentialism at all.
>I notice that doesn't generally apply amongst economists.
I am curious: If those PhD engineers spent some time in
sci.engineering, and had people who'd never studied engineering attack
their profession and themselves due to their professional credentials,
the way economics and PhD economists are attacked here, with all the
name calling and insults, what would their reaction be?
Benign tolerance?
> In any case I don't think you really need a
>clarification of the term "credentialism".
Of course not, it means referring to credentials.
>>
>>>Auld has been consistently disrespectful of Vienneau for
>>>months on end.
>>
>>Oh yes, poor innocent, disrespected Mr. Vienneau.
If it's manner and attitude that you are really reacting to (with your
reaction being displaced onto the fancied "credentialism") then just
remember this is usenet and nobody is free from sin in that regard --
certainly nobody who has posted in or been referred to in this thread.
We've *all* invoked our superior knowledge of what we are talking
about by our *attitude*, and we've all done it on plenty of
occassions. You included.
Mark Patrick Witte
William F Hummel <wfhu...@attbi.com> wrote:
>On 6 Mar 2002 20:59:57 GMT, mwi...@merle.acns.nwu.edu (Mark
>Patrick Witte) wrote:
>
>>In article <h8hc8uog6iq8hk5oi...@4ax.com>,
>>William F Hummel <wfhu...@attbi.com> wrote:
>>>On 6 Mar 2002 09:18:27 -0700, au...@acs.ucalgary.ca (Christopher
>>>Auld) wrote:
>>>
>>>>It's very difficult to maintain any sort of discussion with
>>>>Robert on any of these issues because he doesn't actually read
>>>>economics, he reads books with titles like _Debunking Economics_.
>>>>It is not surprising he holds these quirky, negative views.
>>>>What is surprising is the startlingly arrogant tone he takes
>>>>when lecturing on what he's read in such sources. It grows
>>>>tiresome.
>>>
>>>Not nearly as tiresome as the arrogant tone in your "holier than
>>>thou" comments, following the best tradition of credentialism.
>>
>> Where is Chris guilty of credentialism? For example, I've read quite
>>a few of his posts this past week where he repeatedly explained how differing
>>set-ups in game theory generated different results, and hence how some games
>>were PD and some where something else. It is true that he has considerable
>>credentials in the field but seems to be overly forthcoming in explaining
>>why he holds the views he favors.
>
>Credentialism does not have to be explicit. It is sometimes
Credentialism is saying, "I don't even need to respond to the merits
of your argument since you are not even an economist." That sort of crap
does not fly on the net, thankfully, and I really can't recall any evidence
of Chris doing that.
>implicit in the manner of expression. Auld accuses Vienneau of
>an arrogant tone, yet seems to be unaware of his own. Auld has
>been consistently disrespectful of Vienneau for months on end. I
It is true that Chris should politely bow down and admit Mr.
Vienneau is right when he describes modern economics as a "morally and
intellectually bankrupt" field followed by people who are "ignorant or
Orwellian."
http://groups.google.com/groups?q=bankrupt+group:sci.econ+author:Vienneau&hl=en&scoring=d&selm=rvien-BC936C.05185207102000%40news.dreamscape.com&rnum=1
>don't save old posts so I can't point to examples, other than the
>paragraph above.
It seems a fair cop to me. To indict modern economics, it would
seem to be necessary to read modern economics, and in the case of the recent
game theory thread, quoting works from the 1940s against works that were
built upon fifty years of building upon VNM seems an odd approach.
>There should be no doubt that Vienneau reads economics in
>considerable depth, in spite of what Auld says.
I agree that Mr. Vienneau reads some parts in great depth, but reads
other parts not at all, yet often feels the need to comment upon them,
sometime while even admitting he has not read them.
>Economics just
>happens to be an intellectual pastime for Vienneau rather than a
>professional objective. It's worth noting that leaves him free
>to shape his own views, perhaps not always right, but at least
>more likely to find weaknesses in the conventional wisdom.
I'd like to meet your dentist!
>>>What is lacking in much of academic economics today is any
>>>serious attempt to study heterodox views.
>>
>> What is the the current degree of effort in the field spent on
>>studying heterodox views, and what would be the optimal level? How does
>>this compare with other fields?
>
>You should be in better position than I am to answer these
>questions. My understanding is that very little time, if any, is
>spent exposing students to heterodox views. Yet there are many
>very bright heterodox economists, not all of whom could be
>totally misguided.
Where does one get the genetic test to see if one has the heterodox
gene? How much time should be spent in biology class on "intelligent
design?" I suspect that Keynesians feel that not enough time is spent in
classes on their stuff, Rat Ex guys feel ignored, game theorists feel under
appreciated, econometricians don't think they get their proper due. Alas,
all things are scarce, even classroom time, and I'm sure that many scholars
feel that their work is not regarded as highly as it should be. And who has
the job of changing this? The scholars themselves. If they can convince
the field of the value of their work, then they'll earn more classroom time.
>>OK, so my questions are facitious, but
>>your critique seems contentless. We've had debates where I've pointed out
>>that many people who did work that was viewed as strange and wrong by the
>>vast majority of the profession succeeded in winning their arguments and
>>establishing their approach as a useful in understanding the world. How is
>>it that some succeed in making their case and others do not? Could it
>>perhaps have something to do with the quality of the ideas or the strength
>>of the evidence?
>
>The fact that certain ideas become the accepted wisdom does not
>necessarily mean they are correct.
Certainly not, but it does mean that those pushing those ideas made
such a good argument that they were able to convince some people for a time.
And those who fail to make good arguments, especially if their theories are
later found to be superior by some metrics, only have themselves to blame
for getting beaten in the court of academic competition. Yet again, I will
recommend the writing of Thomas Kuhn, particularly his _Structure of
Scientific Revolutions_.
>Economics is a continually
>evolving discipline. Many ideas, once widely accepted, have
>fallen away. No doubt the same fate awaits many of today's
>ideas. However humility has never been a strong point among
>mainstream economists, so it always very difficult to get a
>respectful hearing for heterodox economics.
In this, economics is just like every other field (really, read Kuhn
if you want to talk about this). Anyone is free to submit articles to
economics journals, for blind refereeing, even people who have never taken
an economics class in their lives. Such people can publish, and even get
tenure at top schools.
Seriously, don't by this romantic notion of the persecuted tribe of
the heterodox, nursing the true flame in the wilderness. There will always
be approaches, by smart people, that the large majority of other smart
people in the field don't find convincing. There is no way to teach what
every smart person or even clique of people do. It is up to these folks to
make their cases based upon good models with good empirical fits that are
able to compete with more established research. In an earlier thread we had
on this topic, I came up with a long list of economists who were dismissed
as nuts when their first tried to publish their work, but they were able to
convince people over time and themselves become the favored approach.
And in this, economics is just like every other empirical field.
>>made clear. The mainstream journals are called that because many people
>>choose to read them, and they contain articles on a wide variety of topics.
>>This is the literature that Chris and I tend to read. They are full of
>>disagreements between authors and any modelling or empirical moment is fair
>>game if it allows a model to explain some aspect of reality better than
>>competing models. As such, what you refer to as the "mainstream" is a very
>>contentious group of rival scholars who don't bar any sort of literature
>>if mining it will give them the upper hand in finding results that match the
>>world we live in better than does the work of their competitors.
>>
>The mainstream journals may be contentious, but they are out of
>bounds to the heterodox economists.
How do you know this?
>Peer reviews are an inbred
>system guaranteed to take care of that.
They are so inbred that they've gone blind, as to who the author is.
More importantly, if a paper matches some aspect of the data that others
can't, or can model something that others can't, then the journal that
publishes that paper will get the citations from it and the resulting
prestige and subscriptions.
>Sure, now and then
>someone comes along with an irrefutable argument that upsets the
>apple cart.
Yes, yes, Friedman, Lucas, Spence, Rodrick, Easterly, Becker,
Akerlof, Sims, Manski, Engel, and a host of others.
>But there is a class of economists who don't even
>get a hearing because their "fundamentals" are so antithetical
>that none in the mainstream take them seriously. So you are
>really addressing the problem with your example.
Let them try their cases in the court of empirical evidence. Read
Kuhn.
>
>WFH
Mason Clark
>
>"Credentialism" means giving undue weight to credentials as being
>determinative in argument (in lieu of facts or reason) or in
>establishing social standing.
>
>That's what it means.
>
>In the five or so years I've been in this group, I don't recall *any*
>of the professionals who have frequented here *ever* having done that.
>None have ever referred to their credentials and said that made them
>right, in my memory.
>
Mason C
susupply
"Mark Patrick Witte" <mwi...@merle.acns.nwu.edu> wrote in message
news:a673rc$mba$1...@news.acns.nwu.edu...
On the other hand, how do the Evil Economists stack up against other
scientists:
<<----------------------------------
Bjørn Lomborg's comments to the 11-page critique in
January 2002 Scientific American (SA),
Substantially finished December 31, 2001; modified to avoid copyright
infringement, latest update February 10, 2002, 22:15:13
[Background:
I received - through informal channels - the final proofs of the 11
page feature in Scientific American, all of it devoted to a thorough
trashing of my recent book The Skeptical Environmentalist,
Cambridge University Press 2001 (referred as SE in references).
The four critiques and accompanying editorial is the first (and so
far only) statement that readers of SA will receive as the basis on
which to judge the cogency of my arguments.
Although I already talked to the editor, John Rennie, in
November, he ended up not wanting me to write an answer to the
critique in the same issue. He has now offered me to write an 800
word reply for the May issue, which I have accepted.
At the same time, Scientific American has objected to the full
version of this response, since it reproduces all the SA text, and SA
finds that this constitute a copyright infringement. Rennie has
offered to place the full version on the SA web-site but only in
May.
I then put up a version with only a limited number of quotes,
but SA has also objected to this, threatening to sue me if I don't
take this down immediately. Thus, for now, for now, I'll have
merely to indicate which paragraphs I am commenting, and thus
the comments mainly makes sense for people who already got the
full text of the SA.
Surprisingly - and saddening - it seems that SA first decides not
to let me reply to their critique in the same issue, then claim I can
only reply shortly five months later due to the production process,
but when the web actually promises to overcome this time lag and
space limit, they attempt to obstruct this with reference to
copyright infringement.
--------------------------------->>
William F Hummel
William F Hummel
Patrick Witte) wrote:
>In article <asrd8ugae81leovd2...@4ax.com>,
>William F Hummel <wfhu...@attbi.com> wrote:
>>Money and credit are the lubricant that allows a modern economy
>>to run. The lack of sufficient credit in the economy can stall
>>it out independent of mainstream theory. Macro models that
>>ignore the financial institutions of an economy are pretty much
>>worthless. In fact the amount and quality of credit market debt
>>is a good measure of the size and vitality of a nation's economy.
>
> Ah, but which is the tail, and which is the dog?
One can delimit a model to make almost any variable cause or
effect. Are you implying the money is a "veil" and can be
ignored in real terms?
>I feel that for
>many questions, financial issues are very important, but that this set
>hardly contains all the interesting questions.
Maybe you can offer some examples of macro questions in which
money and credit play no role, or can be ignored without
affecting the result. I can't.
>
>>Whether Keen offered original arguments or not is hardly the
>>point. How many original arguments will you find in most college
>>text books?
