tag:blogger.com,1999:blog-17232051.post6771373553849813743..comments2024-03-18T22:32:52.802-04:00Comments on Noahpinion: Summing up my thoughts on macroeconomicsNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger43125tag:blogger.com,1999:blog-17232051.post-42812617285305704792017-07-07T04:34:28.493-04:002017-07-07T04:34:28.493-04:00They weren't the first to put het agent into D...They weren't the first to put het agent into DSGE (that would be Bewley, I believe? Also Huggett and Aiyagari). But to my knowledge they were the first to do a het agent DSGE with aggregate risk, which is key for describing business cycles (which is what my talk was about)...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72787610175748477922017-07-05T21:09:31.078-04:002017-07-05T21:09:31.078-04:00(Just a complaint about your slides: Tony Smith an...(Just a complaint about your slides: Tony Smith and Per Krusell did not invent or even pioneered heterogenous agent macro, although they were the first to put het agent models into a DSGE approach, if that is what you are talking about...)Anonymoushttps://www.blogger.com/profile/06131120689629154207noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23166602156794365452017-07-03T09:13:24.418-04:002017-07-03T09:13:24.418-04:00Nice slides, but I miss the ontological dimension....Nice slides, but I miss the ontological dimension. Without fixing economic's ontology your model fixes won't work. You may have a look (caution: self PR) at https://www.researchgate.net/publication/308675193_Fukuyama_models_-_a_re-appraisal_of_the_Lucas_critique which touches upon the issue of what we can possibly know and what investigate with our current toolbox. Somewhat related also argues Tony Lawson.Anonymoushttps://www.blogger.com/profile/06071349875840829663noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-10805969153004553692017-06-14T10:43:55.820-04:002017-06-14T10:43:55.820-04:00He doesn't claim that it's an original ide...He doesn't claim that it's an original idea, and gives credit Knight. He draws upon ideas from many to build his case against standard macro methods.Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-64086113183342129102017-06-14T09:52:46.574-04:002017-06-14T09:52:46.574-04:00Nice slides! I've been engaging recently in a ...Nice slides! I've been engaging recently in a little bit of macro criticizing myself. Roger Farmer wants to keep DSGE models but discard the natural rate of unemployment hypothesis for models with multiple equilibira. Note that the story of multiple equilibria is not uncommon in international macro (currency crises a la Obstfeld or Krugman).<br /><br />http://macrothoughts.weebly.com/blog/modern-macroeconomic-theory-a-degenerative-research-program<br /><br />A second big omission to me seems to be that modern macro models do not take sufficiently the housing sector and credit creation into account. A large part of national wealth in advanced economies is held in the form of housing/land. The biggest part of private sector credit creation is mortgages.<br /><br />http://macrothoughts.weebly.com/blog/-new-and-old-economic-thinking-part-2-modern-macroeconomics-secular-stagnation-bank-credit-and-housingAnonymoushttps://www.blogger.com/profile/08026943014440088649noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28279966030129181732017-06-14T09:47:09.530-04:002017-06-14T09:47:09.530-04:00Very nice slides. I've been recently writing a...Very nice slides. I've been recently writing a couple of macroeconomic critiques myself. Roger Farmer wants to keep DSGE models, but is extremely critical of the natural rate of unemployment hypothesis. Instead, he thinks that models with multiple equilibria are the future. Note that the multiple equilibria story is more prominent in international macroeconomics (currency crises a la Obstfeld and Krugman). <br /><br />http://macrothoughts.weebly.com/blog/modern-macroeconomic-theory-a-degenerative-research-program <br /><br />A second big omission of modern macro seems to me is that those models do not take credit creation against real estate into account. Housing is many advanced economies a substantial part of wealth and the biggest part of private sector debt is mortgages.<br /><br />http://macrothoughts.weebly.com/blog/-new-and-old-economic-thinking-part-2-modern-macroeconomics-secular-stagnation-bank-credit-and-housingAnonymoushttps://www.blogger.com/profile/08026943014440088649noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63022506643656116352017-06-13T23:41:11.771-04:002017-06-13T23:41:11.771-04:00Noah, first off I want to say you are by far my fa...Noah, first off I want to say you are by far my favorite macro-basher. I admire you ability to speak in layperson's terms about some of the most advanced topics. My favorite post of yours was 'The most damning critique of DSGE'. This post really opened my eyes to the world of academic macro. I liked how you said the most damning critique of DSGE is that nobody in the private sector uses these models.<br /><br />It seems that you now think DSGE models combined with credible microfoundations are the best way forward for macroeconomics. I agree that credible microfoundations are key for DSGE to work, but how can a DSGE model ever incorporate real world phenomena like new technologies and predict fraudulent financial securities? This seems implausible to me.<br /><br />I doubt that academic macro will ever get away from this path and that's okay. But, I think the best macroeconomists in the world will always be from the private sector (people like Michael Burry). Michael Burry style analysis is the key to predicting the next financial crisis (not DSGE).Alex Peekhttps://www.blogger.com/profile/16599952608457953713noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23468017807540502272017-06-13T22:52:43.782-04:002017-06-13T22:52:43.782-04:00Did the word "bubble" appear in the slid...Did the word "bubble" appear in the slides once? Nope. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-78031688152703169092017-06-13T19:54:31.963-04:002017-06-13T19:54:31.963-04:00Can you clarify the "sunspot" thing? I t...Can you clarify the "sunspot" thing? I think I understand the point you are trying to make but not what the reference is.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-40443235099614838532017-06-13T19:14:30.354-04:002017-06-13T19:14:30.354-04:00Andrew,
