Monday, April 11, 2011

More on Fringe Economics

This is interesting. Read Krugman's latest "wonkish" post, then look at some of the comments I got on this post. Krugman's language is essentially the same as what you hear coming from all of the crackpot fringe groups. Who are you people who think you are so smart? You are just in love with mathematics. You are only telling us things that we know anyway.

Larry Summers used to say that we had not learned anything in macroeconomics since 1968. Krugman goes a step further:
if all we had known when this crisis struck was 1950-vintage macroeconomics, we would probably have done a better job of responding.
Crackpot.

Krugman has joined the anti-intellectual ranks of global-warming deniers and end-the-Fed types. What's the difference between: (i) If the gold standard was good enough for grandma it's good enough for me; and (ii) If IS/LM was good enough for grandma, it's good enough for me?

73 comments:

  1. Global Warming? You're bringing up global warming!? There MIGHT be some doubt about the IPCC hyper-politicized conclusions and policy recommendations based upon fairly staid research.

    Ok. Whatever. I get what you are trying to say.

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  2. If you have time could you offer your view on Summers, his work and his recent comments at INET?

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  3. He isn't really saying that we haven't learned anything since 1950 so I don't think you can unequivocally state that he is going further than Summers. Also, it's not about what's good enough for me (us, whatever) but rather what is good enough for the current situation (now, whatever). And, honestly, I think you get both of these points. I'm still a fan of yours though (as evidenced by my conviction of your getting it).

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  4. Larry Summers says NSGE work was worthless as far as anyone in the government was concerned.

    Calling Krugman a crackpot is less than helpful as an argument justifying the greater than zero sum cognitive value of NSGE macro.

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  5. 1. I watched a bit of the summers video that is up on Youtube (Summers talking to Martin Wolf). This is not very helpful. As with Krugman, no one will learn much from someone who is not a practicing researcher about what current research practice has to say about the state of the world and what to do about it. There may be some interesting insights that you can extract from Bagehot and Minsky, and it's not worth spending much time on, as there is little science in it. Believe me, I've tried all this. I've read Keynes, Bagehot, Fisher, Wicksell, Adam Smith, etc., but I'll go with post-1950 economics any day.

    2. "He isn't really saying that we haven't learned anything since 1950..." Sure looks like it to me. I've said enough on this topic before. I certainly think that some strands of macro research went off in unproductive directions which left people unprepared for recent events. I also think Krugman is taking the opportunity to take a cheap shot at the profession, and that this only serves to destroy our relationship with lay people.

    3. What NSGE? Neoclassical stochastic general equilibrium? How could you NOT find that useful?

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  6. Steve,

    Thought you might enjoy this old Krugman piece.

    http://www.slate.com/id/1911/

    I'm not sure what could've changed his mind.

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  7. Hi Steve. I think you do not understand logic. IF you would be a wise thinker, you would realize that once you assume rational expectations, you SHOULD be saying things that everyone, even my mam, how is illiterate, knows. That is what you are assuming: every form expectations using your model, hence, people already knows everything your model. So, give us your money back man!

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  8. Sometimes science goes down dead ends, especially theory that's hard to prove empirically (or theory like RBC that's shown very strongly to hold little empirically).

    There are new theories that have later been discarded on further thought and empirical evidence.

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  9. If you really want to persuade you have to explain why your right and he's wrong -- clearly -- this leads to this leads to this...and that's why he's wrong. Not he's wrong and I'm right because my theory is newer than his.

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  10. Richard,

    1. We don't "prove" theories. An economic theory is an abstraction, intended to capture some features of the world we live in so that we can understand it. The theory is constructed with a particular purpose in mind and, by construction, it is going to be "wrong," in the sense that it does not fit some features of the data. But wrong theories can nevertheless be very useful.

    2. No, I've given this more attention than it deserves in the past. You cannot carry on a meaningful discussion on the state of economics with someone who is out of it. Krugman is out of it. End of story.