>
> Does Keen consider his book to be a textbook? I think not. Texts
>generally exist to codify respected research papers into a form that is more
>easily taken in by students. It seems to me that Keen feels that he is
>presenting some original critiques, and suffers some degree of the frequent
>fate of those who strive for originality, which is error.
Surely you must know that econ texts for undergraduate students
contain a fair amount of misleading theory, simply because it is
easy to digest or is basically copied (unthoughtfully) from
earlier texts. Beyond that, what is largely missing in economics
curricula is the institutional framework. As David Colander
said, "The danger of not teaching the importance of the art of
economics [referring to a deep understanding of its institutions]
is that the students start seeing the model as the reality and
they lose any interest in the reality that model is supposed to
describe." (From the Art of Monetary Policy, edited by Colander
and Daane.)
I don't think Keen considers his book to be a textbook. I used
that example as just one of many in which few, if any, original
arguments are offered. Keen no doubt sees his critique as
original in some sense or else he wouldn't have written it. How
many biographies of Abraham Lincoln have been written, each
author simply believing he brings some new perspective?
WFH
John J. Weatherby
"William F Hummel" <wfhu...@attbi.com> wrote in message
> This is a most surprising admission. One who finds monetary
> theory uninteresting and not worth bothering with should not be
> dealing with macroeconomics.
>
a poster speaking of something he knows nothing about. Perhaps Hummel you
should actually find out something about economic fields. Chris is an
applied labor economist. Applied labor economist generally do not study
macro nor do they typically have much interest in them. This isn't always
the case sometimes things like human capital models and R&D models of growth
can merge the two areas.
This is as silly as saying I shouldn't bother with labor or
international trade. What is silly about it? I am a specialist in micro
foundations of macro models. I deal mostly in growth models and industrial
organization issues. I simply do not have a lot of interest in labor or
international trade. I do find some interest in them but I rarely speak on
them other than pointing out something on a principles level. I have never
researched the models and honestly don't remember everything from my open
economy macro class I had as a third year grad. student.
> Money and credit are the lubricant that allows a modern economy
> to run. The lack of sufficient credit in the economy can stall
> it out independent of mainstream theory. Macro models that
> ignore the financial institutions of an economy are pretty much
> worthless.
This again falls to realize the difference between growth and business
cycle models. Yes money has short run effects. No in the long run these
effects generally do not persist. Macro models in the area of growth rarely
involve monetary policy simply because they are long run models. These
models are far from worthless, although I must say from reading the journals
a lot more work needs to be done in the area. Unfortunately not empirical
work exist. Growth tends to be dominated by theorist who really were not all
that interested in econometrics. Some of the work is good but a lot more
testing still needs to be done.
John
John J. Weatherby
"William F Hummel" <wfhu...@attbi.com> wrote in message
> Maybe you can offer some examples of macro questions in which
> money and credit play no role, or can be ignored without
> affecting the result. I can't.
that shocks to labor demand cause recessions and expansions. Money does not
effect the business cycle.
Have you heard of explaining economic growth or do you think this is micro?
What about general equilibrium models of international trade or is this not
macro?
John
William F Hummel
<jjwea...@earthlink.net> wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>> Maybe you can offer some examples of macro questions in which
>> money and credit play no role, or can be ignored without
>> affecting the result. I can't.
>Perhaps you should read about real business cycle theory. The essence is
>that shocks to labor demand cause recessions and expansions.
Shocks to labor demand are more aptly viewed as the result, not
the cause of business cycles.
>Money does not effect the business cycle.
If you really believe money and credit do not affect the business
cycle, you need to go back and start over. It is well known that
lending by financial institutions is almost always pro-cyclical.
That is one of the key factors affecting the amplitude of the
cycle.
>Have you heard of explaining economic growth or do you think this is micro?
If by economic growth you mean expansion as measured by the GDP,
that is of course a macro concept. So what's the point of the
question?
>What about general equilibrium models of international trade or is this not
>macro?
Yes, of course any variable in the aggregate is a macro issue.
Again, what's the point? Surely you don't believe that economic
growth and international trade can exist in just a barter mode.
Both economic growth and international trade volume are closely
related to the issue of credit availability or lack thereof.
WFH
Robert Vienneau
> Plus my head is still spinning after
> listening to a talk today about the magical powers of the bootstrap.
Keen's book is about the internal (in)consistency of the theories
taught throughout undergraduate and much graduate education in
economics. Resampling doesn't seem to have much to do with that.
> It is true that Chris should politely bow down and admit Mr.
> Vienneau is right when he describes modern economics as a "morally and
> intellectually bankrupt" field...
Strawperson. I never described modern (or mainstream) economics
as "morally and intellectectually bankrupt".
When I come upon a book entitled "Debunking Economics", I don't
immediately assume the book is incomprehensible or incompetent.
Even if I come upon somebody asserting, without anything
approaching an argument, that chapter 4 is incompetent, I
don't presume that that must be the case.
> To indict modern economics, it would
> seem to be necessary to read modern economics, and in the case of the
> recent
> game theory thread, quoting works from the 1940s against works that were
> built upon fifty years of building upon VNM seems an odd approach.
Strawperson. I never indicted game theory in that thread. I did not
confine my references in that thread to "works from the 1940s". And,
if a work from the 1940s did, in fact, treat an issue better than
current work does, there would be nothing odd about quoting it.
Not that that is much related to what went on in that thread.
Silliness about how I should read introductory textbooks on
game theory presumes facts not in evidence.
I thought this amusing:
> Does Keen consider his book to be a textbook? I think not. Texts
> generally exist to codify respected research papers into a form that is
> more
> easily taken in by students.
The bulk of the book is about explaining the results of respected
research papers in a form that can be understood by beginners.
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau
William F Hummel
<jjwea...@earthlink.net> wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>> This is a most surprising admission. One who finds monetary
>> theory uninteresting and not worth bothering with should not be
>> dealing with macroeconomics.
>>
> This takes the cake for quotable quotes on sci econ.
Then I suggest you memorize it and put it in your file of
important economic truths.
>Once again we have
>a poster speaking of something he knows nothing about. Perhaps Hummel you
>should actually find out something about economic fields.
Is this disguised credentialism again? You seem to have the
impression that anyone who hasn't degreed in economics cannot
read.
>Chris is an
>applied labor economist. Applied labor economist generally do not study
>macro nor do they typically have much interest in them. This isn't always
>the case sometimes things like human capital models and R&D models of growth
>can merge the two areas.
I know not what Chris does as an economist, but I do know that he
is not well-equipped to do serious macro work if he doesn't have
any interest or knowledge of financial systems and institutions.
> This is as silly as saying I shouldn't bother with labor or
>international trade.
I didn't say that, but perhaps you are right.
>What is silly about it? I am a specialist in micro
>foundations of macro models. I deal mostly in growth models and industrial
>organization issues. I simply do not have a lot of interest in labor or
>international trade. I do find some interest in them but I rarely speak on
>them other than pointing out something on a principles level. I have never
>researched the models and honestly don't remember everything from my open
>economy macro class I had as a third year grad. student.
>
>> Money and credit are the lubricant that allows a modern economy
>> to run. The lack of sufficient credit in the economy can stall
>> it out independent of mainstream theory. Macro models that
>> ignore the financial institutions of an economy are pretty much
>> worthless.
> This again falls to realize the difference between growth and business
>cycle models. Yes money has short run effects. No in the long run these
>effects generally do not persist.
This is the old long run versus short run nonsense. It ignores
the fact that what economic output is lost in the short run is
also lost in the long run. Yes, "full employment" can be
restored after a recession caused by a monetary shock like a
credit crunch. That may give some the impression that money
doesn't matter in the long run. But the loss of production is a
permanent loss.
>Macro models in the area of growth rarely
>involve monetary policy simply because they are long run models. These
>models are far from worthless, although I must say from reading the journals
>a lot more work needs to be done in the area. Unfortunately not empirical
>work exist. Growth tends to be dominated by theorist who really were not all
>that interested in econometrics. Some of the work is good but a lot more
>testing still needs to be done.
Well, precisely how do you define the "long run"? I suspect what
you mean is simply whatever length of time will effectively
disconnect the macro variables being studied. But that's a mere
tautology. Monetary policy in the 1920s had a big effect on the
economic conditions in the 1930s, or doesn't that count as long
term?
The long run doesn't mean forever. In truth the economic
conditions your great-grandchildren will live in are necessarily
a function of economic conditions in your life time.
WFH
Christopher Auld
>When I come upon a book entitled "Debunking Economics", I don't
>immediately assume the book is incomprehensible or incompetent.
>Even if I come upon somebody asserting, without anything
>approaching an argument, that chapter 4 is incompetent, I
>don't presume that that must be the case.
I have prettied up my little piece a little and made it
available here:
http://jerry.ss.ucalgary.ca/debunk.pdf
Robert is welcome to try to defend Keen's monumental
blunders if he wishes -- I notice he has not done so
yet. I don't think asserting I've provided
nothing "approaching an argument" is going to fool
anyone.
I do not intend to take part in the discussion of the
book slated for next week, but if anyone would like
to bring these points up I will provide clarifications,
etc, via email.
Chasna1
>Maybe you can offer some examples of macro questions in which
>money and credit play no role, or can be ignored without
>affecting the result. I can't.
Of course you can't. You don't know the first thing about Macroeconomics.
Example, the natural rate of GDP. Something that is in every good text on
macro.
>Surely you must know that econ texts for undergraduate students
>contain a fair amount of misleading theory, simply because it is
>easy to digest or is basically copied (unthoughtfully) from
>earlier texts.
How would you know, you've never read one. Please tell us about a misleading
theory contain in a current macro textbook.
Chasna1
>Shocks to labor demand are more aptly viewed as the result, not
>the cause of business cycles.
Like hell they are. How do you think technology shocks enter into economic
activity. Oh, I forgot, you're a PKTer and therefore there is no such thing as
the net marginal product of labor.
Chasna1
>Both economic growth and international trade volume are closely
>related to the issue of credit availability or lack thereof.
>
>WFH
Try reading some history on economic development and its relationship to
technology change.
Mark Patrick Witte
Robert Vienneau <rv...@see.sig.com> wrote:
>Mark Patrick Witte wrote (in different posts):
>
>> Plus my head is still spinning after
>> listening to a talk today about the magical powers of the bootstrap.
>
>Keen's book is about the internal (in)consistency of the theories
>taught throughout undergraduate and much graduate education in
>economics. Resampling doesn't seem to have much to do with that.
Ah, that was just a reference to a paper that was still much
discussed today. So well delivered, yet so incomprehensible.
>> It is true that Chris should politely bow down and admit Mr.
>> Vienneau is right when he describes modern economics as a "morally and
>> intellectually bankrupt" field...
>
>Strawperson. I never described modern (or mainstream) economics
>as "morally and intellectectually bankrupt".
No, of course not, no reasonable person would have put such a quote
into a thoughtful post.
>When I come upon a book entitled "Debunking Economics", I don't
>immediately assume the book is incomprehensible or incompetent.
Certainly not, nor do I, books should be judged by what is between
their covers, and this one was.
>Even if I come upon somebody asserting, without anything
>approaching an argument, that chapter 4 is incompetent, I
>don't presume that that must be the case.
But when serious arguments are posted, then an opinion on the book
must be formed. For example, Keen's statements about such matters as
dynamic models are simply uninformed about economics in recent decades.
>> To indict modern economics, it would
>> seem to be necessary to read modern economics, and in the case of the
>> recent
>> game theory thread, quoting works from the 1940s against works that were
>> built upon fifty years of building upon VNM seems an odd approach.
