I noted Howard Reed's erudite and timely essay on what he has called Deconomics on Saturday. The original was posted in Prospect, who also published a response from Professor Diane Coyle, now at Cambridge University.
As I have previously noted, the opening paragraph of her response said:
Do the “tenets of neoclassicism” shape our day-to-day work as economists, as Howard Reed puts it in his ill-informed diatribe for Prospect? No–they do not.
An ad hominem did not make for an auspicious start. Matters did not improve much as the article progressed. Coyle effectively presented three arguments, in my opinion.
The first is that microeconomics does not work the way Howard Reed claims. Citing a pile of her recent reading (for no apparent reason) she says that modern microeconomics is able to relax its core assumptions to cover many of the aberrations that are found in real life, from asymmetrical data, to technological change and the fact that governments do, as a matter of fact, intervene in markets.
Her second argument is that very few economists work on macroeconomics. As she says:
Almost everybody agrees that macroeconomics–which looks at growth, inflation, interest rates and the economy as a whole–is in a troubled state. But this area is a minority field: contrary to popular belief the great majority of economists don't study it.
And then, in what I consider to be her third argument, she said:
But macroeconomics is inherently hard because there is very little data. There is only a handful of key variables, all linked to each other and changing only slowly, the outcome of multiple possible causes in a complex system, and with little opportunity for doing experiments. It will never be able to predict a crisis with a high degree of confidence.
I admit that as a series of arguments these are not the best: what they most certainly do not do is inspire any confidence in Coyle's position. But let me look at them in turn.
I find the first argument quite odd. Most of Howard's argument related to macroeconomics. This could not have been clearer. His opening paragraph said:
When the great crash hit a decade ago, the public realised that the economics profession was clueless. The claim that “boom and bust” had been solved came crashing down, along with about 7 per cent of national income.
That's macro. Not micro. But Coyle bases most of her case on microeconomics. I can't help feeling that this is akin to a person defending their rubbish performance in the Great British Bake Off by saying they cook a magnificent roast dinner. 'So what?' would be the judges' appropriate response. Even if Coyle's defence was appropriate it would miss the point. And as it happens I do not think it is appropriate.
I know from experience that students are still taught the absurd idea that profit is maximised where marginal cost equals marginal revenue. I knew when I was nineteen that this was not true. A subsequent career in accountancy and business (which is almost unknown amongst economists) has taught me a) people do not profit maximise b) no one has a clue what marginal cost is and c) even fewer would know anything about marginal revenue. It's not just that they don't do what economists say is necessary: they could not if they wanted to do so. So why teach it as if it is the truth, and then suggest all variation from it is the aberration when it's actually laughably incorrect? This is the question Coyle does not address, and she simply misses the point as a result.
But I should add that there is also a very good reason for thinking Coyle wrong on micro. If she really knew what Howard suggests - that once there are aberrations in the market then it cannot be assumed that the market provides optimal outcomes to economic organisation - then we should expect her and other microeconomists to be offering non-market solutions to the problems they are asked to comment on at least as often as they are market-based ones. This is a testable hypothesis. And what I know is that the evidence does not support this very obvious conclusion. I can't recall the last time a microeconomics consultant looked at an issue and reported that the state should run a service because market failure made it obvious that there could be no more effective and cost-efficient way to manage the risk that market failure created than that. When such suggestions are made, frequently, then I will know that micro is free from the bias the neo-classicism builds into it.
But this does not happen, and there is a likely reason for that. It is that the prevailing view of neoclassical economics - that anything but a market-based solution is not to be preferred - does in practice prevail and microeconomists cannot tear themselves away from it. It may be that they do have the imagination to do otherwise. What they lack, I suspect, is the courage to do so in a world where only one view can prevail, and that is that the market knows best. To say anything else is unacceptable, most especially amongst their professional colleagues.