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  11. You cannot carry on a meaningful discussion of how causal explanation works in economics and what possible role tautological math constructs can play in the explanatory enterprise with someone who is completely out of it when it comes to the literature on this problems and the basic problems involved.

    You, Stephen, are out of it.

    End of story.

    Stephen writes,

    "We don't "prove" theories. An economic theory is an abstraction, intended to capture some features of the world we live in so that we can understand it. The theory is constructed with a particular purpose in mind and, by construction, it is going to be "wrong," in the sense that it does not fit some features of the data. But wrong theories can nevertheless be very useful."

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  12. Ptolemaic astronomy was a "wrong theory" -- it was a completely bogus account of the structure of the universe -- but is proved very useful at telling us where the planets would be at particular places across great lengths of time.

    Mainstream macroeconomics is very much like Ptolemaic astronomy -- without the useful part ....

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  13. So, you think science in general regresses, that bad ideas rise to the top? Seems this predicts that we should be back eating nuts and berries.

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  14. Stephen Williamson says
    "We don't "prove" theories. An economic theory is an abstraction, intended to capture some features of the world we live in so that we can understand it. The theory is constructed with a particular purpose in mind and, by construction, it is going to be "wrong," in the sense that it does not fit some features of the data. But wrong theories can nevertheless be very useful."

    If Stephen leaves it at that, I do not understand what the objection can be. However, I would want him to abjure remarks like, "neoclassical models based on intertemporal maximization are the only legitimate way to understand the world." The world is far too complex for that to be tenable. Ricardo Caballero wrote an article about this in the JEP - did you see it by chance ?

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  15. How did we go from economics to "science in general"?

    Stephen writes,

    "So, you think science in general regresses, that bad ideas rise to the top? Seems this predicts that we should be back eating nuts and berries."

    In fact, different parts of science have regressed or forgotten prior progress -- are you so unfamiliar with the history of science that I need to provide you with the examples?

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  16. Here's a heads up "anonymous".

    In Williamson world those recommending Caballero are "crackpots".

    Anonymous writes,

    "The world is far too complex for that to be tenable. Ricardo Caballero wrote an article about this in the JEP - did you see it by chance?"

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  17. Steve,

    You're stooping to Krugman's level. He clearly thinks IS/LM is the best model. Fine. Tell us why your models are better. Claiming Krugman is a crackpot does not add value.

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  18. Williamson thinks Caballero a crackpot ? I would not have thought that likely. I think Caballero's work on the macroeconomics of asset shortages is a keystone in understanding the evolution of the international financial system of the past decade. It surely would fit well into the "new monetarist" framework.

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  19. Imagine a mathematical population biologist writing something as brain-dead as the following:

    "There may be some interesting insights that you can extract from Darwin and Simpson, and it's not worth spending much time on, as there is little science in it. Believe me, I've tried all this. I've read Darwin, Mayr, De Vries, Dobzhanksy, Weismann, Ghiselin, etc. .. "
    What we would conclude, in fact, is that this mathematical population biologist is either pulling everyone's leg -- or he has an extremely shallow understanding of his science.

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  20. What's with all these inane comments? Scientific theories should not be evaluated in isolation. If a modern theory relies on unrealistic assumptions and its predictions fit the data imperfectly, the best course of action is not to abandon the theory completely and start from scratch or to return to the outdated theories of yesteryear that relied on equally unrealistic assumptions and had even poorer predictive power. What's necessary in this situation are further refinements to the modern theory so that it's predictions are able to fit the data better (this is how Neptune was discovered). However, I do understand why "public intellectuals" like Krugman would want to revert back to vague, verbal theorizing, since this would allow them to superficially "explain" just about everything and makes their enemies look bad at the same time.

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  21. The idea that economics provides causal explanations and mathematical predictions in the same fashion as simple planetary astronomy is not credible -- I'd like to see anywhere in the literature where anyone has even seriously entertained the idea or attempted to explain how a direct analogy of that sort could possibly go through with even the smallest of success.

    Someone wrote,

    "What's necessary in this situation are further refinements to the modern theory so that it's predictions are able to fit the data better (this is how Neptune was discovered)."

