tag:blogger.com,1999:blog-2499715909956774229.post4530872680181711809..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: Amplification and IndeterminacyStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-2499715909956774229.post-18299142640703111792013-01-17T12:27:21.425-08:002013-01-17T12:27:21.425-08:00Gees! Enough is enough! So much discussion about w...Gees! Enough is enough! So much discussion about what equilibrium is and whether it exists is nonsense, or at least a waste of time. I like to think that the real world is always in some kind of temporary equilibrium. Things happen for a reason. There are always many forces at work and reality is expected to the outcome of those forces. This is not just a practical way to think about equilibrium. That our models are a simplification of reality is one thing, and an incomplete understanding of reality is another. If what we see going on is not an equilibrium, then what is it? Therefore, if there is a financial crisis, it's got to be an equilibrium in some sense rather than a deviation of it. For me, this unfruitful discussion about equilibrium is worrisome. And we economists are perhaps those to blame.Abraham Velanoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-78617116137261944572012-03-18T21:07:14.257-07:002012-03-18T21:07:14.257-07:00Equilibrium is more like a balanced way of process...Equilibrium is more like a balanced way of processing in dynamic models like you get what you pay for. We always get annoyed with this kind of thing as a freshman. But it's not that big a problem I think.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-29469595365939723172012-03-06T12:46:58.149-08:002012-03-06T12:46:58.149-08:00Tell me, oh so wise Anonymous. Are markets with i...Tell me, oh so wise Anonymous. Are markets with inventories in equilibrium? What about markets with rationing? <br /><br />How do you know whether something is in equilibrium? You don't. So in the end you're forced to argue that people are stupid and that you know better than they do what they should be doing. I'd say fuck off, but that might be considered rude.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-19553440125590325762012-03-05T12:57:06.593-08:002012-03-05T12:57:06.593-08:00You cannot frame a debate over something you, and ...You cannot frame a debate over something you, and many of those you read, do not understand. The proof is in the following sentence you wrote:<br /><br />"This blog is an oppossum Blog. Williamson defends Lucas, Taylor, Cochrane, Greenspan like there is no tomorrow,"<br /><br />You group John Taylor and Alan Greenspan together, as if they profess the same policy. This means you have missed the exchange between them over Taylor's assertion that Greenspan made a mistake when he violated the "Taylor rule" by keeping the targeted federal funds rate below the level predicted by the rule Taylor has proposed and Greenspan's response that the Taylor rule is somewhat useful but should not be the only criterion on which the Fed's decision is based. So how can someone side with both when they do not even side with each other? <br /><br />The difference between your approach and those who criticize your comments is that the latter refuse to engage precisely in the tactics of the GOP. Use gross and unfortunate generalizations according to divide the world to "good" and "evil", declare that if you are not with us you are against us, and then go after the those who are not with you with ad hominem attacks. This is the point that people who think like that will never understand: That you can believe that Lucas is a good person and a great economist and still think he is dead wrong on some key issues.CAnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-6992355475581242872012-03-03T14:17:27.061-08:002012-03-03T14:17:27.061-08:00http://www.dklevine.com/archive/refs47869690000000...http://www.dklevine.com/archive/refs4786969000000000384.pdfAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-47389426002668974312012-03-02T16:39:04.481-08:002012-03-02T16:39:04.481-08:00The argument is about framing the debate.