Her second and third arguments are worse, if that is possible. I might agree that few work on macroeconomics but that's hardly a good reason for saying we need not worry about it, or that Howard is wrong to point out its flaws. The right response would be to ask why this is the case? And the answer should be apparent. It is because macro has become deeply hegemonic, largely focussing on general equilibrium analysis. In effect this takes the already unrealistic assumptions of microeconomics and compounds them, not least because fewer of the moderating influences that Coyle exist in micro reach this far. This is an issue discussed this year in a special edition of the Oxford Review of Economic Policy. For those who want to learn more Simon Wren-Lewis' piece in there is worth reading on this, although the other papers add very real value as well. To summarise a complex issue, the fact is that heterodox (mainstream) macro is now based on micro foundations. In other words, micros bias is now built into almost all economics as it is now practiced. That may be why Coyle can say so few do macro.
But the fact is that we need macro and there is data. Let me offer a simple example, which does not get a mention in most current macro debate and yet which is key to the whole economic debate as it has actually developed over the last decade. That debate, which focuses on austerity, revolves around a simple equation which is expressed as:
G - T
G is government spending. T is government tax revenues.
According to many G - T must now equal zero or be positive. Explanation for this is not easy to find on any rational basis that is not microeconomically driven, and so inappropriate.
According to the EU it had to be no more than 3% of GDP per annum. Whilst the same authority said that cumulative totals of G - T should not exceed 60% of GDP.
Reinhart and Rogoff said if G - T was greater than 90% of GDP then an economy was at risk. They were wrong, of course. But the legacy remains.
And the IMF have in the past week published a blog on how to create such rules, as if they mattered.
But do they? And why? And why is this not discussed? After all we do have data on G and T. This is macro. And we can say a lot more on this than we do. G - T is of course heavily influenced by the tax gap. That's a macro discussion I am now writing about in my day job.
And G - T can also be stated not as a constraint but as a financing function so that G - T is positive until such time as long-term unemployment at optimal rates of productivity is zero. This is quite possible. But not done. So why not? Could it be that this would result in the lesson of Keynes - that markets cannot be relied upon to deliver such outcomes would have to be noted? I suspect so.
But my key point is that there is macro we can do. And macro we should do. But to do it we have to assume that anything that exists at a macro level - call it the government and the money, tax and regulation it creates if you wish - is not an aberration to be resented but is instead a core part of the world we live in. Then macro can address real issues. No wonder no one wants to do it right now: it lives in a little bubble of its own where it fails to see bubbles that might explode coming along. Macro needs to be set free to do its job. And it can be. MMT helps that, I admit. That's why I use it,but it's more than MMT too. It's about studying the world as it is. This is what economics has to do. And it is what it is not doing. And that's the crisis Howard rightly draws attention to.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I think Steve Keen arrived at the kernel of Coyle’s problem in ‘Debunking Economics’ (Ch.10, p.204):
“Macroeconomics, the study of the behaviour if the entire economy, was once an area of economic research independent of microeconomics, the study of individual markets. However, working with a cavalier ignorance of the many flaws in microeconomics, economists reshaped macroeconomics, not to increase its relevance to the economy, but to make it a branch of microeconomics.”
The tell-tale is in Coyle’s reference to “macroeconomics is inherently hard because there is very little data”. Macroeconomics represents economic reality, and the microeconomists who currently dominate the discipline have decided it is all too difficult to do; so they have constructed an econometrics-mathematical driven microeconomic, theory-laden approach to their “subject” that carefully avoids reality altogether; and has led the whole discipline badly astray. The ‘touchstone’ of their vision of economic science, as science, is physics; yet they are like physicists who have abandoned studying the real world; they are building abstractions. At the same time economics is one of the disciplines that has been criticised for the poor standards of its use of statistics. Read, for example, Ziliak and McCloskey, ‘The Cult of Statistical Significance’ – by two economists.
The great American quantum-physicist Richard Feynman wrote this in “What is science?” (1966):
“It should not be “science has shown” but “this experiment, this effect, has shown.” And you have as much right as anyone else, upon hearing about the experiments–but be patient and listen to all the evidence–to judge whether a sensible conclusion has been arrived at.”
Notice the particularity” this EXPERIMENT”. There are no experiments in microeconomics, and precious little observation. We may well ask whether it all has much point. Feynman also gave us all the sole key test for all science; it applies universally:
“The test of all knowledge is experiment. Experiment is the sole judge of scientific ‘truth’.” (The Feynman Lectures on Physics: 1964)
We could expand Feynman’s statement to say, the test of all knowledge is data (or observation).