If all economists learned accounting or...Andrew, <br /><br />If all economists learned accounting or a little accounting do you think they would understand how transactions worked and expand their descriptive abilities?<br /><br />I have found accounting vocabulary and concepts to be more descriptive than the use of economic vocabulary.<br />Luca Paciolinoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33113634975648371482017-06-13T18:15:48.663-04:002017-06-13T18:15:48.663-04:00A depressingly orthodox critique of orthodox think...A depressingly orthodox critique of orthodox thinking in economics. (It's Olivier Blanchard's recent statesman-like approach to repairing macroeconomics amped up a few degrees.) <br />Slide #31 says it all. It shows intellectual capture of the so-called critic better than anything I have seen recently! Madhyamakhttps://www.blogger.com/profile/15336753275424005234noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-44362145561036071522017-06-13T17:09:10.319-04:002017-06-13T17:09:10.319-04:00As for "radical uncertainty", the issue ...As for "radical uncertainty", the issue is not new. Frank Knight addressed it with his work on risk and uncertainty. In more modern work, Larry Epstein spent a lifetime trying to model Knight's ideas, and (to the best of my knowledge) Thomas Sargent as well. It ain't easy, and the more complications you introduce, the more mathematical you make it - and then, there are criticisms that it becomes too mathematical. You cannot have it both ways.Manfred the mamoothhttps://www.blogger.com/profile/07516724901598949627noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21426103293171931102017-06-13T13:21:15.713-04:002017-06-13T13:21:15.713-04:00^ amazing new unclassifiable econotroll.^ amazing new unclassifiable econotroll.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-57382600162092709332017-06-13T10:33:42.561-04:002017-06-13T10:33:42.561-04:00Macro collides against the challenges of group psy...Macro collides against the challenges of group psychology. Explaining a sudden drop in aggregate demand really isn't all that different from explaining why Grumpy Cat went viral, why skinny jeans became a thing, and the mystery of avocado toast. Those aren't easy questions, but they can at least be tackled empirically -- tracing them back and looking for patterns in similar events. Econ will be a lot better when it realizes it's a mathematicized branch of psychology applied to group decision-making.Anonymoushttps://www.blogger.com/profile/12591184110877822193noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-39399690222319832112017-06-13T01:31:44.875-04:002017-06-13T01:31:44.875-04:00Ahh, that is a conundrum. A great question. I th...Ahh, that is a conundrum. A great question. I think, focusing on the valid and valuable. What are those things? Is that acceptable to teach? If not acceptable that is a big problem. If the correct and valuable are not well known by the teacher that is solvable in time, by learning. <br /><br />Now, here is a conundrum from the students' side. Why learn a subject matter that includes false doctrines? How is that for morale for 3 to 4 years? Are there better, more valid, more valuable, and more interesting to learn? There are other things available to study? If not in economics there is else ware.<br /><br />My first micro and macro economics classes decreased my understanding of the world and had a large opportunity cost in investing. Decades later, learning a little accounting was enormously enlightening and is profitable to boot. And, it was much more interesting because the use and applications were obvious. It also made economics more clear and helps with culling the chaff out of economics.<br /><br />I think putting the theories to test using economic data. The data is available. One helpful skill needed making sure the units are specified and correct. This is a scientific approach accept it is not actually gathering the data, one is depending on the validity of the data. Oh, and it takes a little work. <br /><br />So, my suggestion is students should learn accounting and economic history. <br /><br />On that note, Jane Gleeson-white, wrote a book on the history of accounting and Luca Pacioli. Pacioli published a math and accounting book that brought both the Indian base 10 number system, math, and most likely Indian accounting to Venice and Europe, that was published right after the movable type printing press was invented. The Venicians were using roman numerals and were in contact with India.