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  22. Macroeconomics is hard. And no, I don't think that is because we macroeconomists are unusually dense. Here's an example I give my class. I don't necessarily subscribe to either of these ways of looking at things, but suppose that (i) The world works like an RBC model, but there is monetary exchange, and money is neutral, but for some reason the central bank is acting to stabilize prices. (ii) The world works like a New Keynesian model, and the central bank acts to stabilize prices because that is what removes the relative price distortions and closes the output gap. What we observe is exactly the same data. Productivity shocks make real GDP move around, and the prices are sticky. Thus, in this sense these two models are observationally equivalent when the policy authority behaves optimally. I don't think you run into this kind of problem in the natural sciences, but it is ubiquitous in macroeconomics.

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  23. Stephen writes,

    "Macroeconomics is hard."

    Then why are you BSing everyone with this notion that everything necessary for providing sound contingent causal explanations can be stuffed into a tautological DSGE math construct?

    And why are you BSing us with the laughable pretense that Frydman, Summers, Laidler, Blanchard, Goldberg, Caballero, Woodford, and the rest are utter crackpots for suggesting that all sorts of significant explanatory causal elements can't be stuffed into a math construct?

    Let's make the first baby step of being serious about the fact that macro is hard by starting with some honesty.

    As an basic empirical fact, the world patently doesn't work like _EITHER_ an RBC model or a New Keynesian model.

    Macroeconomics is hard. Mathematics is easy.

    Compute the math on that one.

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  24. Actually, this is pretty much what Thomas Kuhn's _The Copernican Revolution_ is about.

    Observationally, there wasn't much separating the Ptolemaic system from the Copernican system.

    Stephen writes,

    "Thus, in this sense these two models are observationally equivalent when the policy authority behaves optimally. I don't think you run into this kind of problem in the natural sciences."

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  25. Theories aren't proven precisely necessarily, but you can with evidence show how close to reality they are for given important things. And that's valuable. Otherwise, you'd just say the four fundamental elements theory of the Greeks is just as good and useful and close to reality as modern atomic theory.

    I still think that if Krugman really is wrong you'd be doing a great service by specifically pointing out why in a clear, intuitive, this leads to this, leads to this,..., and that's why he's wrong way.

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  26. "What's with all these inane comments?"

    Greg Ransom is having a slow day in the office?

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  27. The spelling is too good for Ransom.

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  28. "all sorts of significant explanatory causal elements can't be stuffed into a math construct"

    Not true. If it's a good economic idea, and correct, you have to be able to do the math, or the idea is in fact incoherent. Mathematics allows you to be precise about your ideas, and it's an excellent check on your reasoning. Further, you can turn up things that you were unaware of when you did your back-of-the-envelope intuitive reasoning. Then, a further check is that you be able to translate the mathematics back into plain English (or French, Mandarin, or whatever) and get the idea across to someone who may not be conversant in the mathematics. Anyone who is saying that you can't do it by using math is making excuses for themselves. They're saying: "I can't walk from here to downtown." I'm saying: "Get in the car and drive."

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  29. Richard, we _perceive_ reality through theories.

    Perception is theory-laden.

    And there a dozens of very different sorts of "theories" in science.

    You are not thinking of all of science, you are thinking of some tiny domain of it you were once taught from a textbook.

    Richard writes,

    "Theories aren't proven precisely necessarily, but you can with evidence show how close to reality they are for given important things."

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  30. The test of the competence of any economist is to ask him to explain why Lerner and Lange could _not_ "get downtown" (coordinating the economy as a whole) with their equilibrium mathematics.

    Stephen's argument would be that anyone who challenged Lerner and Lange on the use of equilibrium mathematics in economics was just making excuses for themselves -- Stephen would tell them, "Just build yourself an imaginary math construct 'car" and drive."

    Stephen writes,

    "Anyone who is saying that you can't do it by using math is making excuses for themselves. They're saying: "I can't walk from here to downtown." I'm saying: "Get in the car and drive."