There is quite a lot of data in economics and increasingly so. There is also more and more experimental economics, but the central question there is whether you can study anything in isolation. But it’s the same problem in physics – how well my experiments work depends on how well I managed to isolate my system from the environment.
Ceteris Paribus
All things being equal, I think it is the objective of any science to establish a methodology to handle the problem of observation and “isolation” effectively. Some, like physics, are exceptionally rigorous; the social sciences are generally less rigorous because of the complexities (ceteris paribus).
It is not sufficient to throw up one’s hands and just give up. Economics has made a very unsatisfactory distinction between macroeconomics and microeconomics; the intellectual distinction is actually between the theoretical and the experimental; in physics, the distinctions lead to quite different approaches between theoretical physics and experimental physics. In physics this has, generally worked very well (think of Maxwell and Hertz); in economics the ‘macro’ and ‘micro’ ditinction has worked badly from the perspective of “proof” and demonstration of theory.
Personally, I think this is because economics has not devised a sufficiently effective ‘applications’ methodology, with clear concepts of measurement (which are critical). Observationally, the economists could learn from accountants; like Richard! The data in economics is too often defective and the techniques to improve the results have been less than satisfactory. I stand to be corrected on this last point and would be interested in any compelling and authoritative sources/references.
No, make that:
Ceteris Paribus infectus.
@John S Warren: “Personally, I think this is because economics has not devised a sufficiently effective ‘applications’ methodology, with clear concepts of measurement (which are critical). ”
Yes, I agree. Measurement is a problem. I tried to write about this:
https://braveneweurope.com/charles-adams-the-measurement-problem-in-political-economy-a-solution
and even if we could measure it, I doubt there would be agreement on what should be done about it?
@ John S Warren: “Economics has made a very unsatisfactory distinction between macroeconomics and microeconomics; the intellectual distinction is actually between the theoretical and the experimental;”
The distinction between micro and macro is between the individual and the collective. The choice to ‘derive’ macro from micro was a political desire to put the individual centre stage.
@Charles Adams.
Thank you for the link. I shall read it with interest.
John S
You are dead right with regard to the “econometrics-mathematical driven microeconomic, theory-laden approach”
Where Coyle refers to :
“a handful of key variables, all linked to each other and changing only slowly, the outcome of multiple possible causes in a complex system, and with little opportunity for doing experiments”
I think that she was assuming that “experiments” are confined to econometrics which has chronic “endogeneity” restrictions that largely preclude it from dealing with inter-related variables. And all macro variables are inter-related. Which isn’t a genuine problem, It just requires a different approach.
Marco Fante says in reply to John S:
“You are dead right with regard to the “econometrics-mathematical driven microeconomic, theory-laden approach”
“Where Coyle refers to : “a handful of key variables, …… I think that she was assuming that “experiments” are confined to …….”
………..the burgeoning new field of Nanoeconomics ? 🙂
Or to put it another way; how do you observe the unobservable?
John S Warren says:
“Or to put it another way; how do you observe the unobservable?”
A mirror ? Allows you to see your own face which you could otherwise never see.
Two mirrors allows you to see the back of your head.
It is possibly only a ‘clever’ (as in smart arse – incidentally something else you could use a mirror to view) answer to your rhetorical question.
If it has any utility in this context I haven’t figured it out yet.
Ouch!
John S Warren says:
“Ouch!”
Sorry, John.
Sometimes I think rhetorical questions are worth addressing. The mirror suggestion is not entirely fatuous – Leonardo Da Vinci used it and I am unreasonably proud of having discovered for myself that if you draw a picture and wish to view it objectively holding it in front of a mirror will reveal whether you have it lopsided or not. Particularly obvious with a self portrait.
Next time you write a letter by hand hold it in front of a mirror and admire the regularity of your script. You will be amazed.
I have not hand written a letter for decades
The recipient might admire the script
They would not be able to read it
“The recipient might admire the script …They would not be able to read it”
Indeed that may be true, although I suspect you exaggerate. Some people, I’ve noticed, are as proud of their execrable handscript as others are of their incapacity to master numbers (!), but I made no claims concerning legibility.
The legibility question is in part why I suspect the analogy of mirrors may be of only limited utility in regarding economic matters.
