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The arguments for a basic income approach to social insurance are so strong, I sort of wonder why it not only is not widespread, it is not used at all. Humans are full of cognitive quirks that get in the way of implementing rational solutions.
Toggle Commented yesterday on Links for 08-30-16 at Economist's View
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I have elsewhere argued that the (Shiller) idea of using private insurance to protect against idiosyncratic risk is a mistake - generalized social insurance is much better. Private insurance is by nature expensive, piecemeal and potentially unreliable as the interest of the insurance giver is to avoid paying.
Toggle Commented yesterday on Links for 08-30-16 at Economist's View
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David, and how would that argument look with a basic income? It might even REVERSE (because the fall in perceived wealth for wealth holders could be much larger than the much better cushioned wealth-less under a basic income system).
Toggle Commented yesterday on Links for 08-30-16 at Economist's View
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This is sort of correct, but rather short and not very optimistic. I think we can in fact build a much better economics without just shrugging our shoulders and saying "it's complicated". The model should be weather forecasting where enormous progress has been made with a even more complex system. One thing I definitely find missing from this discussion is TIME. Time plays a very important role, and is all but missing from economic model specifications. The old "mythical man-month" argument is needed in a new environment here. Economists have long thought in terms of discrete time periods and partial equilibrium models (simpler to deal with, I admit). But real life doesn't work like that, all sorts of developments incorporate time lags and time lags and uncertainty interact closely with one another.
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I'm not impressed by economists (rather than engineers or geologists) talking about oil production future: http://voxeu.org/article/oils-two-pronged-price-revolution-changes-everything To put it simply, there is no reason to suppose that they know what they are talking about. They are implicitly making the assumption that production capacity can be monotonically increased. No new production is constantly needed to offset declines in other fields. They also don't seem to allow for search costs. Yes the extractable reserves keep increasing. No that doesn't mean average extraction costs are falling despite "efficiency gains" (whatever that means - I suspect it mostly means cost shifting).
Toggle Commented Aug 17, 2016 on Links for 08-17-16 at Economist's View
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MT, I find it interesting that you post this now given my comments in the last few days on DSGE. Given the publication date, I guess this is just co-incidence, but perhaps it made the paper more attractive. But yes, I overwhelmingly agree with the paper. One quibble: "To quote MWG (p.620), “economists are good (or so we hope) at recognizing a state of equilibrium but are poor at predicting precisely how an economy in disequilibrium will evolve.” " If he is talking about "general equilibrium", I don't think it has actually ever existed, so how could it be recognized? For instance, the great moderation was seen as an equilibrium phenomenon when clearly (because of secular changes in important ratios) it wasn't.
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And point 3 (RE) is just weird - it seems to amount to saying, if we make some silly assumptions that help us to solve the model, we can investigate what happens if we relax the assumptions (in the very short term I take it). As I've said before, solving the model is the problem - it makes the assumption that there is no path dependence. Anybody looking seriously at historical economic data cannot help but notice path dependence.
Toggle Commented Aug 16, 2016 on What's Useful about DSGE Models? at Economist's View
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"Second, and this is particularly important for my own research, the NK model makes explicit and gives a central role to expectations about future economic variables...." ???? How is this a justification for DSGE in general? Cannot other sorts of model also do this. And surely it is not irrelevant how the expectations are formed (or how realistically that process is modeled)?
Toggle Commented Aug 16, 2016 on What's Useful about DSGE Models? at Economist's View
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My real question here is how do we know what the path of potential GDP actually is? I wouldn't be surprised if the estimation can be exposed as being distorted by circular logic. That, and I think Chris Lowery has a point.
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Blissex: Read http://rjwaldmann.blogspot.de/2012/03/modern-macroeconomic-methodology-modern.html where the often excellent Robert Waldmann in fact points out that Lucas (micro-foundations - introduced in search of counterfactual policy relevance) and Friedmann are actually contradictory. To me though, the big issue is empirical. DSGE has mainly failed (in all but the minds of the die-hard practitioners) because the solution space has proved to be extremely sensitive to the details of the assumptions used in the model - so that it is almost possible (as Robert Waldmann once offered to do) to create a model to produce any desired policy recommendation. It doesn't take much reflection to see how this makes the methodology essentially useless.
Toggle Commented Aug 15, 2016 on Do DSGE Models Have a Future? at Economist's View
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Kenneth Almquist A perhaps clearer example is the equivalent claim that astronomy must be be based particle physics. We still actually don't fully understand gravity for isntance, but we have none-the-less made a lot of progress in astronomy.
Toggle Commented Aug 15, 2016 on Do DSGE Models Have a Future? at Economist's View
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Please note the very last sentence in the paper: "To do that however, they have to build more on the rest of macro-economics and agree to share the scene with other types of GENERAL EQUILIBRIUM MODELS." They just don't get it do they. General Equilibrium is and always has been the problem. Repeat after me "the economic system is an evolutionary system, not an equilibrium system".
Toggle Commented Aug 12, 2016 on Do DSGE Models Have a Future? at Economist's View
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Hair meets heirs - is well written and interestingly Paul Krugman places (or at least claims to place) himself to the left of the DLC here. I don't like the left-right spectrum as a prism for political views myself. I prefer to describe as temperamentally egalitarian, rather than leftist myself.