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  31. A physicist would laugh you out of the department floor if you made such an argument against someone tying to explain to you aspects of physical phenomena which can't provide specific predictions of place or time or which can't be fully captured with a mathematically tractable formula.

    Stephen writes,

    "Anyone who is saying that you can't do it by using math is making excuses for themselves. They're saying: "I can't walk from here to downtown." I'm saying: "Get in the car and drive.""

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  32. My challenge for Stephen Williamson, which is repeatedly being removed from this site.

    http://hayekcenter.org/?p=4726

    (A problem with your software?)

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  33. Just for the record, no one denies the uses of mathematics which Stephen rehearses. Such a discussion thus becomes a red herring.

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  34. "A physicist would laugh you out of the department floor..."

    Actually, when the physicists try to do economics, it is pretty funny.

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  35. What part of mathematical equilibrium theory _wasn't_ inspired by mahematical physics? See Philip Mirowski's _More Heat Than Light_ for details.

    "Actually, when the physicists try to do economics, it is pretty funny."

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  36. Stephen, you are forgetting Robert Solow's classic when dealing with a crank: "If the person next to you declares he is Napoleon Bonaparte, it is not wise to engage him in discussion about what tactics he should have used at Austerlitz"

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  37. last anonymous,

    I'm not actually engaged here. I'm just throwing in the odd one-liner, and letting this thing run itself out.

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  38. Stephen, you are engaged enough to delete substantive and widely noted counter-examples to your claim that EVERYTHING of interest the real world can be stuffed into maths. Counter-examples noted by many of best in your profession.

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  39. Dear Stephen,

    "Then, a further check is that you be able to translate the mathematics back into plain English (or French, Mandarin, or whatever) and get the idea across to someone who may not be conversant in the mathematics."

    I’m not in the profession, but I have plenty of practical experience with actual financial markets. As part of my efforts to figure out the big picture, I read several journal articles a week. I can vouch that translation back into English rarely happens.

    For instance, I still have yet to read a full English version of the Kiyotaki-Wright search theory of money. KW is one of the building stones of new monetarism, it should have been transcribed theorem by theorem into words.

    You accuse Krugman of destroying your “relationship with lay people.” The real problem is you don’t have much of a relationship with lay people because we don’t understand you - your work is never translated back into English. I for one would love to understand more about what math-oriented economists are saying so as to compare your abstractions to my actual experiences in markets, but it’s tough. My halting math skills have probably granted me just a 60% or-so understanding of Kiyotaki-Wright’s early 1990s papers. Would like to move that up to 100% without taking 3 years of math.

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  40. "Not true. If it's a good economic idea, and correct, you have to be able to do the math, or the idea is in fact incoherent."

    Here there's an issue of how you define math.

    I remember in my PhD micro courses you'd have the little squigly greater than signs for preference and other symbols that were very much like just using a symbol in place of a word. The math wasn't all that different from logic in English.

    And in fact, language can be "math", a chain of unbroken logic linked to acceptable assumptions. Indeed, there was a time when math was done in language without symbols, "Consider a quantity; add it to a second quantity..." The symbols were just a shorthand that saved time and for some things made it a lot more clear and manageable.

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  41. Stephen, your higher status peers have substantive counter-examples to your "it's all in there" claims about math formulas.

    And you?

    So far, Stephen, you've brought nothing to the table.

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  42. There sure are a lot of stupid people posting here. Steve, you're a saint to give these nuts a place to vent their idiocy.

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  43. There's an interesting example of how an old theory, more than 50 years old, was discarded by the field for a newer theory, then 50 years later it appears to the field that the old theory may have been correct after all.

    The old theory was that sugars not only are very bad for weight gain, they are also very bad for toxic effects, and a substantial cause of heart disease.

    This theory was discarded for the one that heart disease is caused by bad fats, and there appears to have been a bias that there can only by one, "thee", explanation, rather than there being more than one thing that contributes (I've noticed this same "thee" explanation thinking in finance and economics).