As a general rule I find often it pays dividends, if something does not function very well, to turn it upside down, and or shake it about, After all what has one lost if it breaks in the process. ?
In organisational terms cynics call this allowing the lunatics to run the asylum. Did anyone ever try that I wonder ?
Without wishing to be pernickity (okay, so I am still sore ….); I am struggling with the term “objectively”.
Actually, I am ‘making smoke’ in order to escape the unexpected invasion of alien Feroequinologists. Terrifying. And I thought Irvine Welsh had written everything there was to say about trainspotting……………
John S Warren says:
“Without wishing to be pernickity (okay, so I am still sore ….);” I really wasn’t trying to get at you, or what you were saying, just kneejerk responidng to the rhetorical question.
“…. I am struggling with the term “objectively”…..” Fair comment. Perhaps I am elevating the advantage of a different perspective to being actually ‘objective’. It isn’t of course. Even a camera won’t create an objective picture.
I’m well prepared to accept that none of us can observe anything with true objectivity.
“Actually, I am ‘making smoke’ …..” Good idea. Time for a fag 🙂
Slightly off-topic (as usual – lol). I’m not qualified to comment on the academic integrity of her argument, which you have dealt with professionally. I can only make a general philosophical point that the stronger most people hold to their beliefs the more difficult it is for them to accept they may be wrong. Academic egos must be similar to those of most politicians and senior management.
As stated oft times here, we have already entered a new societal era – the Gramscian interregnum – that demands a radical rethink on almost every aspect of historic socio-economic policy in order to maximise our potential for sustainable & peaceful co-existence into the foreseeable future. By definition, this is very difficult for conservatives (with a small ‘c’) to understand, hence they cling with desperation to what is familiar and what they believe in. To abandon the belief systems that have been the mainstay props of their adult lives is, for them, like jumping off a cliff into the unknown, and very scary.
Hence, I suggest it is really a waste of valuable time and energy engaging with them and attempting to change their minds, which are subconsciously programmed in state of denial. Better to present and continually refine new ideas that will attract a new audience of progressive thinkers, who tend to be younger. Of course, one is mindful to retain social models that have withstood the test of time (i.e. centuries rather then decades) but there comes a time in the cycle of human existence which demands a quantum leap in our consciousness.
Unfortunately, it is rare for such a shift in consciousness to happen without social disruption. One can only hope that violence is kept to a minimum but all the evidence – up to & including current events – suggest otherwise. It’s difficult not to be pessimistic for the next generation – and to know what best to suggest on an individual level in order to mitigate the likely adverse results. The advice I give to those closest to me is be as independent as circumstances permit. And ideally to quit the UK altogether, which is sleep walking into a force 11 gale. My personal preference would be SW France or central Italy; but for new beginnings Bhutan sounds good. Or even better, Auroraville – https://www.auroville.org. Indian tea is, of course, delicious; not sure about the coffee.
John D Says:
“….but for new beginnings Bhutan sounds good. Or even better, Auroraville — https://www.auroville.org. Indian tea is, of course, delicious; not sure about the coffee.”
Costa Rica is highly spoken of. (Can’t remember why particularly) Plenty of coffee there.
Wherever you go I’m sure Amazon is already beating a distribution path to your door. They’ll probably get there before you. 🙂
You’re right, Andy, I should’ve included Costa Rica which always scores highly on the Happiness Index – https://theculturetrip.com/central-america/costa-rica/articles/why-costa-rica-is-the-worlds-happiest-country – and does indeed grow some of the best coffee in the world. An excellent choice!
Barista!
Im afraid Auroraville may be a disappointment. I was down the road in Pondicherry a month ago and the locals suggested that it had become a somewhat commercial ghetto for Westerners. Expensive stuff to buy for tourists but poorly paid locals. A sort of cultish Shoreditch in Tamil Nadu perhaps?
Good news is that there are plenty of other unspoilt places to go in India. Just jump on a train for a start and hang out the doors. And for the trainspotters here, the railway up to Ooty gets booked 6 months in advance – I know because I tried to book it!
That’s worse than the East Coast Route…..
And we’re not trainspotters
Feroequinologists, please
‘Feroequinologists’ – a word I shall seek every opportunity to use!