Toggle Commented Aug 11, 2016 on Links for 08-11-16 at Economist's View
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pgl "And by its nature - macroeconomics is general equilibrium expect equilibrium did not mean that all markets clear instantly." I disagree - macroeconomics is the economics at the macro scale (it is like the difference between cosmology and astronomy). Macro-economics is related to micro-economics via adding up constraints and removing ceteris paribus assumptions. Equilibrium is not part of the definition. And the really interesting questions arise in disequilibrium.
Toggle Commented Aug 11, 2016 on Do DSGE Models Have a Future? at Economist's View
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I just thought that people might misinterpret me. I am not saying that no equilibrium is possible or that gross instability is common, I am saying that we need to model the forces leading to (or away) from equilibrium and if a (sort of) equilibrium emerges then it EMERGES. Weather these days is forecast by monte carlo experiments with models that can give a probability of different outcomes. Mostly weather remains within stable boundaries, but sometimes there are hurricanes and tornadoes.
Toggle Commented Aug 11, 2016 on Do DSGE Models Have a Future? at Economist's View
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Part of the problem here is the whole way we look at economics, and that in a sense is dictated by what we measure. I keep saying, in equilibrium NOTHING happens. It makes no sense for transactions (which are what we measure) to happen in a world in equilibrium. Transactions happen because of disequilibium. It is like the old joke about the economist and the $5 note (that can't be there because someone would have picked it up). That is how the "great moderation" with secularly increasing levels of debt, increasing productivity with stagnant wages and large persistent trade imbalances came to be seen as sustainable. Macro-economic persistently don't model the actual driving forces (for instance technology and resources). The problem is not just a question of methodology, it is a fundamental philosophical error. Sorry, to be so negative, but this really needs to be thought about more.
Toggle Commented Aug 11, 2016 on Do DSGE Models Have a Future? at Economist's View
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P.S. The paper doesn't even address the general equilibrium issue or mention the possibility of genuinely dynamic agent based modeling (with the stochastic part being as much in the distribution of agent behavior as in factors external to the model). i.e. I think simulation models is the way to go. The model to follow should be weather forecasting.
Toggle Commented Aug 11, 2016 on Do DSGE Models Have a Future? at Economist's View
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jonny backho " It is incorrect to model from individual actors. " No I think this is missing the point. Personally, I think the problem is too little individuality not too much. The more you model heterogeneity, the more realistic the model looks. I really think the problem lies in the GE at the end, general equilibrium. We need models that model behavior, not models that assume that the system tends to a stable equilibrium.
Toggle Commented Aug 11, 2016 on Do DSGE Models Have a Future? at Economist's View
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I have a lot of time for Antonio Fatas, but that title has to go. I know what he means, but most people actually don't care very much about the rate of inflation (sorry John H.), so long as their real incomes go up. We need people to understand that raising expected inflation is a prerequisite for being able to raise interest rates (at least for being able to raise deposit/bond rates). And we need to be able to do that without raising leverage levels (because higher levels of leverage push down real returns - they must because they increase the price of assets without increasing productivity).
Toggle Commented Aug 10, 2016 on Links for 08-10-16 at Economist's View
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"http://www.economist.com/news/economics-brief/21703350-third-our-series-looks-stolper-samuelson-theorem-inconvenient-iota" What interests me about this discussion is that the paper uses rents not accumulated capital for its argument. Rents have been ignored for far too long (particularly in growth theory).
Toggle Commented Aug 9, 2016 on Links for 08-09-16 at Economist's View
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http://www.nber.org/papers/w22491 Just read the summary (pay efforts of pay inequality), but this is potentially interesting (the effects are quite large). It suggests, what I have suggested before that within workplace dynamics rely on co-operation whereas "free market" ideologues often only think competition is important. The world needs both co-operation AND choice (which is related to, but not exactly the same of competition).
Toggle Commented Aug 9, 2016 on Links for 08-09-16 at Economist's View
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http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/08/on-causes-of-brexit.html "Vote Leave was surely one of the most successful political campaigns in history. It was also dishonest and anti-intellectual. That both these claims are true is one of the most troubling features of modern politics." See my previous comment.
Toggle Commented Aug 9, 2016 on Experts, Facts, and Media at Economist's View
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Just spend the money, no need to borrow and promise the already rich a stream of income.
Toggle Commented Aug 9, 2016 on Paul Krugman: Time to Borrow at Economist's View
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This belongs to another thread - but at the bottom of that thread won't be read: http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/08/on-causes-of-brexit.html "Vote Leave was surely one of the most successful political campaigns in history. It was also dishonest and anti-intellectual. That both these claims are true is one of the most troubling features of modern politics." See my previous comment.
Toggle Commented Aug 9, 2016 on Links for 08-09-16 at Economist's View
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I just thought of a good anti-trump campaign - show Dr. Strangelove on TV in primetime. In Dr. Strangelove, the US President is the adult in the room, now replace him with Donald Trump.
Toggle Commented Aug 9, 2016 on Links for 08-09-16 at Economist's View
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