Lars has several posts up relevant to present discussion. The good news is that we are now in the process of drilling down, and some of the mainstreamers are starting to feel the heat thanks to the bloodhounds like Lars that are on the scent and now nipping at their ankles.
The confidence fairy
This post is short and consists mostly of a dynamite Kalecki quote from "Political aspects of full employment" (1943) showing how the neoliberal argument is political rather than economic. It's short and a must-read.
Dumb and dumber in modern macroeconomics
This post answers Simon Wren-Lewis's latest with a couple of devastating quotes from Robert Solow aimed at the mainstream assumption of a representative agent maximizing utility rationally.
Krugman responding to my critique
Paul Krugman responds today to the gadget critique of Lars posted here yesterday in his blog post, Gadgets Versus Scratchpads (More Wonkery), where he argues unconvincingly that IS-LM is not a gadget. Lars promises a response tomorrow. Stay tuned.
Meanwhile, Brad DeLong jumps in with "Microfounded" And Useful Models
To have fake micro foundations for your model is not a feature, but a bug.
6 comments:
This is really good stuff!It´s Lars P Syll that with facts and very good argument sweep the floor in this debate!Thank you for posting this Tom!Very interesting!
It's good to know there are economists like Solow who can actually think before they have recourse to the "gadgets" and "scratchpads." It also looks like Krugman is getting his ass handed to him again, but you can't say Lars Syll has been impolite in the process.
Considering they have physics envy, the average neo-classical economist doesn't understand that DSGE and ISLM models are the Schrodinger's cat of economics. They fall into the logical fallacy of 'reductio ad absurdam'.
Perhaps somebody should explain the underlying message of Schrondingers Cat to them.
Schrödinger's famous thought experiment poses the question, when does a quantum system stop existing as a superposition of states and become one or the other?
In other words it is an understanding of the effects of aggregation.
That DSGE, et al give the 'wrong' answer tells us that they don't understand the aggregation process properly.
So using microfoundations without a full and proper understanding of the effects of aggregation is most definitely a bug.
Professor Lars Pålsson Syll answer Paul Krugman and Simon Wren Lewis in- "The nodal point of the macroeconomics debate"
http://larspsyll.wordpress.com/2012/07/16/the-nodal-point-of-the-macroeconomics-debate/
Could be worse, imagine living in an 'austrian economics' world ('Major Freedom' / 'Bob Roddis') where there is no macro at all and micro foundations is all that exists. Where there is no 'emergence' or 'aggregation' effects.
No shit this individuals don't understand nothing about the universe, their vision is totally upside-down.
Solow is another economist who once famously claimed that all of the major issues in macro were basically "solved".
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