But for other feroequinologists (I do include myself), I highly recommend rail travel in India. Starting with cracking the on-line reservation system. Anticipate delays running into hours. But then the trains may have been on the move for 2 days…
Sounds good
“And we’re not trainspotters
Feroequinologists, please”
So…is feroequinologising an affliction distinct from Gricing ?
Oh yes
It’s a study
Not collecting
Not the same at all
“Oh yes. It’s a study Not collecting Not the same at all”
I had suspected something of the sort.
Incidentally…… I find your claim to have…:”……literally hundreds of books on railway …..The collection now runs to more than 1,000 volumes”….. somewhat fanciful unless you have many duplicates.
Cursory research on my part reveals that the original series ran to only twenty-six volumes, before Christopher took over and added a further sixteen. Series related and companion books adds another ten.
I make that fifty-two. The additional annuals would need to go back most of the way to the time of William the conqueror to get the numbers up to around a thousand. I find that, frankly implausible.
Source: https://en.wikipedia.org/wiki/List_of_Railway_Series_books
🙂
I think you are abolutely correct Richard when what you say that there is a built-in bias within microeconomics towards a market based solution. If that wasn’t the case how do the advocates of markets at any price reconcile the obvious examples of failures with the desire to get back to a ‘ market- based solution ‘ as soon as the opportunity arises – think the East Coast Mainline franchise – the keys have been handed back twice now by franchisees , but the government persists in believing against all the evidence that there is some company out there stupid enough to give it a go. I have a particular interest in public transport, because for my sins, I am a train and bus nerd and last evening I was re-reading a biography of the great Frank Pick. Who ? Well Frank Pick was the man we have to thank for the spectacular development of the London underground network in the 1930’s. He was a bureaucrat with a singular vision ; the creation of a mass transit service which truly served the needs of Londoners and visitors in the most humane and aesthetic way he could and he enlisted the services of a whole host of talented architects and designers to do so. He wasn’t paid an inflated salary with bonuses, or share options . He did the very best he could do with the ability he was born with. So, yes there are alternatives to the market, but so corrupted has our public realm become from incessant doses of ‘ market realism ‘ being heaped upon it it is very hard to imaging someone of Pick’s genius emerging today.
Pick was a genius
Was that the Christian Barman one? I have it in my collection
I have a railway history affliction
Indeed it was Richard.
“I have a railway history affliction”
Generally a terminal condition, I believe.
Optimistic reports of a possible cure have been dashed recently as trials with chemotherapeutic treatment using Novichok medications have demonstrated unconvincing results.
Whooo Whoooo! Steam-on, Richard. 🙂
PS. And Whooo Whooo! to you aswell, John Hope.
For my part I’m going to watch a Spaghetti Western, I’m getting out of my depth and beyond my boredom threshold with Macaroni Comics.
This is DC Thomson land, we know what sort of comics we like round here 🙂
The railway bug bites deep Andy, and to the best of my knowledge there is no known cure !
There is not, I fear
I caught it when 13
By 16 I had read literally hundreds of books on railway history (the 70s were a golrouius decade for railway history publishing that in some ways has never been replicated since)
The collection now runs to more than 1,000 volumes
I fear I might know more on some aspects of that than anything else
“To summarise a complex issue, the fact is that heterodox (mainstream) macro is now based on micro foundations.”
I think you meant to say orthodox not “heterodox” in that sentence.
As well as the usual criticisms of orthodox, neo-classical economics, as I started to get interested in the topic I was struck by the use of ‘models’ and the underlying mathematics.
Having developed a few financial models in my earlier years (in financial services) I’ve long been stuck by the confusion between models and what one might term formulae. It seems to me that too many economists and most of their ‘customers’ think that their ‘models’ produce specific, ‘right’ answers – what one might think of as formulae rather than models. That idea appeals to control orientated, reductionist thinkers. In contrast models are really just simulations, with recognised simplifications from reality which honest, professional modellers go to great lengths to identify. They are helpful in understanding patterns and behaviour but do not pretend to produce specific answers.