    The story is in a long recent New York Times article, "Is Sugar Toxic?", at:

    http://www.nytimes.com/2011/04/17/magazine/mag-17Sugar-t.html

    Listen to this quote and tell me if this kind of thing sounds familiar in economics:

    "European clinicians tended to side with Yudkin; Americans with Keys. The situation wasn’t helped, as one of Yudkin’s colleagues later told me, by the fact that “there was quite a bit of loathing” between the two nutritionists themselves. In 1971, Keys published an article attacking Yudkin and describing his evidence against sugar as “flimsy indeed.” He treated Yudkin as a figure of scorn, and Yudkin never managed to shake the portrayal.

    By the end of the 1970s, any scientist who studied the potentially deleterious effects of sugar in the diet, according to Sheldon Reiser, who did just that at the U.S.D.A.’s Carbohydrate Nutrition Laboratory in Beltsville, Md., and talked about it publicly, was endangering his reputation."

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  44. JP Koning,

    It is easy: go read prof. Williamson´s Macroeconomics textbook. It is a superb way to get the basics of modern macroeconomics. Should be a compulsory read for everyone, even for non-economists.

    A

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  45. Prof. Williamson,

    I am a student of macroeconomics and I would love you to solve me a doubt. I am rather confused about Ricardian Equivalence (RE), about what it says and what it does not say. On his blog, Paul Krugman talks about RE like this: http://krugman.blogs.nytimes.com/2009/04/06/one-more-time/

    As far as I am concerned - and this is something I have read on your terrific textbook Macroeconomics - RE refers to a proposition that states that financing a given path of public spending through taxes or through issuing public debt does not matter for economic activity, as it has no effect on consumption, saving and output. But an increase in the public spending, be it temporary, be it permanent, is another story, and it would actually affect consumption, saving and output, even if RE holds. Am I wrong, professor, or is Paul Krugman?

    Thank you so much in advance.

    Best,

    A

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  46. Anony, thanks for the advice. Will check it out.

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  47. Advancing understanding by achieving a precise understanding of what math formulas _CAN_ and can’t do in economics implies essentially the opposite of what Stephen suggests, that to identify specific limits to math formulas is equivalent to advocating that we “pass a law prohibiting the use of math and statistics” in economics.

    As I’ve already said, there are important roles for math and statistics in economics — e.g. they help us identify the patterns of global order / coordination and disorder / discoordination that demand causal explanation.

    It’s a very flimsy straw man to suggest that the choice is between either believing (a) that math formulas and statistics can capture the _whole_ of what is of significance in an economic explanation; or (b) math formulas and statistics have no place in economics.

    It’s an absurd false choice, not at all implied by the claim that there are a number of centrally significant things that cannot be put into a math formula which play a central explanatory role in economic science. Just as Godel’s proof that there are limits to what can be proved in some formal systems did not imply that logical proof should be “outlawed”, the proof of Knight, Hayek, etc. that there are limits to what math formulas can capture does not imply that equilibrium constructs, statistics, etc. have no explanatory or problem identification role to play in economic science.

    As I say, it’s an extremely weak, unmotivated, and even bizarre straw man to suggest this poverty of alternatives, which has in no way been suggested by anyone.

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  48. Ransom:

    Please go away. No one reading these posts is interested in what you have to say, which is utter nonsense.

    JP,

    I understand exactly what you're saying. No one said that it is going to be easy to understand all this stuff. What I'm trying to do, in general, is to work on three different levels: (i) journal articles, aimed at a specialized audiences; (ii) textbook, which tries to distill frontier macro for an undergraduate audience; (iii) blog, which has more policy content, and where I try to use plain English to say the same things. It's all time-consuming but the activities are complementary. I try out some ideas here that I can use in the academic papers, and there are things I learn here that I can use when I teach and in my textbook, for example. On the Kiyotaki-Wright model, in particular, their original goal with that was to model an idea that is in Jevons, but Jevons wrote down the idea in words. If you formalize the idea in a rigorous modern model, you get some more insight into monetary exchange - for example there can be multiple equilibria. Then, you can add to it by solving some technical problems (that's Lagos-Wright for example), and you can then add private banking and central banking, for example. The result is something that Jevons would never have dreamed of.

