Beyond that John Kaye says to look at how people act, not how we think they should act – despite, as he says, the things he has been teaching over the last many years. Joe Stiglitz says to look at solving the problems of the developing world, Ian Goldin wants a toolbox and Anatole Kaletsky says these are exciting times to study economics. So yeah, despite the amount of interesting things these people usually have to say about economics, there’s not a lot to take away here. The cruel twist is perhaps Rob Johnson’s comment that he would give this advice to a ‘rising star in economics today’ … Of course, said rising star would probably not be coming with your radical or different ideas.

I think Deirdre McCloskey’s letter to a graduate student is a better time to spend five minutes, so let me leave you with her closing sentiment:

Please, please, my dear, be brave, and remake our splendid subject, the intelligent student of prudence, by bringing it back to science. I’ll hire you, if I can. And you’ll have a worthwhile life in science.

Courtesy of Banx at the FT

Back at the keyboard after a hectic late summer which included getting a final sign-off on the thesis, so that is all done, dusted and deposited in the university library. And what a day to be back. In a few hours they will announce who is going to win the Prize for Economics in memory of Alfred Nobel, and if Fama gets it this year I think it will be good fun. He was odds on favourite two years ago, but since the crash and recession all odds are off.

Harvard even had an on-line pool, but had to shut it down due to legal reasons. Oh well, we’ll know in a few hours. Either way, we’re back to our blogging ways now that term has properly started and there can be no more conference distractions.

Unfortunately, we have been advised by Harvard University to immediately shut down the Nobel pool due to legal reasons, and we have decided to comply with this request. We will fully reimburse the money of all participants, and we apologize for any inconvenience this creates for you. All participants will be contacted by email. (http://www.people.fas.harvard.edu/~pollmann/nobel/)

A woman who loved a good fight
Would demand, as she argued all night,
Philosophical heft
From those on the left
And empirical proof from the right.

Inspired by the good doctors observation that:

A recent walk through the economic blogosphere left the impression that liberals (of the progressive variety, as in this randomly selected post by Paul Krugman) like to base their arguments on data, history and “whatever works;” while conservatives (particularly of the supply side or libertarian variety) seem to prefer philosophy, game theory, analogies or even the US constitution – anything but empirical studies.

And yes, I now need to check out Economists do it with models .com which I just found … It’s nice to procrastinate around midnight on Friday when I should be writing an abstract.

http://www.aeaweb.org/econwhitepapers/index.php

Thanks to Stephen Kinsella, for this note

When a high-profile MIT economist in an AEA-sponsored journal can accuse the core of his subfield of descending “deeper and deeper into a Fantasyland”, I wonder what economic sociology is to do. I mean, we’re not going to come up with better, more authoritative critiques of the unreality of the field than that!

And just so we don’t take it out of context, here be Caballero’s paragraph on the problem with the core of the discipline in its full glory:

I think this incremental strategy may well have overshot its peak and may lead us to a minimum rather than a maximum in terms of capturing realistic macroeconomic phenomena. We are digging ourselves, one step at a time, deeper and deeper into a Fantasyland, with economic agents who can solve richer and richer stochastic general equilibrium problems containing all sorts of frictions. Because the “progress” is gradual, we do not seem to notice as we accept what are increasingly absurd behavioral conventions and stretch the intelligence and information of underlying economic agents to levels that render them unrecognizable. (Caballero 2010: 90)

Now, what do we do about it?

There is no need for a new Economics 101. What we have experienced over the past two years is nothing new. There is nothing unexpected that has happened. Events however should serve as “teachable moments. What is surprising is that Keynesian economists do not seem to have learned its lessons.

I’m not sure where the quotation mark ends, but clearly Gregory doesn’t think economics needs an update. But then again, his textbook was last re-published in 2000, and I guess it’s a lot of work re-thinking what you’ve thought for three decades…

Some of the papers had stock-flow consistent models or purely theoretical models built around the quantity theory of money and similar devices and this led to some debate after the issue of a standard fiat money was raised. The argument was made that any fiat money needed a denominator, be it a price level, gold ingots, goods bundle or something which it could base its value on. I suggested that this was not the case, and there were several cases where paper money had been based on ability to pay taxes in that currency. The Maryland Dollar (1720-70)  and French Asignat (1790s) were both examples of this, and papers presented by Farley Grubb and Patrice Baubeau had earlier talked about them, so it seemed an obvious thing to say. The problem is that economists don’t like modelling, or thinking about,  money not based on a common denominator. “It feels wrong” was a comment made. The irony is that not only does it feel wrong, but in set theory, which all our economic modelling in this field is based on, it is wrong. Ben Fine has made the point in a paper well worth reading that money as a variable ‘M’ would be mathematically inconsistent if it values itself and stood as a measure of value for all other goods. Ironically that is exactly what fiat money does, and to avoid that in modelling we use M/x, where x is some denominator which, sadly, makes the money a relative price and not money at all. Funny thing money…

All in all, it’s a very nice place, given its main attraction is a lake. That is made up for with the caliber of the people it attracts. Of all the interesting things I heard, the scariest may be the chief economist at the WTO explaining how positive it was that the debate on TRIPs had shifted from one of static rent-seeking with winners and losers, to a more nuanced picture, even if it was a matter of rent seeking originally. Hmmm…

-I wish, that on every draft which people have commented on, I’d written the date it was returned, the draft number and the name of who commented. Now I have a pile of useful comments, but no idea when or why they were made on an ocean of paper instead.

-I am happy that I wrote out each of my references as I went along. Especially when I have single sheets of paper with notes, even there I pasted in any bibliographical detail at the end. It’s great! Because whenever I add new material this week I only need to copy-paste the reference off the note sheet into the bibliography.

-I wish I’d have some way of shuffling each chapter reference section into a aggregate reference section. This seems like a lose-lose situation though. Because if you work with a ‘thesis bibliography’ from the start, it becomes a pain putting out papers for conferences as the work is on-going, and if you don’t you get the pain in the last week.

-I wish I had asked more people to read my chapters, and to read them earlier. I’ve had lots of great feedback, and a lot of it from outside sources. But each draft seems to make the point clearer, and each comment tends to sharpen the mind. “If it’s unclear to the reader, then your writing is unclear” – regardless of who the reader is. Rough but true.

-I’m glad I went to conferences every year. Why didn’t someone tell me in my first year that going to conferences means you’ll meet people who are interested in what you do, have expert knowledge, and are generally willing to read your stuff (because they’re interested) and give you comments and feedback. Fantastic.

I’m sure more will come to me as I finish the thing up – and it has to be done – and once this week is over there will be more recurrent blog posts from my side. I already have two or three very exciting things lined up :)