tag:blogger.com,1999:blog-17232051.post4842386032693168961..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Econ grad students and the Macro WarsNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger62125tag:blogger.com,1999:blog-17232051.post-69931015380433377442013-05-29T16:52:09.248-04:002013-05-29T16:52:09.248-04:00If you don't agree with any of that, there'...<i>If you don't agree with any of that, there's only a million people working on generalizations to uncertainty, ambiguity, social preferences, and so on.</i><br /><br />Seconded.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74115361270819692622013-05-29T14:29:53.128-04:002013-05-29T14:29:53.128-04:00Ugh, one of you people...
"Rational" in...Ugh, one of you people...<br /><br />"Rational" in economics means agents act deliberately. They have preferences over outcomes, and these prefernces are at least partially ordered, so you can tell me you prefer A to B, or B to A, or they can't be compared. Add completeness, so all options are comparable, and continuity, so that your preferences between A and B don't switch if I change A and B a little, and you have standard microeconomics.<br /><br />If you don't agree with any of that, there's only a million people working on generalizations to uncertainty, ambiguity, social preferences, and so on.<br /><br />What you want is to make claims without being confronted with a framework in which they must be consistent, which is not what micro is about.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-47011995031790807792012-12-13T02:14:04.476-05:002012-12-13T02:14:04.476-05:00Political science is harder. Waaaaay harder. The...Political science is harder. Waaaaay harder. They've got a few results, I guess, but it's hard to make generalizations about something which as as big as the nature of power.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63145198241617127122012-12-10T01:01:22.009-05:002012-12-10T01:01:22.009-05:00Wow, you are so knowledgable! Can you please refer...Wow, you are so knowledgable! Can you please refer me to the "neo-liberal macro" papers you have in mind? <br /><br />Anything by Ed Prescott, most work by Milton Friedman, Lucas, etc...<br /><br />"Can you also refer me to the non-neo-liberal macro papers/models that forecasted the "financial tsunami"?"<br /><br />Marx, Veblen, Keynes, Hicks, Minsky,...Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-41393273804758302652012-12-10T01:00:20.796-05:002012-12-10T01:00:20.796-05:00Several of the people you refer to who got Nobels ...Several of the people you refer to who got Nobels got them for writing stuff which is just empirically wrong. The "revolutions" in macro in the 1970s appear to have changed it from a fledging scientific field to a pile of junk.<br /><br />There really is a "macro war", but I think it's part of the usual political war between Veblen's "leisure class" and everyone else. Which side are you on?Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28780367974357677192012-12-10T00:57:20.706-05:002012-12-10T00:57:20.706-05:00Your "successful applications of micro" ...Your "successful applications of micro" link goes to "Page Not Found", which is kind of funny.<br /><br />"In experimental settings, basic micro theory actually does a pretty good job of predicting human behavior when uncertainty is not involved"<br /><br />Since there is no such circumstance in the real world, how useful *is* that? Really?<br /><br />At the moment, the corporate crime rates mean that a major uncertainty in any deal is "Is the other guy trying to cheat me?" But this uncertainty is *always* present.<br /><br />There are particular micro approaches which are working very well for limited areas, but I wouldn't call them "basic micro"; they've arisen out of experimental economics, game theory, marketing, political theory, etc.<br /><br />None of these have much of anything to do with traditional "rational money-maximizer" micro. The very defensive paper by Levine and Zheng does not make a convincing case that "rational money-maximizer" micro works for anything. In particular, the theory of the firm is poorly developed; firms simply don't behave the way traditional micro predicts they will.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-15210644632829263242012-12-10T00:47:16.781-05:002012-12-10T00:47:16.781-05:00Micro's "rational agents" are the bi...Micro's "rational agents" are the biggest piece of flim-flam in all of economics. We know people aren't rational, and worse, we know that macro's definition of "rational" isn't even rational. (Consider, for a first and key point, the marginal utility of money.)