    Ricardian equivalence anonymous:

    Here, there is a big difference between thinking about the effects of expenditures by the government on goods and services, and changes in the timing of taxes. The latter is what Ricardian equivalence deals with though, in fact, the lack of Ricardian equivalence is a key part of Keynesian economics - that's a big contributor to the Keynesian multiplier. I deal with some of those things in my text book, and have discussed them (and there is a contribution by Hal Cole here as well) in other blog posts. See:

    http://newmonetarism.blogspot.com/2011/03/ricardian-equivalence.html

    http://newmonetarism.blogspot.com/2011/03/hal-coles-take-on-krugmandelong-debate.html

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  49. It is telling that all the people posting here about what math cannot do (Knightian uncertainty) ignore the massive literature that uses math for that very purpose. Steve, you were too nice -- most of the people here should go away because their comments are nonsense.

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  50. I have looked at the "Austrian" blog sites from which your arch-critic Ransom emanates and what a bombed out vacant lot they are. There is no community of scholars, just a cult of about half-a-dozen people talking to each other about how smart they are, not like those thousands and thousands of mainstream economists. They oafishly revel in their mathematical ignorance.
    How depressing their discourse is in its rambling verbal confusion!

    Keep on advancing the science, Prof W.

    By the way, I know you are busy, but what do you think of Angeletos and La'O 's paper on Sentiments ? Seems intriguing.

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  51. Stephen, thanks for your comments. I asked about a English translation of Kiyotaki & Wright, and you seem to be directing me to Jevons for this.

    Ignoring the fact that I thought you didn't like pre-1950s stuff, I've read Jevons and Menger many times. Reading old work is one of the strategies that the layman can use to gain intellectual access to economic ideas since most of it is in English.

    The way I see it, the only way I can really evaluate how well KW have built on these 19th C. ideas is by understanding their mathematical reconstructions. Because I've looked high and low for a formal English translation of the 1990s KW version of Jevons-Menger and it has yet to be written. Which means that I can't compare it to the original Jevons-Menger formulation which I have a pretty good grasp of.

    Anyways, enough complaining on my part, I'll just have to get better at math. But I very much enjoy your attempts on this blog to translate the math back into words.

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  52. general comment: You can see this post does not have a lot of content. It's just expressing some frustration with some elements of the right and left of the spectrum. Some of the comments illustrate the problem. It's important to be open to alternative ideas, as you never know where good ones might come from. Sometimes you explore something and find out there is nothing going on but negativity, which certainly seems to be the case with Ransom and friends.

    JP: Here is KW 89 in words: In developed economies where people specialize on both the consumption and production sides, and where information problems make exchange using credit difficult, barter exchange is costly and time-consuming. We can overcome this problem if economic agents coordinate on the use of a particular object as a medium of exchange. That object - money - could in principle be a commodity or an object with no intrinsic value. Now, we hold money for two reasons: because it has good intrinsic properties (portability and scarcity, for example) and also because it is acceptable. However, acceptability is an endogenous property of a medium of exchange - objects are acceptable because they are acceptable. This can lead to multiple outcomes. We could just as easily observe a particular economy with object A used as money, as with object B used as money. That's it.

    I hope I did not give you the impression that reading classic works in economics is a complete waste of time. Those works were written by thoughtful and perceptive people, and sometimes we forget the important things they had to say. However, time is scarce, and if you spent all your time reading Marshall, Keynes, Wicksell, Hicks, etc., you would never get up to speed in modern economics, which would not make you of much use to anyone as an economist. We're not just replicating what is in the old works. We are building on the ideas, keeping good ideas, and throwing out the bad ones.

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  53. The fact is the grad student today don't learn a ANY economics other than the math of the moment -- history of econ classes were eliminated from core requirements. One of the many reasons why the AEA began labeling econ grads as "Idiot Savants". See the Com. of Grad. Education report of 1992.