Ive also thought that given that economics is all about human behaviour which is distinctly non-linear, if one is going to try to build models, then it requires the use of mathematical tools that describe non-linearity and complexity. Some may be aware of the story of John Reed, CEO of Citibank, who dragged some of his economists back in the late 80s down to talk to the physicists at the Los Alamos laboratory.
An insight is here: http://tuvalu.santafe.edu/~wbarthur/Papers/Complexity%20&%20Economy%20Preface.pdf
The physicists were somewhat surprised by what they saw as the primitive mathematics being used by the economists. More cynical persons might say that economists confuse a knowledge of statistical methods with an understanding of real mathematics
Steve Keen has of course been on this case for a while, with his Minsky agent-based modelling tool. Even the Bank of England is apparently looking now at complexity and economics. Unfortunately for most of the economists trained in the last 20-30 years its probably too much to expect them to re-learn
(Im happy to be corrected by superior mathematical brains on the blog. My studies of models built using non-linear maths were a very long time ago!)
I think you make some shrewd observations. The expertise of good mathematics in economics, however I do not think is necessarily a guarantee of very much, because economics is much more dependent on sound psychological understanding than most economists (or mathematicians) often appear – at least to me – comfortable handling. It seems to me that too many economists do not appear to have much insight into human psychology, beyond a very old-fashioned Benthamite utilitariianism, sufficient only to allow them, very quickly, to hasten on to the microeconomics and the ‘graphs’. Economics seems to have abandoned all pretence at a deep understanding of human psychology long, long ago; yet everything in economics is dependent on human choice, or trust, or motivation; on feeling, or on unconscious responses.
I will not even start on the the use of data to exploit human responses very effectively, that we have seen in recent weeks quite luridly exposed to scrutiny (and the origins of that did not begin with social media, but has roots in business that go much further back; and were exploited tellingly on a mass scale, even in WWI).
Am I being excessively rude to the discipline of economics? I certainly believe its has failed to do what it says on the tin.
John S Warren says:
“Am I being excessively rude to the discipline of economics? I certainly believe its has failed to do what it says on the tin.”
Au contraire, John. You flatter economics (certainly some economic theorists) by suggesting it might be a ‘discipline’. 🙂
John SW
Totally agree that economics is much more about psychology than maths. When I first learnt that the idea that humans were fundamentally rational (with access to perfect data) was fundamental to neoclassical economics, I concluded that student economists must be extraordinarily gullible or hang out with some very weird people.
So if you accept that humans are not always rational and most certainly do not have equal access to reliable data (even if it was available), then you are certainly in a world of complexity and chaos. The only tools that might provide and insight into the consequences are those that describe non-linear relationships.
Eric Beinhockers book The Origins of Wealth is the best I’ve read that takes a systemic, complexity view of economics. Plus of course the Econocracy from the Post-Crash team, with their deconstruction of economics education
Robin
I appreciated the absurdity of this as an undergraduate and have often said so
The right wing trollosphere led by Tim Worstall have always interpreted this as me saying I did not bother with economics thereafter
I did: I just saw much iof it for the nonsense it is, which they are daft enough to but hook, line and sinker
It may say a lot about why they are in the right wing trollosphere of course
Richard
Re Tim Worstall – recommend anyone to keep an eye on CapX where Worstofall is a regular contributor. Its does represent the lunatic fringe of the neo-liberal right and is a good indicator of what they are thinking. Or just ranting about
I subscribe
It gives me a daily shot of WTF
I would be quite happy to see ‘econometrics’ disappear completely overnight. Overall that would probably be a net gain.
I know that some people might want to slap me for saying so but I am really wary of the inferential statistics mob. They seem to have become like the military-industrial complex of acadaemia. They have invaded so many areas of study since computing has enabled them to do so and then taken up so much valuable time and space drawing scholars into their incomplete, irreconcilable ever-expanding void that throws up internal problems and creates more and more complexity in finding new methods to solve them. It seems to be 90% self-referential. An end unto itself.
To the extent that it has practical applications a lot of them are really inappropriate but it invades those areas of study or research anyway like an empire that must expand in order to justify its own enormous cost. In so many cases it gets away with the pretense of relevance by being so big, mysteriously inaccessible and scientific in its appearance that few dare question it. That and the fact that its so open to corrupt compromise – like hey, weve got the modeling and what does the modeling say? Whatever the client wants it to say.