>
>Strawperson. I never indicted game theory in that thread. I did not
But game theory is a central element in much of modern economics,
and so some exposure to it would be expected of anyone who would would
presume to discuss the state of modern economics.
>confine my references in that thread to "works from the 1940s". And,
>if a work from the 1940s did, in fact, treat an issue better than
>current work does, there would be nothing odd about quoting it.
Sadly, in this case, it didn't.
>Not that that is much related to what went on in that thread.
>Silliness about how I should read introductory textbooks on
>game theory presumes facts not in evidence.
Well, confusing PD and non-PD games won't get a person even partial
credit in intro micro.
>I thought this amusing:
>
>> Does Keen consider his book to be a textbook? I think not. Texts
>> generally exist to codify respected research papers into a form that is
>> more
>> easily taken in by students.
>
>The bulk of the book is about explaining the results of respected
>research papers in a form that can be understood by beginners.
How did G.B. Shaw put it when he returned a book with a poor review
when the author complained that some of the pages had not been split? "I
do not have to eat a whole egg to know that it is rotten."
Anyway, if Keen is serious, then he should not rely upon the sloppy
editing procedures of book publishers but should instead step up to the
plate of refereed journals.
Mark Patrick Witte
William F Hummel <wfhu...@attbi.com> wrote:
>On 7 Mar 2002 06:32:27 GMT, mwi...@merle.acns.nwu.edu (Mark
>Patrick Witte) wrote:
>>>worthless. In fact the amount and quality of credit market debt
>>>is a good measure of the size and vitality of a nation's economy.
>>
>> Ah, but which is the tail, and which is the dog?
>
>One can delimit a model to make almost any variable cause or
>effect.
Hence, it is an emprical question, and a difficult one at that.
>>I feel that for
>>many questions, financial issues are very important, but that this set
>>hardly contains all the interesting questions.
>
>Maybe you can offer some examples of macro questions in which
>money and credit play no role, or can be ignored without
>affecting the result. I can't.
Consumption, long run growth.
>> Does Keen consider his book to be a textbook? I think not. Texts
>>generally exist to codify respected research papers into a form that is more
>>easily taken in by students. It seems to me that Keen feels that he is
>>presenting some original critiques, and suffers some degree of the frequent
>>fate of those who strive for originality, which is error.
>
>Surely you must know that econ texts for undergraduate students
>contain a fair amount of misleading theory, simply because it is
>easy to digest or is basically copied (unthoughtfully) from
>earlier texts. Beyond that, what is largely missing in economics
>curricula is the institutional framework. As David Colander
>said, "The danger of not teaching the importance of the art of
>economics [referring to a deep understanding of its institutions]
>is that the students start seeing the model as the reality and
>they lose any interest in the reality that model is supposed to
>describe." (From the Art of Monetary Policy, edited by Colander
>and Daane.)
Colander must be a hell of a teacher if he is able to sell models to
undergraduates like that.
Mason Clark
>>Maybe you can offer some examples of macro questions in which
>>money and credit play no role, or can be ignored without
>>affecting the result. I can't.
>
> Consumption, long run growth.
Darn, just when I was withdrawing from my quotation addiction.
ro...@telus.net
wrote:
><ro...@telus.net> wrote:
>>au...@acs.ucalgary.ca (Christopher Auld) wrote:
>
>>>- I am not interested in conspiracy theories.
>
>>How convenient for conspirators that such attitudes are widespread...
>
>Whatever you say friend.
>
>[ Backs away slowly. ]
Too bad there were no black helicopters to snicker about when the
Reichstag burned....
-- Roy L
ro...@telus.net
wrote:
><ro...@telus.net> wrote:
>
>>Whatever factor is assumed to be uniform. In the example (snipped),
>>IIRC, it would be the demand for X under different income
>>distributions.
>
>Well, in some contexts that sort of thing is possible,
>and is done. In other it's impossible.
Or inconvenient, or too hard to understand, or might not yield the
desired results....
>Sometimes,
>for example, calculating the desired predictions from
>the model for a single agent may require weeks of
>computer time running sophisticated numerical algorithms.
IOW, it is more important to get an answer than to ask the right
question.
>It may simply be impossible to calculate outcomes for
>multi-agent (with one such case being a continuum)
>economies.
Maybe economists can learn from chaos theory that not being able to
calculate an outcome is sometimes the price of contact with the truth.
>>>What do you mean by "how closely it matches reality?"
>
>>How well it "predicts" actual data, including historical data.
>
>The metric for judging macroeconomic models is how closely
>they can mimic the moments of macroeconomic data. Much
>research goes into figuring out how the baseline model has
>to be changed such that it is able to predict these
>processes.
Let me know when a model can predict the dot.com boom and bust.
>Whether this is particularly productive line of research
>remains in doubt. Personally, I tend to think of such
>models more as convenient systems of stochastic equations
>amenable to representing macroeconomic time series than
>structural economic models.
IOW, the hell with understanding.
>><yawn> They both expressed great dissatisfaction with the orthodoxies
>>of their day.
>
>Criticising current thought on some subject is not the
>even the same type of discourse as alleging that professors
>deliberately "indoctrinate" and "brainwash" their students.
Manners were generally better 200 years ago, at least among the better
sort of people; but IIRC, Smith at least had some sharp words for 18th
C pedagogues.
>>>>>The attack "That model's no good because you made strong
>>>>>assumptions just to make it tractable" is terribly naive. What
>>>>>good is a model that can't be solved?
>
>>>>It might be closer to the truth?
>
>>>Sure. So?
>
>>Thank you for providing such an eloquent debunking of economics....
>
>And, I suppose, every other quantitative discipline. There
>is always an untractable generalization of the model in
>question that is "closer to the truth." So what? If it
>can't be solved, it can't say anything about the world,
A bizarre notion. The n-body problem in orbital dynamics can't be
solved either, but the idea that the model can't tell us anything
about the world is just absurd.
>and obviously can't help us.
A very presumptuous claim. It could be helpful to know that
solvability is an early warning sign of bogosity.
>>>What good is it if it can't be solved?
>
>>It will be less useful in justifying destructive and evil policies.
>
>I can't even parse this:
Right. Your brain rejected the phrase, "closer to the truth" after
one iteration.
>[Models which can't be solved] will be less useful in
>justifying destructive and evil policies.
[Models which are closer to the truth] will be less useful in
justifying destructive and evil policies.
There now, that didn't hurt, did it?
>Since when have models which can't be solved been
>useful in justifying any policies of any sort?
There is now a government-funded effort to characterize the orbits of
near-earth asteroids.
>>Yes, but economics is the only discipline where the vital interests of
>>the most powerful interests in society may be -- and, in fact, are --
>>seriously jeopardized by too much truth.
>
>Oh, another conspiracy theorist. Dull.
Your dismissive attitude and eagerness to flay a predictable strawman
(rather than a conspiracy, why not independent agents pursuing their
own interests in a game-theory universe?) speaks volumes. Not
flattering ones.
>>>What models do you have in mind that "say nothing useful
>>>about the real world?"
>
>>See the "Coase Theorem" thread.
>
>The Coase Theorem says many useful things about the
>world.
Useful... to whom, exactly?
-- Roy L
ro...@telus.net
<susu...@mindspring.com> wrote:
>Bjørn Lomborg's comments to the 11-page critique in
>January 2002 Scientific American (SA),
[snip]
>Surprisingly - and saddening - it seems that SA first decides not
>to let me reply to their critique in the same issue, then claim I can
>only reply shortly five months later due to the production process,
>but when the web actually promises to overcome this time lag and
>space limit, they attempt to obstruct this with reference to
>copyright infringement.
Personally, I was floored by the anti-scientific rants SA published
contra Lomborg. The editors did not even blink an eye when the
enviro-thugs they hired turned around and committed much worse
versions of the same epistemological faults they were accusing Lomborg
of. Astonishing. It might even have been a worse hatchet job than
they did on "The Bell Curve."
-- Roy L
John J. Weatherby
>
> Shocks to labor demand are more aptly viewed as the result, not
> the cause of business cycles.
>
what changes is the fixed wage. This changes over long periods of time due
to new rounds of negoitation.
> >Money does not effect the business cycle.
>
> If you really believe money and credit do not affect the business
> cycle, you need to go back and start over.
I don't think what I was trying to do is to expose you to the fact there are
other models in existance. I am not a huge fan of RBC nor do actually study
business cycles. However RBC is an alternative to Keynes and Rational
Expectations. In some ways it fits the data better, ie. the Keynesian model
predicts real wages will rise during recession, RBC predicts that the shock
to labor demand will cause real wages to fall. The data show that real wages
fall during recessions and rise in expansions, this is the RBC explanation
not the Keynesian explanation.
> >Have you heard of explaining economic growth or do you think this is
micro?
>
> If by economic growth you mean expansion as measured by the GDP,
> that is of course a macro concept. So what's the point of the
> question?
>
Growth studies the long run trend. The point is the long run money
doesn't matter. This is a macro model that:
A. is not worthless
and
B. has no money in the model.
> >What about general equilibrium models of international trade or is this
not
> >macro?
>
> Yes, of course any variable in the aggregate is a macro issue.
> Again, what's the point? Surely you don't believe that economic
> growth and international trade can exist in just a barter mode.
> Both economic growth and international trade volume are closely
> related to the issue of credit availability or lack thereof.
Not necessarily where do find proof that liquidity constraints are problem
with international trade. You what you call barter is actually trade with
perfect capital markets. In this case money is not an issue. If there are
imperfections such as liquidity constraint money can become an issue.
However again these models are baseline comparison and not worthless. They
also do not have money in the model. Yes money and credit can be and has
been put into these models, the empirical evidence does not seem to support
that is a great improvement.
John
William F Hummel
Patrick Witte) wrote:
>In article <98ff8ukj53i8278dd...@4ax.com>,
>William F Hummel <wfhu...@attbi.com> wrote:
>>>I feel that for
>>>many questions, financial issues are very important, but that this set
>>>hardly contains all the interesting questions.
>>
>>Maybe you can offer some examples of macro questions in which
>>money and credit play no role, or can be ignored without
>>affecting the result. I can't.
>
> Consumption, long run growth.
Ah, the ill-defined "long run" rears its head. I'm sure I need
not repeat Keynes's remark about "the long run."
The growth rate may eventually recover from a recession, but the
cumulative growth will never do so. Same is true of consumption.
Macroeconomic theory would be sterile if it only applied to the
"long run" in the sense that neoclassical economists like to use
that term.
A significant fraction of the population in the US spent a decade
in misery in the 1930s. Without reference to the role of money
and credit during much of the 1920s and throughout the 1930s,
economic theory has no explanation for that macroeconomic
disaster.
>
>>> Does Keen consider his book to be a textbook? I think not. Texts
>>>generally exist to codify respected research papers into a form that is more
>>>easily taken in by students. It seems to me that Keen feels that he is
>>>presenting some original critiques, and suffers some degree of the frequent
>>>fate of those who strive for originality, which is error.
>>
>>Surely you must know that econ texts for undergraduate students
>>contain a fair amount of misleading theory, simply because it is
>>easy to digest or is basically copied (unthoughtfully) from
>>earlier texts. Beyond that, what is largely missing in economics
>>curricula is the institutional framework. As David Colander
>>said, "The danger of not teaching the importance of the art of
>>economics [referring to a deep understanding of its institutions]
>>is that the students start seeing the model as the reality and
>>they lose any interest in the reality that model is supposed to
>>describe." (From the Art of Monetary Policy, edited by Colander
>>and Daane.)
