economics | Utopia, you are standing in it!

How neoclassical are New Keynesian dynamic stochastic general equilibrium models?

01 Jul 2019 Leave a comment

by Jim Rose in business cycles, history of economic thought, macroeconomics

Oh Jimmy boy, give it a break. Even Krugman grudingly admitted he didn't read what I wrote https://t.co/LOiYYxA92U pic.twitter.com/XftvVTcvlS
— Dr. Steve Keen (@ProfSteveKeen) July 1, 2019

In sum, New Keynesian models are most certainly not reincarnations of textbook IS–LM models with maximization added on. Rather, they are real business cycle models augmented with a few distortions—typically sticky prices and monopoly power—and shocks that do little to contribute to fluctuations or influence the nature of optimal policy

From Kehoe, Patrick J., Virgiliu Midrigan, and Elena Pastorino. 2018. “Evolution of Modern Business Cycle Models: Accounting for the Great Recession.” Journal of Economic Perspectives, 32 (3): 141-66.

@paulkrugman on @ProfSteveKeen

01 Jul 2019 Leave a comment

by Jim Rose in macroeconomics, politics - New Zealand

From https://krugman.blogs.nytimes.com/2012/04/02/oh-my-steve-keen-edition/ and see https://creditwritedowns.com/2012/04/banks-matter-krugmans-barter-mysticism.html for the text of broken link

Why am I reminded of Neoclassical Economics? Let me count the ways…

Firstly, there are similar underlying principles to the DSGE models that now dominate Neoclassical macroeconomics, and as with Ptolemaic Astronomy, these underlying principles clearly fail to describe the real world. They are:

All markets are barter systems which are in equilibrium at all times in the absence of exogenous shocks—even during recessions—and after a shock they will rapidly return to equilibrium via instantaneous adjustments to relative prices;

The preferences of consumers and the technology employed by firms are the “deep parameters” of the economy, which are unaltered by any policies set by economic policy makers; and

Perfect competition is universal, ensuring that the equilibrium described in (1) is socially optimal.

If that were actually the real world, then not only would there not be a crisis now, there would never have been a Great Depression either—and recessions would simply be minor statistically unpredictable but inevitable events when the majority of shocks hitting the economy were negative, and they would rapidly be resolved by adjustments to relative prices (wages included, of course).

So economists like Krugman—who describe themselves as “New Keynesians”—have tweaked the base case to derive models that “ape” real-world data, with “sticky” prices rather than perfectly flexible ones, “frictions” that slow down quantity adjustments, and imperfect competition to generate less-than-optimal social outcomes.

This is Ptolemaic Economics: take a model that is utterly unlike the real world, and which in its pure form can’t possibly fit real world data, and then add “imperfections” so that it can appear to do so.

Rugby sponsors draw the line in odd places

01 Jul 2019 Leave a comment

by Jim Rose in economics of crime, economics of religion, labour economics, law and economics, politics - Australia, sports economics Tags: employment law

From Champ and Freeman

01 Jul 2019 Leave a comment

by Jim Rose in business cycles, econometerics, macroeconomics, monetary economics Tags: monetary neutrality

Unintended consequences of @eugeniesage’s #plasticbagfascism

01 Jul 2019 Leave a comment

by Jim Rose in economics of regulation, environmental economics, politics - New Zealand Tags: offsetting behaviour, recycling, The fatal conceit, unintended consequences

How safe are nuclear weapons?

01 Jul 2019 Leave a comment

by Jim Rose in defence economics Tags: Atomic weapons

The environmental curse of @eugeniesage’s #plasticbagfascism

01 Jul 2019 Leave a comment

by Jim Rose in economics of regulation, environmental economics, politics - New Zealand Tags: offsetting behaviour, recycling, The fatal conceit, unintended consequences

“Mainstream economists reach mathematical conclusions about their model of the economy that they don’t like…and are then willing to make patently absurd assumptions to rescue their desired equilibrium conclusion” @ProfSteveKeen with a list from Deirdre McCloskey on what is yet to be shored up

01 Jul 2019 Leave a comment

by Jim Rose in history of economic thought Tags: market failure

"Mainstream economists reach mathematical conclusions about their model of the economy that they don’t like…and are then willing to make patently absurd assumptions to rescue their desired equilibrium conclusion."– @ProfSteveKeen https://t.co/zHdwGCeMA9 pic.twitter.com/lfkBg2wWOH

— Evonomics (@EvonomicsMag) June 30, 2019

Bruce Bueno de Mesquita, 2016 Leaders incentives to avoid peace

01 Jul 2019 Leave a comment

by Jim Rose in defence economics, economics of bureaucracy, income redistribution, Public Choice, rentseeking, war and peace Tags: game theory

My New Republic piece on the unnecessary death of Makayla Sault

01 Jul 2019 Leave a comment

by Jim Rose in applied price theory

Why Evolution Is True

I’ve rewritten Tuesday’s post on the death of First Nations child Makayla Sault. a martyr to her parents’ faith and the political correctness of the Canadian government (as well as the cowardice of some Canadian doctors); and it’s been published by The New Republic.

The rewritten piece is called “A little girl died because Canada chose cultural sensitivity over Western medicine,” and you might have a look to see what’s up there (according to Stephen Fry’s Dictum, I don’t read the comments).

But looking at it to make sure that my essay came out okay, I did see the first comment: kudos to Alex Musso for posting this familiar graphic:

Oh, and the editor at TNR found a heartbreaking picture of Makayla to head the piece. What an adorable child! She’s dead now, and didn’t have to be.

Screen shot 2015-01-21 at 5.17.25 PM

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Ideology versus science (again): University of New South Wales urges professors to lie about the arrival date of Aboriginals

01 Jul 2019 Leave a comment

by Jim Rose in applied price theory

Why Evolution Is True

A reader sent me a link to an article from The Australian which, sadly, is behind a paywall (click on screenshot to see). It is the very height of shameless pandering to ethnic groups who accept false stories about their history, and it’s also the nadir of academic truth. (If you want a transcript of the entire piece, judicious inquiry will yield one.)

For you, dear readers, I’ll transcribe the relevant parts:

University science lecturers have been warned off making the familiar statement in class that “Aboriginal people have been in Australia for 40,000 years.”
It puts a limit on the occupation of Australia and many indigenous peoples see this as “inappropriate,” according to the University of NSW language advice for staff.
The document suggests that it is “more appropriate” to say that Aborigines have been here since the beginning of the “Dreaming/s” because this “reflects the beliefs of many…

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	Bernard Keenan and E… on Bernard Keenan and Ewan Smith:…
	Thoughts on Owning a… on Thoughts on Owning a Self-Driv…
	A Libertarian Perspe… on A Libertarian Perspective on t…
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Utopia, you are standing in it!

How neoclassical are New Keynesian dynamic stochastic general equilibrium models?

@paulkrugman on @ProfSteveKeen

Rugby sponsors draw the line in odd places

From Champ and Freeman

Unintended consequences of @eugeniesage’s #plasticbagfascism

How safe are nuclear weapons?

The environmental curse of @eugeniesage’s #plasticbagfascism

Bruce Bueno de Mesquita, 2016 Leaders incentives to avoid peace

My New Republic piece on the unnecessary death of Makayla Sault

Ideology versus science (again): University of New South Wales urges professors to lie about the arrival date of Aboriginals

A bit of a gap

Are the Poor Getting Poorer?

Didn’t know Japan was that religious, and China is seriously irreligious

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