<br /><br />Micro is *rotten*. Macro wasn't rotten until people started trying to build it on "microfoundations", which are foundations of sand.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-5615603731278047652012-11-28T11:38:06.716-05:002012-11-28T11:38:06.716-05:00I think the distinction between micro and macro am...I think the distinction between micro and macro amongst graduate students might be due to the ready application of macroeconomic models to how the economy works whereas we are told at the beginning of micro to assume a rational agent which feels like operating in the world of the abstract. Therefore in micro it seems that we can only learn lessons that may or may not apply to reality. However in macroeconomics we are challenged with the task of readily applying the models to macroeconomic phenomena. Although the assumptions in macro models are now meant to be "microfounded" it seems like in macro we are more confused between abstraction and reality.<br /><br />One of Simon Wren Lewis' graduate studentsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-22639353978512537572012-11-27T06:56:11.108-05:002012-11-27T06:56:11.108-05:00How do we estimate macro-data? We use the framewor...How do we estimate macro-data? We use the framework of the national accounts, of course, and use it to classify and add billions of micro data. Those are the real micro-foundations of economics! These accounts enable at the very least an apt description of the recent past - as well as of the more distant past. And they enable analysis of the present and the future, one might try to read Dean Baker. What makes this macro? The accounting identities, of course, i.e. quadruple and even eightfold accounting. The national accounts are a consistent (in the sense that sectors add to all kind of totals which are consistent which each other as well as with the 'accoutning identities') as well as coherent, in the sense that concepts and definitions are carefully crafted to enable apt measurement of reality as well as to fit in the system. Read the SNA. The what? The SNA, the System of National Accounting (http://en.wikipedia.org/wiki/United_Nations_System_of_National_Accounts) which spells this out in bewildering boring but consistent and coherent detail. Much ideas of what Ph. D. students perceive to be macro, like Ricardian equivalence and intertemporal optimization, are in fact clever tricks to circumvent the accounting identities which, as the accounting identities are inherent to any economic system based upon an unit of account serving in an (not necessarily: market) exchange system with property rules, are however doomed to fail. The national accounts are the system used to map as well as to measure the modern macro economy, economics is a strange science in the sense that Ph. D. candidates do not know about how the very subject they are supposed to analyse is measured and do not know how to use this measurement framework in an analytical way (Hans-Werner Sinn is a case in point, when he analysed the Target 2 balances while abstracting from the capital and financial account, using only the current account).<br /><br />Merijn Knibbe Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-32162374239883572062012-11-26T17:19:17.762-05:002012-11-26T17:19:17.762-05:00Anonymous 4:56 PM.
What has your calculus added t...Anonymous 4:56 PM.<br /><br />What has your calculus added to macro economics? I understand that failed Physicists like Noah and a host of others enjoy going down to the minor league that is Economics because its math is so much easier but what has the increased mathematization of economics accomplished for the field? Other than provide more employment opportunities for the more math literate? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80647837074477670722012-11-26T15:01:51.347-05:002012-11-26T15:01:51.347-05:00"Let's be blunt and admit that neo-libera..."Let's be blunt and admit that neo-liberal macro is in its paradigmatic death throes"<br /><br />Wow, you are so knowledgable! Can you please refer me to the "neo-liberal macro" papers you have in mind? Can you also refer me to the non-neo-liberal macro papers/models that forecasted the "financial tsunami"? I will be eternaly grateful!CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21317326378541947782012-11-26T13:34:24.214-05:002012-11-26T13:34:24.214-05:00Fascinating reading, again, Noah, if a bit over my...Fascinating reading, again, Noah, if a bit over my head in spots. I especially liked that last thread you recommended, although as an ecologist married to a statistician, I did sometimes feel like a physicist listening to a vigorous dispute between two schools of astrology. Not that there's anything wrong with that.JohnRnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-12863022623109755932012-11-25T16:24:19.954-05:002012-11-25T16:24:19.954-05:00Steve, I think that at least once, you should try ...Steve, I think that at least once, you should try to publish a comment in the AER that consists of nothing but the sentence "No, you're wrong." If nothing else, the referee comments would be fun to read.