>
> Colander must be a hell of a teacher if he is able to sell models to
>undergraduates like that.
Yes, and I suspect a number of economists could learn a lot
sitting in on his seminars at Middlebury College.
WFH
John J. Weatherby
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-0D75C6....@news.dreamscape.com...
I did not
> confine my references in that thread to "works from the 1940s".
I thought this funny too. It is my opinion that you economic learning stops
ca. 1962. It seems every argument you make has not appeared in a journal
since that time. Why? Well because they were resolved by 1962.
John
William F Hummel
<jjwea...@earthlink.net> wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:6aof8u08uqn2dej3h...@4ax.com...
>>
>> Shocks to labor demand are more aptly viewed as the result, not
>> the cause of business cycles.
>>
>This doesn't even apply to Keynes. Under his model labor demand is constant
>what changes is the fixed wage. This changes over long periods of time due
>to new rounds of negoitation.
This has nothing to do with the point I made, which was about the
causal relation.
>
>> >Money does not effect the business cycle.
>>
>> If you really believe money and credit do not affect the business
>> cycle, you need to go back and start over.
>
>I don't think what I was trying to do is to expose you to the fact there are
>other models in existance. I am not a huge fan of RBC nor do actually study
>business cycles. However RBC is an alternative to Keynes and Rational
>Expectations. In some ways it fits the data better, ie. the Keynesian model
>predicts real wages will rise during recession, RBC predicts that the shock
>to labor demand will cause real wages to fall. The data show that real wages
>fall during recessions and rise in expansions, this is the RBC explanation
>not the Keynesian explanation.
Again, this has nothing to do with critical role of money and
credit as it relates to the business cycle. You said "money does
not affect the business cycle." That is simply untrue for the
reason I stated in my previous post, and for some reason you
edited out.
>
>> >Have you heard of explaining economic growth or do you think this is
>micro?
>>
>> If by economic growth you mean expansion as measured by the GDP,
>> that is of course a macro concept. So what's the point of the
>> question?
>>
> Growth studies the long run trend. The point is the long run money
>doesn't matter. This is a macro model that:
>A. is not worthless
>and
>B. has no money in the model.
If money doesn't matter, why do different nations have such
remarkably different long run growth rates? How does the long
run growth rate of Australia compare to that of Madagascar, for
example? It should be obvious that a monetary system that works
well and provides credit in a responsible manner will grow faster
than one that works primarily on a cash basis. It's hard for me
to imagine why mainstream economists would ignore this fact.
>
>> >What about general equilibrium models of international trade or is this
>not
>> >macro?
>>
>> Yes, of course any variable in the aggregate is a macro issue.
>> Again, what's the point? Surely you don't believe that economic
>> growth and international trade can exist in just a barter mode.
>> Both economic growth and international trade volume are closely
>> related to the issue of credit availability or lack thereof.
>
>Not necessarily where do find proof that liquidity constraints are problem
>with international trade.
All you have to do is look at what happened to international
trade during the 1930s.
>You what you call barter is actually trade with
>perfect capital markets. In this case money is not an issue. If there are
>imperfections such as liquidity constraint money can become an issue.
>However again these models are baseline comparison and not worthless. They
>also do not have money in the model. Yes money and credit can be and has
>been put into these models, the empirical evidence does not seem to support
>that is a great improvement.
The reason money and credit are not integrated into the models is
more likely to be that they are messy to deal with. One reason
economists are so poor at forecasting is that their models are
often oversimplified, but they tend to forget the simplifying
assumptions.
WFH
John J. Weatherby
"William F Hummel" <wfhu...@attbi.com> wrote in message It ignores
> the fact that what economic output is lost in the short run is
> also lost in the long run. Yes, "full employment" can be
> restored after a recession caused by a monetary shock like a
> credit crunch. That may give some the impression that money
> doesn't matter in the long run. But the loss of production is a
> permanent loss.
Really how did you find this? It seems every perron, Vogelsang, or even ADF
test I have run or seen shows that the US economy, as well the UK, India,
Australia, Pakistan, etc., that GDP has an increasing trend. For the US we
average 2 to 3% growth a year. How it is simple expansions are larger and
last longer than recessions. Not only is all lost production recovered but
even more is added.
If what you were saying is correct then GDP would have a negative long
run trend or several structural breaks would be present. A structural break
is when the trend jumps up or down. For the UK they have one in 1917. The US
has a structural break in 1929. This is the only evidence that output losses
may be permenant. The data dips sharply in 1929, then reverts back to the
trend. However the trend is lower. The growth rate was restored but the
level of GDP is lower than what it would have been without the depression.
The depression is unique and largely government caused.
> Well, precisely how do you define the "long run"? I suspect what
> you mean is simply whatever length of time will effectively
> disconnect the macro variables being studied.
The principles definition is the amount of time for it takes for capital to
be able to change. The short run is time when firms are constrained by plant
size and other forms of capital. In the long run firms can optimize the
capital stocks. Lets take an example. Lets say I ran GM. When I make
production decisions for the next quarter to perhaps 2 years, I have
constraints. I can't build a new plant that quickly. Capital investment and
R&D investment takes time. This is the short run.
However if look at the picture in 3 to 5 years variables are no longer
fixed, I can plan to easily build 10 new plants in 5 years. This is the long
run. In essences firms have a dual decision.
1. What to produce in the short run given constraints. Current prices and
wages have a large effect on this decision. Basically rental on capital and
mortages on land are fixed cost.
2. In the dynamic sense firms look to the future and future investment. Here
plants, capital, and R&D are variable. What is important here is
expectations of future returns. Firms make long run investment decisions. In
this case nominal interest rates do not affect decisions much. Firms use
expect real interest rates to decide on current investment. If expectations
are rational then the real rate is predicted to be stable, and the data show
that there are. The real interest rate is the nominal interest rate minus
expected inflation. Long run decisions are not heavily influenced by short
term fluctuations in the interest rate. Why? If people have rational
expectations, eventually expectations adjust and the interest rate to a
stable rate. In a sense you can think of a natural rate of interest. This
means money does not have long effects.
>But that's a mere
> tautology. Monetary policy in the 1920s had a big effect on the
> economic conditions in the 1930s, or doesn't that count as long
> term?
>
The effect was a very bad one. But also note that these were not one shot
monetary and fiscal policy measures. The economy tried to recovered about
three times and bad policy stifled the economy again. Again these are only
short term effects.
> The long run doesn't mean forever. In truth the economic
> conditions your great-grandchildren will live in are necessarily
> a function of economic conditions in your life time.
>
Perhaps but not a function of today's money supply. There are much more
a function of today's technology and long term savings rates.
John
William F Hummel
<jjwea...@earthlink.net> wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message It ignores
>> the fact that what economic output is lost in the short run is
>> also lost in the long run. Yes, "full employment" can be
>> restored after a recession caused by a monetary shock like a
>> credit crunch. That may give some the impression that money
>> doesn't matter in the long run. But the loss of production is a
>> permanent loss.
>
>Really how did you find this? It seems every perron, Vogelsang, or even ADF
>test I have run or seen shows that the US economy, as well the UK, India,
>Australia, Pakistan, etc., that GDP has an increasing trend. For the US we
>average 2 to 3% growth a year. How it is simple expansions are larger and
>last longer than recessions. Not only is all lost production recovered but
>even more is added.
> If what you were saying is correct then GDP would have a negative long
>run trend or several structural breaks would be present. A structural break
>is when the trend jumps up or down. For the UK they have one in 1917. The US
>has a structural break in 1929. This is the only evidence that output losses
>may be permenant. The data dips sharply in 1929, then reverts back to the
>trend. However the trend is lower. The growth rate was restored but the
>level of GDP is lower than what it would have been without the depression.
>The depression is unique and largely government caused.
Surprising that you don't seem to understand the difference
between a variable and its integral. What I said was that
whatever contribution to wealth is lost today is lost forever.
The cumulative wealth of a nation is the integral of its rate of
growth. Nowhere did I imply that the GDP has a negative growth
rate on average.
>
>>Monetary policy in the 1920s had a big effect on the
>> economic conditions in the 1930s, or doesn't that count as long
>> term?
>>
>The effect was a very bad one. But also note that these were not one shot
>monetary and fiscal policy measures. The economy tried to recovered about
>three times and bad policy stifled the economy again. Again these are only
>short term effects.
"only short term effects" can starve a lot of people. When they
last ten years, as in the Great Depression, it's a bit much to
call that "short term."
>
>> The long run doesn't mean forever. In truth the economic
>> conditions your great-grandchildren will live in are necessarily
>> a function of economic conditions in your life time.
>>
> Perhaps but not a function of today's money supply. There are much more
>a function of today's technology and long term savings rates.
Only a monetarist would refer to the "money supply" in this
context. No, it is the entire monetary system that matters,
especially the factors that control the price and availability of
credit. The growth of technology depends directly on the
availability of credit. More generally, the amount of economic
activity depends on the amount of credit that producers can
acquire. So money/credit does matter in both the short and the
long run.
WFH
Christopher Auld
>>>>- I am not interested in conspiracy theories.
>>
>>>How convenient for conspirators that such attitudes are widespread...
>Too bad there were no black helicopters to snicker about when the
>Reichstag burned....
I do enjoy how in one thread Roy balks at the suggest that
he's engaging in conspiracy theories, then explicitly
states he's alleging a conspiracy moments later in another.
Usenet is fun! In any case, I think I will claim my right
to invoke Godwin's Law and end this thread. Perhaps Roy
can tell us more stories about how dumb macroeconometricians
are later, possibly after extending his entertaining argument
that wage regressions are "too subtle" for James Heckman,
and hopefully without succumbing to the temptation to
compare others to Nazis.
Chasna1
>Ah, the ill-defined "long run" rears its head. I'm sure I need
>not repeat Keynes's remark about "the long run."
Keynes defined the long run in terms identical to those used by modern
neoclassical economists. Oh, but I forgot, your expertise in economics is based
purely on the fact that you've never studied the subject.
Chasna1
>The cumulative wealth of a nation is the integral of its rate of
>growth.
Care to give us some details on this amazing statement. Perhaps an explanation
maybe?
> The growth of technology depends directly on the
>availability of credit.
Another amazing declaration from our expert on economics, but again, a complete
disregard of the actual historical process. I can only conclude that Hummel has
no concept of what economists mean by technological change.
Mark Patrick Witte
William F Hummel <wfhu...@attbi.com> wrote:
>On 8 Mar 2002 04:01:05 GMT, mwi...@merle.acns.nwu.edu (Mark
>Patrick Witte) wrote:
>
>>In article <98ff8ukj53i8278dd...@4ax.com>,
>>William F Hummel <wfhu...@attbi.com> wrote:
>
>>>>I feel that for
>>>>many questions, financial issues are very important, but that this set
>>>>hardly contains all the interesting questions.
>>>
>>>Maybe you can offer some examples of macro questions in which
>>>money and credit play no role, or can be ignored without
>>>affecting the result. I can't.
>>
>> Consumption, long run growth.
>
>Ah, the ill-defined "long run" rears its head. I'm sure I need
>not repeat Keynes's remark about "the long run."