Marco Fante says:
I would be quite happy to see ‘econometrics’ disappear completely overnight……
…….. inferential statistics mob. …….military-industrial complex of acadaemia. …… drawing scholars into their incomplete, irreconcilable ever-expanding void ……. 90% self-referential. An end unto itself.
That’s a very eloquent and loquacious way to describe a bunch of ouanquers, Marco.
But I applaud you delicacy
PS. Did acadaemia really once have a diphthong or was that a case of digit grassé ? (or Gros doigt as Google translate tells me it might be. )
Robin Stafford says:
“Re Tim Worstall — recommend anyone to keep an eye on CapX …”
Why bother when you can get the same garbage, with high class production values, from BBC Radio 4 without having to log on to the computer. ?
And you can have breakfast the while .
Robin Stafford says:
(I’m happy to be corrected by superior mathematical brains on the blog……..)”
Ditto. But for anyone not particularly into esoteric mathematics I recommend Jim Rickards ‘The Road to Ruin’ as offering interesting insights as to why esoteric mathematics is important, and what it might reveal without having to do the hard sums. The ‘clever buggers’ will do that as long as somebody asks the right questions)
“The [..] new tool in the toolkit is complexity theory. The crucial question in economics today is whether capital markets are complex systems. If the answer is yes then EVERY equilibrium model used in financial economics is obsolete.”
“The sabre toothed cat is the missing mammal of modern economics” What does Cro-Magnon hunting strategy tell us about the balance of risk and reward? How does the ‘great stability’ become the GFC almost overnight.
This is interesting stuff. Trolls should definitely be reading this; this is no left wing pinko polemic. Quite the contrary this is a survival manual for those with something to protect. Government, I suggest, has a society to protect and similar principles apply.
“… in a complex system, and with little opportunity for doing experiments”…”
We’re living in an experiment. A series of experiments in reality, as a procession of Chancellor’s of the Exchequer tinker about with the inputs.
How can it be possible to suggest that there is a dearth of data ? We’re drowning in data. Current data and historic data for back testing.
“G is government spending. T is government tax revenues.
According to many G – T must now equal zero or be positive. Explanation for this is not easy to find on any rational basis that is not microeconomically driven, and so inappropriate.”
Erm……. Surely this is worse than merely ‘inappropriate’ ?
If the object of the exercise is to achieve (or merely record) a balance the money currently tied up in privately held savings (onshore or off) and therefore not accounted for in a given period are going to create a figure which is meaningless.
Whether that is micromeaningless or macromeaningless seems to me to be rather beside the point.
PS. For the mathematically minded I should say that savings are ‘S’
Or, of course PS – private savings, if we must also allow for GS – government savings, (or would that be SWF – sovereign wealth fund ? )
G – T + M = DM …… Dry Martini
Very good…..
I like it. (shaken not stirred).
I am an Economics graduate, who for the last 22 years have been teaching Maths whilst maintaining an interest in economics. This last year I have been teaching the macro part of A level, but next year take on teaching micro as well and of course from my first look at the syllabus am likely to be constrained by that to a fairly classical view of micro, more so than at macro. Of course I can add my caveats etc. but with time constraints and the need to get students past the exam probably won’t be able to go much away from the orthodox, except to hopefully give enough hints that the inquiring mind might persue
I well remember my own sixth form
New Cardwell was my economics teacher
He did hint (more than hint) at the weaknesses
Great guy who did me a massive service
Thanks for what you do
Graham BC says:
“….. but with time constraints and the need to get students past the exam probably won’t be able to go much away from the orthodox, except to hopefully give enough hints that the inquiring mind might pursue”
It’s not just economics. I studied English Literature at ‘A’ level and was expected to write a coherent explanation as to why King Lear was ‘a man more sinned against than sinning’.
I thoroughly enjoyed the course, but there was no way I could trot out a defence of the infantile behaviour of an old fool who was clearly the architect of his own downfall, and barking mad (like others from the modern era we might mention) before leaning office.
I scraped a ‘pass’.
Perhaps you could offer your students the option of passing the exam or being educated. Depends really on whether you need your job. I don’t suppose you’d stay employed for long 🙂