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28158865372029521802012-11-25T15:21:38.176-05:002012-11-25T15:21:38.176-05:00Seriously, writers are interesting, and successful...Seriously, writers are interesting, and successful, when they write what they know. Pandering to an audience of grumblers isn't a recipe for success.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-22896465728292807332012-11-24T18:47:49.161-05:002012-11-24T18:47:49.161-05:00Let's be blunt and admit that neo-liberal macr...Let's be blunt and admit that neo-liberal macro is in its paradigmatic death throes. Not only did it utterly fail to see the biggest financial tsunami in history coming right at it, but four years later it is still wandering in the desert for lack of a way out. It has failed every predictive test on bond yields, interest rates, inflation, austerity, the confidence fairy (thank you PK), the eurozone and sovereign default.<br /><br />Because this shlock continues to be taught despite its uselessness, macro students rightly feel macro is a waste of time. Because in its current form it is.Ben Johannsonnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-44290720793086406612012-11-24T17:58:14.039-05:002012-11-24T17:58:14.039-05:00Wrong. Revealed your ignorance there, I'm afra...<i>Wrong. Revealed your ignorance there, I'm afraid.</i><br /><br />Oh, OK. Now I see my mistake...How could I have been so wrong?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-68148840837394135202012-11-24T15:01:23.732-05:002012-11-24T15:01:23.732-05:00"Macro theory tends to pick a couple of the (..."Macro theory tends to pick a couple of the (least realistic, simplest) approaches from micro theory and apply them to a problem that is much more complex than any studied by micro theorists."<br /><br />Wrong. Revealed your ignorance there, I'm afraid.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-5879381697844023232012-11-24T05:38:27.957-05:002012-11-24T05:38:27.957-05:00Fortunately most macroeconomists realize early in ...Fortunately most macroeconomists realize early in their careers that forecasting the future is a futile endeavour, especially when you have trouble to even understand the past.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36729024189213793852012-11-24T05:30:41.885-05:002012-11-24T05:30:41.885-05:00"In my field, international trade, we're ..."In my field, international trade, we're all pro free trade"<br /><br />"I think general equilibrium theory is pure nonsense, but it's not my field, so I leave them alone."<br /><br />Isn't trade theory just general equilibrium applied to countries?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-76189328528432094002012-11-23T22:17:53.182-05:002012-11-23T22:17:53.182-05:00Damn you Ludwig, back in your cage!! Shoo! Shoo!Damn you Ludwig, back in your cage!! Shoo! Shoo!Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-49736086711491118952012-11-23T22:15:37.467-05:002012-11-23T22:15:37.467-05:00My sense is that macro went wrong when macro-econo...<i>My sense is that macro went wrong when macro-economists decided micro foundations were necessary and that it was infected by the unreality of micro theory.</i><br /><br />Yes, I agree (see <a href="http://noahpinionblog.blogspot.com/2012/07/microfoundations-would-be-nice-if-we.html" rel="nofollow">here</a>).<br /><br />But "micro theory" has a million approaches, not all of which fit together in a coherent framework. I like this. Macro theory tends to pick a couple of the (least realistic, simplest) approaches from micro theory and apply them to a problem that is much more complex than any studied by micro theorists. This, I don't really like.<br /><br />Micro theory has had plenty of victories. In experimental settings, basic micro theory actually does a pretty good job of predicting human behavior when uncertainty is not involved - see <a href="http://www.dklevine.com/papers/theoryandexperiment2.pdf.pdf" rel="nofollow">this survey by David Levine and Jie Zheng</a>. It's only once you start introducing risk and uncertainty that existing micro theories start not to work very well.<br /><br />And then there are all the successful examples of <a href="http://www.economist.com/news/finance-and-economics/21567079-meet-economists-who-are-making-markets-work-better-micro-stars-macro-effects?fsrc=scn%2Ftw%2Fte%2Fpe%2Fmicrostarsmacroeffects" rel="nofollow">applications of micro</a>. Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16956271598952439612012-11-23T19:48:31.448-05:002012-11-23T19:48:31.448-05:00Well, I only have a business school economics mast...Well, I only have a business school economics master's but I gotta say that from the start of my study of economics the good old IS-LM model just really seemed to make sense in an economy like we have now. And, given Paul Krugman et al's, deliciously devastating demonstration that indeed that model is the way to go in times like these one can only conclude that political reactions are what are throwing a monkey wrench in the whole thing. <br /><br />See: Galileo...Noah Campbellhttps://www.blogger.com/profile/04227692422820068840noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24672249762235856342012-11-23T13:31:36.411-05:002012-11-23T13:31:36.411-05:00What is that whole "macro wars thing" an...What is that whole "macro wars thing" anyway? I don't see any particular war going on within the economics profession, other than the usual grumbling and shouting. This is actually a peaceful time in the history of economic thought, if you compare it to what happened when economists started doing more math, or the revolution in macro in the 1970s. Any wars are in the minds of people who don't actually do macroeconomics, or who once did it (maybe they sort of did it) and now want to blog about how it should be done.<br /><br />That said, there are many ways to skin a cat (apologies to cats). All of economics, including macro, is in flux, and people are hungry for new ideas. That's the nature of the business. You can't advance macroeconomics by whining about it in the EJMR or in Noah's comments section.<br /><br />In the 1970s there was a group of people who were not members of the economics establishment. In fact, several of them were kicked out of the Ivy League, and the rest were not given places there when they got out of graduate school. Those people worked at what were, at the time, obscure institutions in which to practice economics - Carnegie Mellon, Rochester, Minnesota. But those people kicked the butts of the economics establishment, started their own journals, and revolutionized economics. Ed Prescott, who was kicked out of Penn, has become enormously influential, in part through a lot of hard work in supervising a very large number of excellent and influential students. Tom Sargent was also kicked out of Penn, with much the same results. Bob Lucas wrote a watershed paper in 1972 that the AER would not publish - it came out in JET, at that time barely off the ground. All three of those people now have Nobel prizes.<br /><br />Bottom line: Quit whining. The obstacles are all in your minds.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-77618237293597789942012-11-23T10:28:34.600-05:002012-11-23T10:28:34.600-05:00If you wanted to get a grip on recent progress in ...If you wanted to get a grip on recent progress in Physics, would you ask a random sample of people on the street? If you wanted to find out what is going on in macroeconomics, would you read EJMR? Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-29646638452465227682012-11-23T06:08:54.286-05:002012-11-23T06:08:54.286-05:00Two observations.
What's the rest of econom...Two observations. <br /><br />What's the rest of economics ? I read "micro theory" and "mostly harmless econometrics." These are very different. It's true that micro theory is mentioned only by a defender of the relative merits of macroeconomics, but it is odd. Micro theory does not have a great record of confirmed predictions either (consider experimental game theory). My sense is that macro went wrong when macro-economists decided micro foundations were necessary and that it was infected by the unreality of micro theory. On the other hand the theory behind mostly harmless econometrics is common sense with the additional advantage of being true.<br /><br />I consider micro theory and natural experiment/good instrument micro econometrics to be polar opposites. One of Macro's many problems is that macro theory is not considered a reputable field of mathematics by itself without regard to correspondence to the data. Micro theorists can leave empirical micro economists alone as they are considered different fields. <br /><br />The second observation is that the defenses of macro contain amusing typos of the Yglesias type -- correctly spelled wrong word. Odd to me as I can't type or spell and I am an extreme skeptic. <br /><br />Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.com