No, go ahead, and consider its context. There are issues, such as
business cycles that are short run subjects, but if you will recall some of
Keynes's later writings, there are long run issues as well. And in those
later writings, Keynes sounded almost like Lucas who followed a similar
business cycles-growth turn in his focus. Lucas has a great quote about how
if you look at the facts about long run growth, "it becomes the only thing
you can think about."
>The growth rate may eventually recover from a recession, but the
>cumulative growth will never do so.
Citation? There is strong evidence to the contrary, that is,
bounce-back seems to exist and macro growth seems to be trend reverting.
> Same is true of consumption.
>Macroeconomic theory would be sterile if it only applied to the
>"long run" in the sense that neoclassical economists like to use
>that term.
Well, the issues involved in consumption theory are short run but
not generally monetary.
>A significant fraction of the population in the US spent a decade
>in misery in the 1930s. Without reference to the role of money
>and credit during much of the 1920s and throughout the 1930s,
>economic theory has no explanation for that macroeconomic
>disaster.
Your point is...?
Mark Patrick Witte
>On 6 Mar 2002 22:00:51 -0700, au...@acs.ucalgary.ca (Christopher Auld)
>wrote:
>
>>
>>and is done. In other it's impossible.
>
>Or inconvenient, or too hard to understand, or might not yield the
>desired results....
Where the desired results are...matching the data generated by the
real world.
>>Sometimes,
>>for example, calculating the desired predictions from
>>the model for a single agent may require weeks of
>>computer time running sophisticated numerical algorithms.
>
>IOW, it is more important to get an answer than to ask the right
>question.
The most important questions are religious in nature, so you can ask
away, but don't expect any answers in this mortal plain.
>>It may simply be impossible to calculate outcomes for
>>multi-agent (with one such case being a continuum)
>>economies.
>
>Maybe economists can learn from chaos theory that not being able to
>calculate an outcome is sometimes the price of contact with the truth.
No, chaotic models must be tractable, even if they don't converge to
a unique solution or even a fully bounded solution set.
>>>>What do you mean by "how closely it matches reality?"
>>
>>>How well it "predicts" actual data, including historical data.
>>
>>The metric for judging macroeconomic models is how closely
>>they can mimic the moments of macroeconomic data. Much
>>research goes into figuring out how the baseline model has
>>to be changed such that it is able to predict these
>>processes.
>
>Let me know when a model can predict the dot.com boom and bust.
Robert Shiller was one of many academics to hit that one pretty well.
>>Whether this is particularly productive line of research
>>remains in doubt. Personally, I tend to think of such
>>models more as convenient systems of stochastic equations
>>amenable to representing macroeconomic time series than
>>structural economic models.
>
>IOW, the hell with understanding.
For some people yeah, these models are just too hard, but for
others, they are quite helpful.
>>><yawn> They both expressed great dissatisfaction with the orthodoxies
>>>of their day.
>>
>>Criticising current thought on some subject is not the
>>even the same type of discourse as alleging that professors
>>deliberately "indoctrinate" and "brainwash" their students.
>
>Manners were generally better 200 years ago, at least among the better
>sort of people; but IIRC, Smith at least had some sharp words for 18th
>C pedagogues.
Smith did his share of arguing in the parks with general
loudmouthes. The best crafted portions of his book clearly benefitted from
the give and take with people who had strong options but didn't know much.
He got very good at selling his ideas persuasively.
>>>>>>The attack "That model's no good because you made strong
>>>>>>assumptions just to make it tractable" is terribly naive. What
>>>>>>good is a model that can't be solved?
>>
>>>>>It might be closer to the truth?
>>
>>>>Sure. So?
>>
>>>Thank you for providing such an eloquent debunking of economics....
>>
>>And, I suppose, every other quantitative discipline. There
>>is always an untractable generalization of the model in
>>question that is "closer to the truth." So what? If it
>>can't be solved, it can't say anything about the world,
>
>A bizarre notion. The n-body problem in orbital dynamics can't be
>solved either, but the idea that the model can't tell us anything
>about the world is just absurd.
What does an unsolvable model offer in the way of explanations?
>>and obviously can't help us.
>
>A very presumptuous claim. It could be helpful to know that
>solvability is an early warning sign of bogosity.
This is like arguing baseball with someone who has never seen a
game.
>>>>What good is it if it can't be solved?
>>
>>>It will be less useful in justifying destructive and evil policies.
>>
>>I can't even parse this:
>
>Right. Your brain rejected the phrase, "closer to the truth" after
>one iteration.
>
>>[Models which can't be solved] will be less useful in
>>justifying destructive and evil policies.
Spooky!
>[Models which are closer to the truth] will be less useful in
>justifying destructive and evil policies.
Wooo!
>There now, that didn't hurt, did it?
>
>>Since when have models which can't be solved been
>>useful in justifying any policies of any sort?
>
>There is now a government-funded effort to characterize the orbits of
>near-earth asteroids.
Yeah? They're working on adding the right solutions to solve a form
of the model? (My understanding is this work is largely emprical and based
upon an "augmented" single center model, with that center of course being
the sun and the augmentation coming from the limited time that a passing
asteroid is in the range where Earth's gravitational field would have a
non-trivial effect.)
>>>Yes, but economics is the only discipline where the vital interests of
>>>the most powerful interests in society may be -- and, in fact, are --
>>>seriously jeopardized by too much truth.
>>
>>Oh, another conspiracy theorist. Dull.
>
>Your dismissive attitude and eagerness to flay a predictable strawman
>(rather than a conspiracy, why not independent agents pursuing their
>own interests in a game-theory universe?) speaks volumes. Not
>flattering ones.
Sure, independent agents are free to do whatever they want, just
like independent gas particles. But if you imagine that all the economists
in the world are working together to serve the man, then I feel your pain
that Fox is ending the X-Files.
>>>>What models do you have in mind that "say nothing useful
>>>>about the real world?"
>>
>>>See the "Coase Theorem" thread.
>>
>>The Coase Theorem says many useful things about the
>>world.
>
>Useful... to whom, exactly?
Well, evidently it's useful to all the law journals that cite Coase's
papers. These lawyers seem to find Coase's work very descriptive of the
real world, which isn't so surprising given that the bulk of his Coase
Theorem paper was examples taken from...but why do I waste your time talking
about an article that you've probably read dozens of times. Excuse me.
>
>-- Roy L
William F Hummel
Patrick Witte) wrote:
>In article <ccoh8ucg0f4p2tlaj...@4ax.com>,
>William F Hummel <wfhu...@attbi.com> wrote:
>>On 8 Mar 2002 04:01:05 GMT, mwi...@merle.acns.nwu.edu (Mark
>>Patrick Witte) wrote:
>>
>>>In article <98ff8ukj53i8278dd...@4ax.com>,
>>>William F Hummel <wfhu...@attbi.com> wrote:
>>>>
>>>>Maybe you can offer some examples of macro questions in which
>>>>money and credit play no role, or can be ignored without
>>>>affecting the result. I can't.
>>>
>>> Consumption, long run growth.
>>
>>Ah, the ill-defined "long run" rears its head. I'm sure I need
>>not repeat Keynes's remark about "the long run."
>
> No, go ahead, and consider its context. There are issues, such as
>business cycles that are short run subjects, but if you will recall some of
>Keynes's later writings, there are long run issues as well. And in those
>later writings, Keynes sounded almost like Lucas who followed a similar
>business cycles-growth turn in his focus. Lucas has a great quote about how
>if you look at the facts about long run growth, "it becomes the only thing
>you can think about."
>
>>The growth rate may eventually recover from a recession, but the
>>cumulative growth will never do so.
>
> Citation? There is strong evidence to the contrary, that is,
>bounce-back seems to exist and macro growth seems to be trend reverting.
There was a huge drop in GDP during the 1930s. How long did it
take after the war for the cumulative growth to return to trend
(ignoring wartime weapons production)? What all trend-reverting
talk seems to say is simply that one can find a best fit straight
line through the data over whatever time period one chooses. Is
there something significant here?
>> Same is true of consumption.
>>Macroeconomic theory would be sterile if it only applied to the
>>"long run" in the sense that neoclassical economists like to use
>>that term.
>
> Well, the issues involved in consumption theory are short run but
>not generally monetary.
Ignoring monetary influences to make the theory tractable?
>
>>A significant fraction of the population in the US spent a decade
>>in misery in the 1930s. Without reference to the role of money
>>and credit during much of the 1920s and throughout the 1930s,
>>economic theory has no explanation for that macroeconomic
>>disaster.
>
> Your point is...?
In simple terms, money matters on a time scale that matters.
WFH
Christopher Auld
my critique of Keen's "new critiques" is
available here in .pdf or .dvi from:
http://jerry.ss.ucalgary.ca/debunk.pdf
http://jerry.ss.ucalgary.ca/debunk.dvi
Mason Clark
>Returning to the subject, a revised version of
>my critique of Keen's "new critiques" is
>available here in .pdf or .dvi from:
>
> http://jerry.ss.ucalgary.ca/debunk.pdf
> http://jerry.ss.ucalgary.ca/debunk.dvi
Chris, have you ever looked at the book?
Robert Vienneau
(Mark Patrick Witte) wrote:
> In article <rvien-0D75C6....@news.dreamscape.com>,
> Robert Vienneau <rv...@see.sig.com> wrote:
> >Keen's book is about the internal (in)consistency of the theories
> >taught throughout undergraduate and much graduate education in
> >economics.
> >> It is true that Chris should politely bow down and admit Mr.
> >> Vienneau is right when he describes modern economics as a "morally
> >> and intellectually bankrupt" field...
> >Strawperson. I never described modern (or mainstream) economics
> >as "morally and intellectectually bankrupt".
> No, of course not, no reasonable person would have put such a quote
> into a thoughtful post.
That seems a weird way of apologizing for making false statements
about what I've said. I'm not inclined to argue with Mr. Witte's
description of himself as unreasonable and his posts as not
thoughtful.
Some students of the sociology of economics might have views that
some practitioners of economics find extreme. I think it would
be a violation of academic norms to suppress the examination of
the material that supports those views - in fact, the whole
subject of the contemporary sociology of economics - on the
grounds of "manners" or "politeness".
It's nice to know that whatever "physics envy" Mark Witte may
exhibit, it does not extend to gravity waves.
> >When I come upon a book entitled "Debunking Economics", I don't
> >immediately assume the book is incomprehensible or incompetent.
> Certainly not, nor do I, books should be judged by what is between
> their covers, and this one was.
The evidence presented here is that this one was not.
> >Even if I come upon somebody asserting, without anything
> >approaching an argument, that chapter 4 is incompetent, I
> >don't presume that that must be the case.
>
> But when serious arguments are posted, then an opinion on the book
> must be formed. For example, Keen's statements about such matters as
> dynamic models are simply uninformed about economics in recent decades.
Statement's on which page of the book?
In a previous post, I summarized the point of Chapter 8. I think that
point correct.
Keen seems to prefer research in the theory of the firm like that
of Kalecki, Penrose, Chandler, Marris, Eichner, Nell, and Harcourt &
Kenyon over, e.g., Zabel (1967). One might argue that work in the
first set is more empirically applicable. And that work in the
style of the second is applicable only to firms in some alternate
universe. Thus, the firm's objective function in a dynamic setting
is a contested subject.
Turning to a tired subject...
Consider a non-cooperative game with the following payoff matrix:
RV> (-1, 2) (1/2, 1 )
RV> (0, 1/2) (1, -1)
CA> this isn't a prisoners' dilemna
MW> Well, confusing PD and non-PD games won't get a person even partial
MW> credit in intro micro.