    Things have not gotten better.

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  54. These are the things that are easy to pick up on your own. You do not need special instruction or a course in the history of economic thought to read Wicksell. I would go so far as to say that for Economic History too, though I know some people would argue with me about that. We eliminated these things from the core of PhD programs for good reason. The requirements were simply there to protect someone's turf, which also goes for most of the field requirements that still exist in many PhD programs. You could make a good case for requiring only the core and a dissertation. Getting a PhD in economics is about acquiring some basic tools, then learning to do research, which then directs what you read.

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  55. Professor Williamson,

    Thank you so much for your hints as to what RE is and what it is not.

    Am I allowed to ask you about whether you know of some recent books?

    There´s a new book out by Jean-Pascal BĂ©nassy.

    http://www.amazon.com/Macroeconomic-Theory-Jean-Pascal-B%C3%A9nassy/dp/0195387716/ref=sr_1_1?ie=UTF8&qid=1303059060&sr=8-1

    Another book I´d love to know your opinion about is the following:

    http://www.amazon.com/gp/product/0978936000/ref=s9_simh_gw_p14_d0_i1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-3&pf_rd_r=1G3CH3CYQ24QH9YWK22A&pf_rd_t=101&pf_rd_p=470938811&pf_rd_i=507846

    Thank you very much in advance.

    All the best,

    A

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  56. I have not seen the Benassy book, so I don't have an opinion on it. The Great Depressions book I have seen. That's a project run by Tim Kehoe and Ed Prescott which involves applying an RBC-type approach to longer downturns, including the Great Depression in the US. It's interesting, but of course it downplays financial factors in all these episodes, which I think is wrong.

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  57. Stephen, thanks for that, but I think you missed my point. I'm not looking for a three sentence summarization of KW 1989, I can get that from the abstract or conclusion. It's really the middle (pgs. 930 - 950) that needs an in-depth translation. KW 1989 isn't even that bad, Lagos & Wright 2005 for instance is a nightmare. Anyways, like I already said, the path of least resistance is just to get better at math. Translation back into English, Alfred Marshall's third maxim for good economics, really doesn't seem to be a priority in any of the papers I've tried to read. I guess I could pick up a textbook, but my interests are pretty specific and textbooks far too broad-brushed. This post has obviously strayed, so I will now hush up.

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  58. "You could make a good case for requiring only the core and a dissertation. Getting a PhD in economics is about acquiring some basic tools, then learning to do research, which then directs what you read."

    Here's the problem I see with that from my finance PhD experience (which involved taking about half of the econ. PhD required classes): After the classes are done, there's very quickly huge pressure (and penalties) to finish the dissertation and write papers as fast as humanly (or super-humanly) possible.

    Thus, the pressure is to stop spending time learning anything besides what you need to publish papers as fast as possible. And, the fastest way to crank out paper after paper is to narrowly specialize. Then there's a lot less constant new learning necessary to produce.

    So the great incentive if you want to advance in the field (or not fall back), and everyone does after having worked massive hours for years and years, is to only spend time learning about and producing in your narrow specialty. Unless you're forced to learn about other economics, by say a PhD program requirement, you spend time on it at your own risk, because it's doing way less to add to your production than if you had spent that time working on your specialty. And the competition you're judged against knows that too.

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  59. Come on, Richard. If a PhD program in economics is not loaded with field requirements, a student can be done with most course work by the end of the second year. A good model is a second-year paper requirement, due at the end of the summer of the second year, that gets students jump-started on research. Then they have 3 more years (and some take 4, 5, or more) to get the dissertation done. That's hardly a harried, rush-rush schedule to churn papers out with not much thought. Especially at the top, students are treated very well. Some have to do TA work for financial support, but there are many fellowship students who have no specific demands on their time other than working on the dissertation full-time. Students of course need to specialize, but the beauty of economics training is the common core, which makes it easy to understand what people are doing in other fields. A typical economics department in a research university has an array of seminars and workshops in different fields, which students can attend to get ideas from people working in different areas. You don't know what you are talking about.