<br /><br />Preview:<br />https://www.google.com/search?tbm=bks&q=editions:6rZv76hkH0kC&sa=X&ved=0ahUKEwi6zq72ibrUAhUBQyYKHWASCAkQmBYIKjAA<br /><br />In nearest library: <br />https://www.worldcat.org/title/double-entry-how-the-merchants-of-venice-created-modern-finance/oclc/783160450<br /><br />A place to buy:<br />https://www.amazon.com/Double-Entry-Merchants-Created-Finance/dp/0393346595<br />Luca Paciolinoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-7289445315026320902017-06-13T00:46:57.158-04:002017-06-13T00:46:57.158-04:00"I personally believe that that statement is ..."I personally believe that that statement is too rigid, there are instances where you can use the "fundamentals" of economies to try and argue if assets are being overvalued. The housing bubble is an example where more economists would and should have been savvy about the possibility of one. "<br /><br />Correct. I think people and economists that understand accounting have an advantage in that respect. <br /><br />"Geologists really can't predict earthquakes, that doest mean their profession has nothing to offer society. Similarly, macroeconomists really can't anticipate recessions, that does't mean they have nothing to offer either. "<br /><br />So, if living in properly engineered structures or boats are the solution to unpredictable earthquakes what is the solution for for people with unpredicted recessions busts and busts of various assets? Luca Paciolinoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2646811958632299942017-06-13T00:34:28.137-04:002017-06-13T00:34:28.137-04:00Good point. Especially if you divide the prices b...Good point. Especially if you divide the prices by M2 money supply! <br /><br />What about a mortgage or leverage bubble? <br />Luca Paciolinoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21641049190504327272017-06-12T23:41:28.019-04:002017-06-12T23:41:28.019-04:00Sums up a lot of the reasons I didn't pursue m...Sums up a lot of the reasons I didn't pursue macro at the graduate level in the early 1990s and went into business law instead. Probably my biggest gripe is that economists don't even understand the nuts and bolts of how transactions work that is common knowledge among everyone who does them. This makes them vulnerable to huge, absurd mistakes, rather than merely subtle mistakes and personal biases. Economics needs to dramatically expand the descriptive side of the discipline and give the predictive side a break for a while.andrewhttps://www.blogger.com/profile/08172964121659914379noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-27778487014650091722017-06-12T19:38:30.748-04:002017-06-12T19:38:30.748-04:00Fantastic post...you seem to have reached new heig...Fantastic post...you seem to have reached new heights, so hardly time to hang up your spurs.<br /><br />Being a bit older, what you describe at the end recalls the 1960's microfoundations program. I can actually remember a class I took in which Lucas likened it to a pot luck supper. There were reasons people gave up on it, one of which was the finding that models with many equations had as many sources of inaccuracy. But perhaps if we approach it with more humble ambitions...Anonymoushttps://www.blogger.com/profile/15016147020973120305noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85538149538237032352017-06-12T19:07:36.631-04:002017-06-12T19:07:36.631-04:00The text books need revision because American econ...The text books need revision because American economics needs revision. Luca Paciolinoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-34147001592858591942017-06-12T19:02:07.319-04:002017-06-12T19:02:07.319-04:00Learn the basics of accounting. If you doubt me a...Learn the basics of accounting. If you doubt me ask an experienced accountant if that is a good way to learn economics. Wile you at it ask her or him what they think of academic economics? Maybe ask an accounting professor.Luca Paciolinoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85503253606869072032017-06-12T17:30:23.451-04:002017-06-12T17:30:23.451-04:00Good call.Good call.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16727658211925613012017-06-12T17:17:16.204-04:002017-06-12T17:17:16.204-04:00Thanks for using blogspot. Google blocks your powe...Thanks for using blogspot. Google blocks your powerpoint because my IP is not from the US and i have to read your blog in blogspot.nlAnonymoushttps://www.blogger.com/profile/01045711200245601707noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-88119328482353906882017-06-12T17:14:54.083-04:002017-06-12T17:14:54.083-04:00The behavior of real estate prices since the crash...The behavior of real estate prices since the crash, and the magnitude of the crash versus the pre-crash expected ROR indicate there was no real estate bubble, unless it was a small one.Antihttps://www.blogger.com/profile/17677035271760844211noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72483484523073158262017-06-12T16:09:36.932-04:002017-06-12T16:09:36.932-04:00To understand the papers that Noah cites, I would ...To understand the papers that Noah cites, I would start with David Romer's Macro textbook. After that, I would work through Ljungqvist & Sargent's book "Recursive Macroeconomic Theory". Also, search the Internet for summaries, introductions (Harald Uhlig has one somewhere, I think).<br />To read all this stuff, you need to understand differential equations and the discrete version of it.<br />What is the additional value? You get to follow the literature in the academic journals, and you get to do your own simulations with Matlab (by the way, you need to learn Matlab or some other program, like Mathematica).<br />That's it. Manfred the mamoothhttps://www.blogger.com/profile/07516724901598949627noreply@blogger.com