Personally, I thought it best to just note Chris Auld's mistake and
to move on to other topics.
This is a different thread. I don't know why Mark Witte wants to
dwell here on his misunderstandings of what was discussed in that
other thread.
> >I thought this amusing:
> >> Does Keen consider his book to be a textbook? I think not. Texts
> >> generally exist to codify respected research papers into a form that
> >> is more
> >> easily taken in by students.
> >The bulk of the book is about explaining the results of respected
> >research papers in a form that can be understood by beginners.
> How did G.B. Shaw put it when he returned a book with a poor review
> when the author complained that some of the pages had not been split? "I
> do not have to eat a whole egg to know that it is rotten."
The above is, of course, a non sequitur.
The bulk of Keen's book is about explaining the results of respected
research papers in a form that can be understood by beginners.
> Anyway, if Keen is serious, then he should not rely upon the sloppy
> editing procedures of book publishers but should instead step up to the
> plate of refereed journals.
Which might have something to do with why Keen had that footnote on
p. 97.
I have never been able to figure out where Mr. Witte's area of
specialization lies. But he does seem to be good on gossip. Perhaps
he can tell us about the AEA reception of the Schelling committee's
report.
Christopher Auld
>(Mark Patrick Witte) wrote:
>> must be formed. For example, Keen's statements about such matters as
>> dynamic models are simply uninformed about economics in recent decades.
>Statement's on which page of the book?
It is just sad that Mason and Robert both wish to ignore
terrible blunder's on Keen's part because they appear
in what Keen describes as the mathematical presentation
of the critiques in his book rather than the popular
presentation.
>first set is more empirically applicable. And that work in the
>style of the second is applicable only to firms in some alternate
>universe. Thus, the firm's objective function in a dynamic setting
>is a contested subject.
Robert, if you have any substantive defence of either:
1. Keen's simply incorrect presentation of a dynamic model.
This is not an argument over whether discounted profits
is the appropriate objective function*AL*, as Keen's
objective function isn't even the correct type of
mathematical object for such problems.
or:
2. His ignorant remarks about the content of modern
economics.
Please do provide them. The above isn't going to fly.
>Consider a non-cooperative game with the following payoff matrix:
>
>RV> (-1, 2) (1/2, 1 )
>RV> (0, 1/2) (1, -1)
>
>CA> this isn't a prisoners' dilemna
>
>MW> Well, confusing PD and non-PD games won't get a person even partial
>MW> credit in intro micro.
This is an outrageous misrepresentation. Robert has
carefully edited out the labelling of the players' actions.
Yes, the above matrix formally forms a PD: My point was
labelling the axes such that (cooperate, defect) is the
equilibrium voids the point of the "dilemma."
Indeed, if an undergraduate handed in a midterm in an intro
game theory course explaining the PD in which the actions
were mislabelled in that manner, he'd be severely marked
down for clearly misunderstanding the point of the game.
Such an individual would have less of an excuse for such
an error than Robert, since he'd have a clear presentation
of the ideas in an accessible introductory textbook, whereas
as Robert thinks learning the basics beneath him.
John Weatherby
> On Fri, 08 Mar 2002 16:31:10 GMT, "John J. Weatherby"
> <jjwea...@earthlink.net> wrote:
> This has nothing to do with the point I made, which was about the
> causal relation.
caused by the recession. I have never seen a model that predicts this.
> Again, this has nothing to do with critical role of money and
> credit as it relates to the business cycle.
Yes it does it shows evidence in support of a model that says money does not
matter.
> If money doesn't matter, why do different nations have such
> remarkably different long run growth rates?
1. Differences in capital
2. Differences in national savings
3. Differences in technology
4. Differences in Human capital
The first two are the explanation of Robert Solow's model. The next are the
explanations provided by Neo-Schumpterian models and human capital models,
althoug capital can play a role in both of these as well.
>How does the long
> run growth rate of Australia compare to that of Madagascar, for
> example? It should be obvious that a monetary system that works
> well and provides credit in a responsible manner will grow faster
> than one that works primarily on a cash basis.
Although Freidman has made this argument, I still haven't seen a study
proving it. The difference between Australia and Madagascar can be explained
by the 4 factors mentioned earlier. Institutions may play a role as well but
it is hard to measure that effect.
> It's hard for me
> to imagine why mainstream economists would ignore >this fact.
Surely you don't mean mainstream followers of Milton Freidman do you?
Unfortunately Mr. Hummel we differ, You always think about the money supply
and I always think about Sex but I don't put that in my post. Ok so I stole
the line from Solow but it works.
> >
> All you have to do is look at what happened to international
> trade during the 1930s.
>
You mean high tarrifs implemented. Embargos enact on nations for applying
the wrong actions to the wrong small country?
> The reason money and credit are not integrated into the models is
> more likely to be that they are messy to deal with.
No there are plenty of journal articles that are not cash in advance
economies. All you have to do is to pick some of the big international
monetary journals. No you don't see this in principles or even in first year
grad. courses. They appear in field courses and only economist who are
interested in international monetary generally read them.
>One reason
> economists are so poor at forecasting is that their models are
> often oversimplified, but they tend to forget the simplifying
> assumptions.
>
Again you are wrong. The simplification often improves accuracy. Why did
ISLM fail? Due to the fact forecaster were throwing everything but the
kitchen sink into their regressions. Often there were instances of
multicolineraty, endogenity, etc. These problems weren't fixed and could
only be fixed by simplifying the model.
John
> WFH
>
Christopher Auld
>(Mark Patrick Witte) wrote:
[ Slew of insults deleted.]
>Statement's on which page of the book?
Robert and Mason are in a horrible quandry. Steve
Keen makes ludicrous arguments, but the arguments are
nobly anti-economist, so what is one to do? Best
to pretend that the formal analysis Keen presents on
his web page as a supplement to the book doesn't
exist. (Incidentally, there exists a literature
considering the consequences of cognitive dissonance
on economic outcomes.)
A little honesty is in order here: Mr. Vienneau,
is Steve Keen correct that "neoclassical economists"
have never considered dynamic optimization problems?
>Keen seems to prefer research in the theory of the firm like that
>of Kalecki, Penrose, Chandler, Marris, Eichner, Nell, and Harcourt &
>Kenyon over, e.g., Zabel (1967). One might argue that work in the
>first set is more empirically applicable. And that work in the
>style of the second is applicable only to firms in some alternate
>universe. Thus, the firm's objective function in a dynamic setting
>is a contested subject.
Perhaps Robert could cite a paper by any of these authors
which proposes a model anything like Keen's? Personally,
I rather think that an "alternative universe" in which
a firm would trade away an arbitrarily large amount of
money two seconds away for a penny right now -- so long as
that penny arrives quickly enough -- is much less like our
own than alternative universes in which firms make choices
in dynamic, stochastic environments to make their
present values as large as possible. The latter objective
characterizes much contemporary research, much of which
is empirical.
Keen's model, such that it is, does not propose a reasonable
objective for firms, is inherently static, is not solved
using methods which are appropriate for dynamic problems
and, unsurprisingly, is not drawn from the literature.
>Consider a non-cooperative game with the following payoff matrix:
>
>RV> (-1, 2) (1/2, 1 )
>RV> (0, 1/2) (1, -1)
>
>CA> this isn't a prisoners' dilemna
>Personally, I thought it best to just note Chris Auld's mistake and
>to move on to other topics.
Outrageous. Here's the original text:
> STRATEGY Defect Cooperate
> Defect (-1, 2) (1/2, 1 )
> PLAYER A Cooperate (0, 1/2) (1, -1)
Notice that Robert has carefully and dishonestly removed
the labelling of the axes. Yes, the payoffs technically
form a PD; in context, my comment refers to the fact
that mislabelling the axes such that one player has a
dominant strategy to "cooperate" ruins the exposition of
the _dilemma_.
John Weatherby
> On Fri, 08 Mar 2002 17:40:10 GMT, "John J. Weatherby"
> <jjwea...@earthlink.net> wrote:
> >
> Surprising that you don't seem to understand the difference
> between a variable and its integral.
real per capita GDP and graph the amount of real per capita GDP on the Y
Axis and time on the X axis, what you get is roughly a straight increasing
line. The US shows a straight line from 1870 to 1929. The level dips sharply
in 1929. Then there is flat spot and levels increase sharply to just below
what real per capita GDP was in 1929. From there on real GDP becomes higher
than 1929. This means that the stock of wealth is higher in 2002 than it was
in 1929, even given recessions. There is no permenant loss of wealth.
The second point that if drew a straight line from 1929 to 2002, you
would find the stock of wealth would be slightly higher than it is today.
This is the only permenant loss.
> >>Monetary policy in the 1920s had a big effect on the
> >> economic conditions in the 1930s, or doesn't that count as long
> >> term?
> >>
No there were several short term actions.
1. 1929 the money supply was decreased, actually decreased not a slower rate
of growth. The reserve requirement was almost doubled.
2. 1931 congress raises taxes.
3. 1933 congress raises taxes again
4. around 1936 renewed fears inflation cause the Fed to cut the money supply
again.
The great depression was caused by several short term monetary and fiscal
policy decisions. The shocks of any these would have died out. In fact in
each case the economy was recovering when the FED or congress took action
that killed the recovery.
> Only a monetarist would refer to the "money supply" in this
> context.
This is strange for you to be using the term monetarist in negative
fashion, your earlier postings sounded very suscipiously close to Miltion
Freidman.
>The growth of technology depends directly on the
> availability of credit.
The interest rate does affect R&D. However credit is not as crucial as it
seems, most technological growth comes from companies that have market power
and make non-zero economic profits. It is these profits that fund R&D. This
may be true for start up companies however.
>More generally, the amount of economic
> activity depends on the amount of credit that producers can
> acquire. So money/credit does matter in both the short and the
> long run.
>
Completely wrong. There are less than 20% of consumers who are considered
liquidity constrained. Again as I have explained in the long run evidence
shows the effects of monetary policy decrease to almost zero.
John
susupply
"Robert Vienneau" <rv...@see.sig.com>
who still thinks we're all too lazy to Google him,
wrote in message news:rvien-DD2C3B....@news.dreamscape.com...
> In article <a69dq7$fnf$1...@news.acns.nwu.edu>, mwi...@merle.acns.nwu.edu
> (Mark Patrick Witte) wrote:
> > >> It is true that Chris should politely bow down and admit Mr.
> > >> Vienneau is right when he describes modern economics as a "morally
> > >> and intellectually bankrupt" field...
>
> > >Strawperson. I never described modern (or mainstream) economics
> > >as "morally and intellectectually bankrupt".
>
> > No, of course not, no reasonable person would have put such a quote
> > into a thoughtful post.
>
> That seems a weird way of apologizing for making false statements
> about what I've said. I'm not inclined to argue with Mr. Witte's
> description of himself as unreasonable and his posts as not
> thoughtful.
How about this post:
<<---------------------------------------------
From: Robert Vienneau (rv...@see.sig.com)
Subject: Re: Amin Well Before Prague
Newsgroups: sci.econ
View: Complete Thread (22 articles) | Original Format
Date: 2000-10-07 02:23:12 PST
[snip]
When some describe mainstream economics as "morally and
intellectually bankrupt" (not Amin in the quote), I don't immediately
find their opinion incomprehensible or incompetent.
--------------------------------------------->>
William F Hummel
<jjwea...@earthlink.net> wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:uavh8u4q26sjqq8j7...@4ax.com...