If mark...The argument is about framing the debate.<br /><br />If markets are not in equilibrium, one has gone a long way toward making a very convincing case for regulation<br /><br />Conversely, if markets are guided by the invisible hand toward equilibrium then ... <br /><br />Someone gets right to the point with this comment.<br /><br />Look, you have an issue with Alan Greenspan, that's fine. Why don't you take it up with him and stop busting our chops?<br /><br />The reason I am busting chops is that people trusted this "profession" to bust Greenspan's chops and its didn't.<br /><br />I guess what keeps me adding a comment is a less re-learned from a David Bruck piece this week in the NYT when he complains that insanity has taken over the GOP because all the rinos are really opossums. <br /><br />This blog is an oppossum Blog. Williamson defends Lucas, Taylor, Cochrane, Greenspan like there is no tomorrow, leading Economics of Contempt to write:<br /><br />After reading John Taylor and John Cochrane's analyses Lehman's failure, I'm beginning to understand how it's possible for economists to say that "we're still arguing about the causes of the Great Depression." It's generally hard to come to an agreement when one side simply lies, or refuses to acknowledge undeniable facts.<br /><br />Two my cents is that the economic "concept" of equilibrium is a lie, a refusal to acknowledge undeniable facts.<br /><br />I realize I am beating a dead horse, but economics will have no use or benefit until it becomes truthful and long after that gains public respect. Today, the public correctly sees only opportunism. You have lots and lots of people and their crap that need to be thrown from the temple, like money changers. As long as Taylor, Greenspan, Cochrane, Lucas, all Hayekians and Austrians and lots and lots of others.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-37912904973852581152012-03-02T09:03:52.112-08:002012-03-02T09:03:52.112-08:00Ok. Let say we agree to repeat after you that &quo...Ok. Let say we agree to repeat after you that "Markets are never in equilibrium." <br /><br />Where does that leave us, exactly? Does such wordsmithing give you added insight into how good or bad outcomes are? It does not.<br /><br />Please understand this: Equilibrium in economics does not imply that equilibrium is a nice outcome. For example, "Equilibrium" output levels under monopoly, you will recall are generally not good even by the standard of pareto optimality. Most Nash equilibria of games will also fail this test, and so on...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-55006549986929311482012-03-02T08:31:57.605-08:002012-03-02T08:31:57.605-08:00"Why is it so hard to say the truth: markets ..."Why is it so hard to say the truth: markets are never in equilibrium?"<br /><br />Why is it so hard to say the truth: Anonymous doesn't have any idea what he's talking about.<br /><br />See, I can do it too.The Hooka Catnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-17283152655795840412012-03-02T07:58:01.890-08:002012-03-02T07:58:01.890-08:00"markets are never in equilibrium?"
Rea..."markets are never in equilibrium?"<br /><br />Really? So when you go to buy milk, bread, gasoline, and so on you keep witnessing shortages of some items and surpluses of others? Or did you have the old Soviet Union in mind?<br /><br />Of course in SOME markets frictions do prevent the equilibrium from being reached. Three ECONOMISTS won the last Nobel price for shedding light to the role of frictions in the labor market and defining an "equilibrium level of unemployment". Look, you have an issue with Alan Greenspan, that's fine. Why don't you take it up with him and stop busting our chops?CAnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-25721504383815266502012-03-01T15:49:58.171-08:002012-03-01T15:49:58.171-08:00Here is Alan Greenspan, economist, back as a free ...Here is Alan Greenspan, economist, back as a free market evangelist, and it’s rather wonderful to read him describe economic equilibrium:<br /><br />Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque. With notably rare exceptions (2008, for example), the global “invisible hand” has created relatively stable exchange rates, interest rates, prices, and wage rates.<br /><br />http://crookedtimber.org/2011/03/30/with-notably-rare-exceptions/<br /><br />It is amazing to see people so dedicated to promoting dishonesty. Why is it so hard to say the truth: markets are never in equilibrium?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-62788685622181919602012-03-01T14:45:34.086-08:002012-03-01T14:45:34.086-08:00'overly aggregated, completely uninterested in...'overly aggregated, completely uninterested in micro foundations and therefore worthless.'<br /><br />Of course this is an unbacked assertion about micro foundations being important.<br /><br />'Keen argues that neoclassical econ ignores debt. What a damn fool. The literature has been full of papers on debt, even before the crisis. Its just that Keen didnt read them.'<br /><br />Keen overstates his case but many neoclassical models *do* ignore debt in general, as 'one person's asset is another's liability'. The papers that incorporate debt generally do it on an ad-hoc basis.<br /><br />All in all, Keen's empirical evidence is just too ample for me to disagree with him on debt.Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-24029805429549746662012-03-01T12:04:03.686-08:002012-03-01T12:04:03.686-08:00"I understand what "equilibrium" is..."I understand what "equilibrium" is in plain english and I understand how "equilibrium" is misused to describe an entirely different state in economics."<br /><br />A statement more demonstrably false has rarely been committed to e-paper.The Hooka Catnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-40126087264964996582012-02-29T10:47:10.173-08:002012-02-29T10:47:10.173-08:00Suppose we have two moneys, MBS's and cash. MB...Suppose we have two moneys, MBS's and cash. MBS's are somewhat better than cash because they pay positive nominal interest rate. Suppose MBS's suddenly disappear. Apart from the loss due to the need to use more costly cash to pay for transactions, why would this lead to a major recession? Is there something about the transition to the cash only economy that makes it particularly painful to get there? What would that be?