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  60. I mean these things are true to an extent, but there's pressure to graduate as early as possible, and then there's pressure to publish as much and as soon as possible on the job. You're exposed to other economics in the 90 minute seminars, but is that really learning them well? I remember talking to a nationally respected econometrician on a very basic IO issue, Microsoft's anti-trust case, and him showing not even elementary understanding.

    Also, it depends on what you go into. The most mathematcal finance and econometrics really takes a lot of math learning time, at least if you don't already have a masters or PhD in math before starting. It doesn't leave much extra time if you want to graduate in around four years.

    And you do see a lot of complaints from economists about economists without bachelors in econ, not understanding intuitively much of the field.

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  61. I just don't see a lot of professors and PhD students having a lot of free time to just study something not in their specialty that won't help them much to produce papers.

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  62. David Colander, in a paper linked at the AEA web site:

    "The report of the Committee on Graduate Education in Economics called for a balancing of breadth and depth in the core. That clearly hasn’t happened; the core focuses more on depth, not breadth. The core courses provide little context for why those techniques that the students are learning are important or why they have developed. The core courses almost never survey the field, nor do they attempt to put the ongoing debates in context. They make almost no attempt to provide knowledge of the field that would translate beyond the particular professor’s approach. Students have little sense of background to the debates or the techniques and do not understand why they developed, and what use they are.

    Instead, the students are thrown into the particular approach, and a particular
    technique, and told to learn it."

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  63. “Report of the Commission on Graduate Education in Economics.” Journal of Economic Literature, 29 (3), pp. 1035-1053. Krueger, Anne O., Kenneth J. Arrow, Olivier Jean Blanchard, Alan S. Blinder, Claudia Goldin, Edward E. Leamer, Robert Lucas, John Panzar, Rudolph G. Penner, T. Paul Schultz, Joseph E. Stiglitz, and Lawrence H. Summers. 1991.

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  64. Richard,

    Yes, time is scarce. So what?

    David Colander: PhD 1976, has taught at Middlebury College since 1982, a place that apparently has no graduate programs in economics. Apparently he is an authority in graduate education. Go figure. The last I checked, we don't decide on the content of graduate programs by deferring to some AEA committee, fortunately.

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  65. Stephen, there are scientists who study academic economists like endemologists study bugs. Colander is one of those scientists -- he's done extensive research on the topic, as did the AEA committee.

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  66. I dare say that that those who study economists like endemologiest study bugs have a far better, empirically grounded, non-fashion flipping handle on their object of study than do academic economists on theirs.

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  67. That's entomologist I think.....

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  68. Prof. Williamson,

    I don´t know if you have read this:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1701401&http://www.google.es/url?sa=t&source=web&cd=9&ved=0CFsQFjAI&url=http%3A%2F%2Fpapers.ssrn.com%2Fsol3%2FDelivery.cfm%2FSSRN_ID1701401_code600.pdf%3Fabstractid%3D1701401%26mirid%3D1&rct=j&q=teaching%20intermediate%20macroeconomics%20macroeconomics%20stephen%20williamson&ei=vLStTaemO8as8QOYp4zzAQ&usg=AFQjCNGRUgLed_XMbP6TP5tCXZH2yKLSpw

    Maybe you are interested in taking a look at it.

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  69. No I haven't read it. I have to revise my book, so I'll take a look before I do that.

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  70. Ok, thank you so much, prof. Williamson.

    Will you include Farmer´s Old Keynesian microfounded model in your book? I am aware that doing that would be very challenging...

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  71. I actually thought of that. Not sure where it goes though. I have a simple version of 1990s Farmer in one of the business cycle chapters - increasing returns and multiple equilibria. The new Farmer is actually not that hard if you simplify it, and you could teach it to undergraduates. It has unemployment in it, which is nice.

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  72. That would be awesome, prof. Williamson. I am looking forward to your textbook new edition, which should be out...in 2013?

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