>> On Fri, 08 Mar 2002 17:40:10 GMT, "John J. Weatherby"
>> <jjwea...@earthlink.net> wrote:
>> >
>> Surprising that you don't seem to understand the difference
>> between a variable and its integral.
> I understand perfectly what you don't understand is that if you take
>real per capita GDP and graph the amount of real per capita GDP on the Y
>Axis and time on the X axis, what you get is roughly a straight increasing
>line. The US shows a straight line from 1870 to 1929. The level dips sharply
>in 1929. Then there is flat spot and levels increase sharply to just below
>what real per capita GDP was in 1929. From there on real GDP becomes higher
>than 1929. This means that the stock of wealth is higher in 2002 than it was
>in 1929, even given recessions. There is no permenant loss of wealth.
You apparently don't realize that you have just confirmed my
point. Yes, the stock of wealth is higher in 2002 than it was in
1929 because the average growth rate of GDP over that period was
positive. But the cumulative wealth in 2002 is less than it
would be if the huge dip in GDP during the depression years had
not existed. Nowhere did I say there was a permanent loss of
wealth, something you still seem confused about. What I did say
is that production lost (relative to a full employment economy)
is lost forever.
> The second point that if drew a straight line from 1929 to 2002, you
>would find the stock of wealth would be slightly higher than it is today.
>This is the only permenant loss.
>
I can't make sense out of this statement.
>
>> >>Monetary policy in the 1920s had a big effect on the
>> >> economic conditions in the 1930s, or doesn't that count as long
>> >> term?
>> >>
> No there were several short term actions.
>1. 1929 the money supply was decreased, actually decreased not a slower rate
>of growth. The reserve requirement was almost doubled.
>
>2. 1931 congress raises taxes.
>3. 1933 congress raises taxes again
>4. around 1936 renewed fears inflation cause the Fed to cut the money supply
>again.
You didn't understand what I said. Monetary policy in the 1920s
was a major contributor to the bubble that burst in 1929 and
helped to initiate the Great Depression. There were other
factors to (See Kindleberger 1973), but my point remains that the
macroeconomic disaster of the 1930s decade cannot be explained
without reference to the role of money and credit. Your own list
of points merely confirms that.
>
>The great depression was caused by several short term monetary and fiscal
>policy decisions. The shocks of any these would have died out. In fact in
>each case the economy was recovering when the FED or congress took action
>that killed the recovery.
>
Your bold assertions here about what caused the Great Depression
and sustained it for a decade are merely your own opinion. I
really doubt that you understand the real issues involved.
>
>> Only a monetarist would refer to the "money supply" in this
>> context.
> This is strange for you to be using the term monetarist in negative
>fashion, your earlier postings sounded very suscipiously close to Miltion
>Freidman.
The name is Friedman, not Freidman. It would also be nice if you
would not consistently edit out the context which appears in
prior comments. In any case, I can't imagine how you could ever
conclude I support Friedman's monetarist doctrine.
In what you edited out, I specifically objected to your use of
the term "money supply" to characterize what I had been saying
about the importance of monetary issues in macroeconomics. In
truth the size of the money supply in whatever measure one
chooses is of little consequence. What is far more important is
the interest rate targeted by the Fed which acts as the benchmark
for all short term rates, and also signals its stance on
recessionary and inflationary pressures.
>
>>The growth of technology depends directly on the
>> availability of credit.
>
>The interest rate does affect R&D. However credit is not as crucial as it
>seems, most technological growth comes from companies that have market power
>and make non-zero economic profits. It is these profits that fund R&D. This
>may be true for start up companies however.
It's true that most investment is funded out of earnings, but
that does not negate the importance of credit to manage cash
flow. The ability of a large company to sell its own debt
(especially commercial paper) can mean the difference between
bare survival and normal operation.
>
>>More generally, the amount of economic
>> activity depends on the amount of credit that producers can
>> acquire. So money/credit does matter in both the short and the
>> long run.
>>
>Completely wrong. There are less than 20% of consumers who are considered
>liquidity constrained.
This is nonsense. The main threat to recovery from the current
recession is the enormous consumer debt burden. Consumers have
been on a borrowing binge for several years, and it will be very
difficult for them to sustain past spending levels that would
encourage businesses to begin investing in new capital equipment.
>Again as I have explained in the long run evidence
>shows the effects of monetary policy decrease to almost zero.
You haven't shown such evidence at all. Also you haven't defined
what is meant by the "long run." Is it 5 years, 10 years, 50
years? Or is just it a convenient way of saying whatever period
of time it takes for today's decisions to be forgotten history?
WFH
Mason Clark
http://masonc.home.netcom.com/gdp_loss.html
or just the graph:
http://masonc.home.netcom.com/gdp_los1.gif
A picture's worth 10,000 words.
Mason C
William F Hummel
<jjwea...@earthlink.net> wrote:
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:bkqh8ucsekf7sfltk...@4ax.com...
>> On Fri, 08 Mar 2002 16:31:10 GMT, "John J. Weatherby"
>> <jjwea...@earthlink.net> wrote:
>> This has nothing to do with the point I made, which was about the
>> causal relation.
> What theory do you have that predicts that labor demand shocks are
>caused by the recession. I have never seen a model that predicts this.
>
Why do you keep editing out the part of my earlier remarks that
apply to your questions? I didn't say labor demand shocks are
caused by a recession. I said "shocks to labor demand are more
aptly viewed as the result, not the cause of business cycles."
First, business cycles are not necessarily recessions, and second
the thing that causes business cycles can also result in labor
demand shocks, for example pro-cyclic lending practices of
financial institutions.
>
>> Again, this has nothing to do with critical role of money and
>> credit as it relates to the business cycle.
>
>Yes it does it shows evidence in support of a model that says money does not
>matter.
Once again you edited out the antecedent of "this" in my remarks.
You had mentioned something about Keynes and his labor demand
model. It was unrelated to my earlier remarks.
>
>> If money doesn't matter, why do different nations have such
>> remarkably different long run growth rates?
>
>1. Differences in capital
>2. Differences in national savings
>3. Differences in technology
>4. Differences in Human capital
>
>The first two are the explanation of Robert Solow's model. The next are the
>explanations provided by Neo-Schumpterian models and human capital models,
>althoug capital can play a role in both of these as well.
I am tired of resurrecting the context that you edited out. I'll
simply say your remarks were a non sequitur to my previous
remarks and you can go back and check it out for yourself.
>
>>How does the long
>> run growth rate of Australia compare to that of Madagascar, for
>> example? It should be obvious that a monetary system that works
>> well and provides credit in a responsible manner will grow faster
>> than one that works primarily on a cash basis.
>
> Although Freidman has made this argument, I still haven't seen a study
>proving it. The difference between Australia and Madagascar can be explained
>by the 4 factors mentioned earlier. Institutions may play a role as well but
>it is hard to measure that effect.
Yes, of course there are other factors besides monetary issues
that affect the economic growth of the two nations in my example.
Yet you chose to ignore the monetary issue because, as you said,
"it is hard to measure that effect." That is not a valid reason
to throw it out. It is precisely such methodology that leads to
biased and/or misleading models in macroeconomics -- make it
simple enough to solve.
>
>> All you have to do is look at what happened to international
>> trade during the 1930s.
>
>You mean high tarrifs implemented. Embargos enact on nations for applying
>the wrong actions to the wrong small country?
>
Yes, other things affected international trade during the 1930s,
but surely you are not claiming that the issue of credit
availability or lack thereof is to be ignored. Or are you
willing once again to close your eyes to that issue because it is
hard to get the data or to model? Remember a great deal of trade
is/was based on the availability of banker's acceptances.
>
>> The reason money and credit are not integrated into the models is
>> more likely to be that they are messy to deal with.
>
>No there are plenty of journal articles that are not cash in advance
>economies. All you have to do is to pick some of the big international
>monetary journals. No you don't see this in principles or even in first year
>grad. courses. They appear in field courses and only economist who are
>interested in international monetary generally read them.
But undergraduates are pretty much taught that money doesn't
matter in the real economy. And what little they are taught
about monetary issues is simply wrong, e.g. the money multiplier
concept and the assumption the central bank controls the size of
the money supply.
>
>>One reason
>> economists are so poor at forecasting is that their models are
>> often oversimplified, but they tend to forget the simplifying
>> assumptions.
>>
> Again you are wrong. The simplification often improves accuracy. Why did
>ISLM fail? Due to the fact forecaster were throwing everything but the
>kitchen sink into their regressions. Often there were instances of
>multicolineraty, endogenity, etc. These problems weren't fixed and could
>only be fixed by simplifying the model.
>
Simplification is a pedagogic necessity, but it doesn't improve
accuracy of models. Complexity per se is not the answer either.
But when I hear economists say that monetary issues are ignorable
in macroeconomic studies, then it's a safe bet the conclusions
will be misleading or wrong. One only has to look at
correlations between Fed policy moves and the business cycle or
inflation to see clear evidence of that. In particular, look
what Volcker did to the economy in the early 1980s through
monetary policy measures.
WFH
Robert Vienneau
(Christopher Auld) wrote:
> Robert Vienneau <rv...@see.sig.com> wrote:
> >(Mark Patrick Witte) wrote:
> >Statement's on which page of the book?
> Robert and Mason are in a horrible quandry. Steve
> Keen makes ludicrous arguments,
Consider the following propositions:
1. The perfectly competitive firm faces a (firm) demand
curve with a slope of zero.
2. The market demand curve is the sum of the (firm) demand
curves.
3. The market demand curve slopes down.
Keen says not all of these can be true at once. It should be
noted that Chris Auld does not disagree.
Chris Auld shows how all three propositions can be true at
once for an imperfectly competitive market with n firms. At
the limit, as n increases without bound, the first and
third propositions above are true. Chris Auld makes no
effort to show that the second proposition is true at
the limit.
Instead, he argues that for a large enough n, the difference
between the downward slope of the firm demand curve and zero
is small enough not to matter. That is, he redefines "perfect
competition" to mean "imperfect competition with enough firms
(under certain assumptions) so the difference is not enough
to matter."
So I guess by "ludicrous", Chris Auld means "true but
uninteresting".
Personally, I think the critique of Marshallian partial
equilibrium in Sraffa (1926) more important. I also note
that clarifying the exact content of that critique is a
subject of contemporary interest among some economists.
By the way, at least one sentence on page 302 of Keen's
book is incorrect.
> but the arguments are
> nobly anti-economist, so what is one to do?
I don't operate with a category of "anti-economist".
> Best
> to pretend that the formal analysis Keen presents on
> his web page as a supplement to the book doesn't
> exist. (Incidentally, there exists a literature
> considering the consequences of cognitive dissonance
> on economic outcomes.)
"Books should be judged by what is between their covers, and
this one was."
-- Mark Patrick Witte
> A little honesty is in order here: Mr. Vienneau,
> is Steve Keen correct that "neoclassical economists"
> have never considered dynamic optimization problems?
> >Zabel (1967)
The Cowles Foundation has a web site:
<http://cowles.econ.yale.edu/>
They have generously made papers published under their sponsorship
available over the web. Personally, I found Zabel (1967) too
boring to read. I only skimmed it to identify a certain point.
Chris Auld can now apologize about the comment on honesty above.
A certain comedy about game theory receives a positive blurb
from Chris Auld:
> Outrageous.