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-84945310179470137632012-02-29T08:07:35.532-08:002012-02-29T08:07:35.532-08:00Prof. Williamson, thanks for posting your reading ...Prof. Williamson, thanks for posting your reading list. Helps those of us who do research in different areas catch up!CAnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-70982055427933150062012-02-29T08:05:43.671-08:002012-02-29T08:05:43.671-08:00Does the world "relativity" as used in p...Does the world "relativity" as used in physics have the same meaning as in "plain English". No! You may want to read "Fashionable Nonsense: Postmodern Intellectual's Abuse of Science" to see what happens when people fail to make that distinction. Does this makes physicists dishonest? Give me a break! If you want to talk economics bother to learn to use the language properly, and stop blaming everyone else, post after post, for your deficiencies.CAnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-2380388479248637442012-02-29T07:27:54.412-08:002012-02-29T07:27:54.412-08:00I understand what "equilibrium" is in pl...I understand what "equilibrium" is in plain english and I understand how "equilibrium" is misused to describe an entirely different state in economics.<br /><br />The issue is why did economists start misusing the word "equilibrium"? The answer does not lie in science, for their are better words for describing the intended idea or concept. <br /><br />The answer is that it permits economists to mislead and make the political argument that there is no need for regulation because "markets" will return to natural state of being in balance,etc.<br /><br />In fact, the opposite is true. Man is not an economic rational actor, but is driven by the psychology of human misjudgments. Markets do not return to any "natural state," and there is an ongoing need for regulation.<br /><br />IOW, the misuse of the word is intentional framing of a larger and very real political argument (and really not about any science at all).<br /><br />No honest person would ever describe markets as being in "equilibrium." Similarly, no honest person would credit the idea of the efficient-market hypothesis. Both are word games, not science.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-71315294800855349562012-02-28T17:57:14.991-08:002012-02-28T17:57:14.991-08:00"I understand the language of economics."..."I understand the language of economics."<br /><br />That is wrong, or misleading, deceptive, or whatever. You really do not understand what an equilibrium is. You need some more training.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-65645721019200464862012-02-28T17:54:51.701-08:002012-02-28T17:54:51.701-08:00Of course you're stating the obvious, Richard....Of course you're stating the obvious, Richard.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-12952631952668394142012-02-28T15:02:02.068-08:002012-02-28T15:02:02.068-08:001) I understand the language of economics
2) I al...1) I understand the language of economics<br /><br />2) I also understand when one is being misleading and deceptive<br /><br />3) to use a common word and give it a meaning the polar opposite of its common use is deceptive and misleading, especially when on goes to Congress or writes for the publicAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-91720463675203284072012-02-28T12:08:38.535-08:002012-02-28T12:08:38.535-08:00Just because you don't understand the language...Just because you don't understand the language of economics doesn't make it deficient, it makes you deficient. Lots of people think irregardless is a word, but they're as wrong as you are.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-49407711850003613322012-02-28T06:45:50.801-08:002012-02-28T06:45:50.801-08:00it seems to be that using "equilibrium" ...it seems to be that using "equilibrium" to describe something not in equilibrium, as that word is commonly understood, is at best "misleading"<br /><br />This is especially true because of the policy implications of admitting the truth which is that the economy is never in equilibrium.<br /><br />IOW,this is not science, it is a word game, no different than Greenspan's "with notably rare exceptions" caveat.<br /><br />It is one thing to use technical jargon. It something else entirely to use words that are misleading or to use words in a misleading way, having one's fingers crossed so that one can later claim, well according to such and such a paper, black = white.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-83327554006746780112012-02-28T05:39:40.547-08:002012-02-28T05:39:40.547-08:00Richard--there is.
Finance and financial interme...Richard--there is. <br /><br />Finance and financial intermediation are all about the study of contracts, and when and why particular forms are used. Mechanism design is the usual route to figuring out the tradeoffs involved. See the now-old book by Dewatripont and Tirole on bank regulation, for example: http://mitpress.mit.edu/catalog/item/default.asp?tid=7331&ttype=2. and there's been a lot of work sinceAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-21691696100515542362012-02-28T01:03:23.566-08:002012-02-28T01:03:23.566-08:00Allright then, perhaps regulation (more than zero ...Allright then, perhaps regulation (more than zero or a tiny amount) is a very important issue here. Perhaps it can really prevent regular crises, hardship, and loss. So there should be a good deal of study of how to regulate finance well.Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-86432320561092768712012-02-27T19:43:25.973-08:002012-02-27T19:43:25.973-08:00Look at Canada. I don't think you could say th...Look at Canada. I don't think you could say the Canadians have ever had a financial crisis. Is that heavy or light regulation? In some ways the US is heavier. It's just different regulation.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-55074030024992363252012-02-27T19:41:14.851-08:002012-02-27T19:41:14.851-08:00Gary,
Yes, as anonymous is pointing out, in moder...Gary,<br /><br />Yes, as anonymous is pointing out, in modern dynamic econmics, we can think about equilibrium systems that fluctuate and grow. They may fluctuate and grow in response to exogenous shocks, or they may fluctuate and grow endogenously.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.com