Christopher Auld
> 1. The perfectly competitive firm faces a (firm) demand
> curve with a slope of zero.
>
> 2. The market demand curve is the sum of the (firm) demand
> curves.
>
> 3. The market demand curve slopes down.
>
>Keen says not all of these can be true at once. It should be
>noted that Chris Auld does not disagree.
I don't even know how to make sense of this. Competitive
firms have supply curves which are summed to yield market
supply. Price-taking consumers have demand curves which are
summed to yield market demand. We do not "sum the firm
demand curves" to get market demand; I don't even know
how to make sense out that remark.
>Chris Auld shows how all three propositions can be true at
>once for an imperfectly competitive market with n firms. At
>the limit, as n increases without bound, the first and
>third propositions above are true. Chris Auld makes no
>effort to show that the second proposition is true at
>the limit.
Damn straight I don't. Robert apparently confuses summing
individual consumer demands to get market demand with
summing individual firm demands to get market demand. And
again I'm not even sure how to parse Robert's allegations:
Does he mean "Chris Auld doesn't show how all three...?"
In any case, I simply showed that, in the context of a
perfectly mundane Cournot model with n identical firms,
linear demand, and constant marginal cost, the competitive
result obtains as n goes to infinity, which is a
sufficient counterexample to show several of Keen's claims
are false. If Robert would like to show a mathematical
flaw in this easy, old, and well-known proof, he is welcome
to do so. Otherwise he's just blowing smoke.
>Instead, he argues that for a large enough n, the difference
>between the downward slope of the firm demand curve and zero
>is small enough not to matter. That is, he redefines "perfect
>competition" to mean "imperfect competition with enough firms
>(under certain assumptions) so the difference is not enough
>to matter."
No, I do not. I clearly explain that "perfect competition"
can be rigorously defined in a manner which escapes Keen's
(obvious) point. I *also* show that imperfectly competitive
markets are arbitrarily close approximations to competitive
markets for large n. This addresses Keen's explicit argument
that that statement is false. Finally, I address Keen's
ridiculous argument that if firms in a market with n firms
choose quantities to maximize profits and take other firms'
output as given, then the monopoly solution will obtain
(Keen was unfamiliar with the obscure "Cournot model" and
is currently "working through it.") That last one is
possibly the most "ludicrous" in a very close race...
>So I guess by "ludicrous", Chris Auld means "true but
>uninteresting".
Keen's arguments are simply flat-out wrong. Not only
are the arguments Robert makes a further hash of above
wrong, Keen's other arguments are wrong as well. Anyone
interested in the actual discussion rather than Robert's
misunderstood and misrepresented paraphrasing thereof
can follow along by pointing your browser to
http://maelstrom.stjohns.edu/CGI/wa.exe?A1=ind0203&L=hayek-l#8
and/or read what I actually wrote at your choice of:
http://jerry.ss.ucalgary.ca/debunk.pdf
http://jerry.ss.ucalgary.ca/debunk.ps
http://jerry.ss.ucalgary.ca/debunk.dvi
>> A little honesty is in order here: Mr. Vienneau,
>> is Steve Keen correct that "neoclassical economists"
>> have never considered dynamic optimization problems?
>
>> >Zabel (1967)
>
>The Cowles Foundation has a web site:
>
> <http://cowles.econ.yale.edu/>
>
>They have generously made papers published under their sponsorship
>available over the web. Personally, I found Zabel (1967) too
>boring to read. I only skimmed it to identify a certain point.
I suppose the answer is "no"? Keen makes a big deal out
of his idea that economists, stuck in their ancient ways,
do not consider dynamic models. Right or wrong? What I
mean by "honesty" is admitting Keen is wrong, despite the
fantabulous title of his book.
>A certain comedy about game theory receives a positive blurb
>from Chris Auld:
>
>> Outrageous.
A "comedy" where Vienneau is caught deliberately altering
quoted text to fabricate a point? Yeah, that's funnier
than last week's "Friends" I'd admit.
Paul Walker
1CC578.201...@news.dreamscape.com:
> In article <a6g6n0$u...@acs1.acs.ucalgary.ca>, au...@acs.ucalgary.ca
> (Christopher Auld) wrote:
>> Robert Vienneau <rv...@see.sig.com> wrote:
>> >(Mark Patrick Witte) wrote:
>> >Statement's on which page of the book?
>> Robert and Mason are in a horrible quandry. Steve
>> Keen makes ludicrous arguments,
> Consider the following propositions:
> 1. The perfectly competitive firm faces a (firm) demand
> curve with a slope of zero.
> 2. The market demand curve is the sum of the (firm) demand
> curves.
> 3. The market demand curve slopes down.
> Keen says not all of these can be true at once. It should be
> noted that Chris Auld does not disagree.
Well of course they can't all be true at once, 2 is never true.
--
____________________________________________________
Paul Walker p.wa...@econ.canterbury.ac.nz
Robert Vienneau
> Robert Vienneau <rv...@see.sig.com> wrote:
>
> > 1. The perfectly competitive firm faces a (firm) demand
> > curve with a slope of zero.
> >
> > 2. The market demand curve is the sum of the (firm) demand
> > curves.
> >
> > 3. The market demand curve slopes down.
> >
> >Keen says not all of these can be true at once. It should be
> >noted that Chris Auld does not disagree.
> I don't even know how to make sense of this...
Apparently, the formal argument below is standard. I looked
up the New Palgrave article on "Perfectly and Imperfectly
Competitive Markets", by John Roberts. He does not outline
the 'rithmetic below. He references, among others, Aumann (1964)
and Stigler (1957). I have never seen this argument in a textbook,
though.
Assume all firms in a market are identical. At this point, I don't
impose any assumptions that assure the market is competitive or
imperfectly competitive. The quantity produced for the market, Q,
is the sum of the quantities, q, produced by each of n individual
firms:
Q = n*q (a)
The market demand curve, P(Q), is a function relating the price
on the market, P, to the Quantity demanded on the market. The slope of
the firm's demand curve, dP/dq, is related to the slope of
the market demand curve:
dP/dq = dP/dQ * dQ/dq = dP/dQ (b)
(The firm considers conjectural variations in its quantity alone;
it ignores the reactions of other firms.)
Marginal Revenue, for the firm, is defined as the variation in
the firm's revenue with changes in the quantity produced by the
firm:
MR = d(P*q)/dq (c)
A little calculus gives:
MR = P*dq/dq + q * dP/dq (d)
Or, using Equation b:
MR = P + q * dP/dQ (e)
The elasticity of the market demand curve is defined as the
proportionate change in the price with proportionate changes
in quantity:
E = dP/dQ * Q/P (f)
From (a), one gets:
E = dP/dQ * n * q/P (g)
Or,
(P/n) * E = dP/dQ * q (h)
Substitute into (e):
MR = P + (P/n) * E (i)
Perfect competion requires that firms believe that the price
is unaffected by their individual variations in quantity, that
marginal revenue be equal to price:
MR = P (j)
Hence, from Equations i and e,
(P/n) * E = q * dP/dQ = 0 (k)
In other words, perfect competition in this model requires:
1/n = q = 0 (l)
n * q = Q > 0 (m)
If I recall my measure theory correctly, this requires a
continuum of firms, each producing a quantity of zero.
Given Chris Auld's previously broad use of the phrase, he
should only be too glad to say that there is an aggregation
problem here. As is (perhaps, very) imprecisely indicated by (2)
above.
I notice that nowhere have I equated marginal revenue
and marginal cost. Thus, I have neither derived a firm
supply curve, nor arguably summed supply curves over firms to
obtain a market supply curve.
Now suppose somebody presents a simple model of an imperfect
competition model with a finite number of firms, n. Suppose that
person solves the model for n = 1, 2, and so on. One might get
that the limit of the slope of the firm demand curve is zero as
the number of firms increases without bound. But one will NOT
obtain the above perfectly competitive model as the limit of that
model. The number of firms in this limit is infinite, but this
infinity is too small. It is only of the order of the rationals,
not a continuum. Furthermore, each of these infinite number of
firms will indeed be producing a quantity of zero, but the
market quantity found as the sum of their production will be
zero too, as I understand it. (It is required that this sum
be positive for the perfectly competitive model to be
the limit.)
> I *also* show that imperfectly competitive
> markets are arbitrarily close approximations to competitive
> markets for large n.
That's the definition of a limit. Chris Auld makes this
into a matter of practical applicability, contrary to what
I would do.
> This addresses Keen's explicit argument
> that that statement is false.
Steve Keen states that perfect competition cannot be defined
without introducing assumptions he finds specious, such as a
continuum of firms each producing a quantity of zero.
> >So I guess by "ludicrous", Chris Auld means "true but
> >uninteresting".
> Keen's arguments are simply flat-out wrong.
As is apparent from his web page, Keen is still working out
his opinion of this.
What to make of the above math? Opinions can and do vary among
perfectly competent economists, perhaps by school. For a
critique of this sort of use of the mathematics of the
continuum, see a paper by Nicholas Georgescu-Roegen in the
Journal of Economic Issues in the late 1970s/early 1980s.
(Georgescu-Roegen performed a classic study of integrability
conditions, first proved the (non)substitution theorem, and
first introduced seperating hyperplane theorems into
economics. I don't recall what the last means precisely, but
it was part of the post-war trend to adopt topological
arguments and move away from calculus. I think this theorem
may be why Debreu (1959) does not reference any works on
game theory.)
> Not only
> are the arguments Robert makes a further hash of above
> wrong, Keen's other arguments are wrong as well...
False. The bulk of Keen's book is about explaining the results of
respected research papers in a form that can be understood by
beginners. These arguments, which I had found more interesting than
Keen's extensions, are correct and well-accepted. There may be
places that one can object to looseness of Keen's phrasing. In
many cases, that's all one can say.
This bit about a continuum of firms I am beginning to find
of interest, though.
> http://maelstrom.stjohns.edu/CGI/wa.exe?A1=ind0203&L=hayek-l#8
> and/or read what I actually wrote at:
> http://jerry.ss.ucalgary.ca/debunk.pdf
> http://jerry.ss.ucalgary.ca/debunk.ps
> http://jerry.ss.ucalgary.ca/debunk.dvi
"Books should be judged by what is between their covers, and
this one was."
-- Mark Patrick Witte
> >> A little honesty is in order here: Mr. Vienneau,
> >> is Steve Keen correct that "neoclassical economists"
> >> have never considered dynamic optimization problems?
> >
> >> >Zabel (1967)
> > <http://cowles.econ.yale.edu/>
(Explore the papers available off of there.)
> I suppose the answer is "no"? Keen makes a big deal out
> of his idea that economists, stuck in their ancient ways,
> do not consider dynamic models. Right or wrong?
The phrasing in the paragraph immediately above, although not
insinuating anything about me, is quite silly.
And, if he had read the book, Chris Auld might have noticed
Keen's reference of J. M. Blatt (who I've only read a little of)
and chapter 8.
> What I
> mean by "honesty" is admitting Keen is wrong...
[ >>By the way, at least one sentence on page 302 of Keen's ]
[ >>book is incorrect. ]
Chris Auld can now apologize about the comments on honesty above.
> >A certain comedy about game theory receives a positive blurb
> >from Chris Auld:
> >
> >> Outrageous.
The context was Mark Witte behaving like a five-year old. I
tried to be humerous in my response. I really don't think this is
any big deal:
CA Then> this isn't a prisoners' dilemna
CA Now> Yes, the payoffs technically form a PD