Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Four Basic Truths of Macroeconomics

bloomberg.com

Post reply on HN
Print view View original

211–220 of 286 posts

Re: Four Basic Truths of Macroeconomics

#211

Post by RobertoG »

notahacker wrote: post #206
RobertoG wrote: post #197

Earlier quoted context omitted.

Yes, but that's my point too. The framework is never challenged. He says "The first and most important thing [..] is that a strong negative shock to demand [..] leads to a loss of output and employment" Fair enough. Not even a comment of what causes the demand shock, but it's OK. And then he jumps to: " Nominal wages are sticky, for a complex mix of sociological reasons, and so employers do not always respond to lowe…

It's hardly surprising that a short news piece summarising the conclusions of an entire field of study does not engage itself with challenging the frameworks used. Nominal wage stickiness, recessions etc has been the subject of an enormous amount of study (and wage stickiness is sufficient, but not actually necessary to cause recessions). And the exception to the rule that increasing the money supply is dealt with by…

What you says is true. It's a little unfair to criticize his description of economics for what he says in a short article, but I'm not criticizing so much what he says here but his point that there are four essential truths of Macro that justify the current framework.

>"And the exception to the rule that increasing the money supply is dealt with by the very next sentence from the one you've singled out as a gotcha."

I disagree with that. There is evidence that the mainstream view is wrong on this, but it's never recognized, not even discussed because it's one of the "truths of macroeconomics" (and because the rest of the building would start to wobble if recognized).

There is a good way to see it. If you know the mainstream model of macroeconomics, you can make predictions, are the predictions about the last decades right or wrong? What the model (the framework that the author is defending) says about what would happen with big increases of bank reserves in the system?

Because the predictions were wrong, instead of changing the theory, they speculate that the world has change while they were not looking. It seems to me that would not be allowed in other sciences.

Re: Four Basic Truths of Macroeconomics

#212

Post by learnstats2 »

dataking wrote: post #171
viburnum wrote: post #169

This is a good example of how so much economics is meant to distract you from what’s important. Cowen is framing economics to exclude things like unemployment, the process by which investment, savings, and income are determined, and the distribution of income. If you get people into the weeds about sticky prices and whatnot, it’s like putting blinders on a horse.

> This is a good example of how so much economics is meant to distract you from what’s important. I think your assumption of malice is unfounded. A likely benign explanation is that Cowen focused on areas there economists are in broad agreement without intent to mislead.

It appears to me that Cowen has set out (his own right-wing understanding of) assumptions underlying macroeconomics, in line with the editorial position of Bloomberg.

The assumptions are set in stone before you can begin to do macroeconomics, given to you when you take Macro 101, to lay the foundation of your future work, rather than examined and challenged.

I don't think this is exactly malicious, but it bothers me that the field largely operates on, and draws research conclusions from, unchallenged assumptions.

Re: Four Basic Truths of Macroeconomics

#213

Post by huitzitziltzin »

TheOtherHobbes wrote: post #191
dataking wrote: post #171

Earlier quoted context omitted.

> This is a good example of how so much economics is meant to distract you from what’s important. I think your assumption of malice is unfounded. A likely benign explanation is that Cowen focused on areas there economists are in broad agreement without intent to mislead.

Economists are in broad agreement because they're paid to be. This is well-documented historically. The Mont Pelerin Society was specifically founded to promote a certain view of economics, and the Chicago School was supported financially by some very rich sponsors who wanted a a pet academic alternative to progressive slant of Keynesianism. The "consensus" in neoliberal economics and its core ideas - including "rati…

> Economists are in broad agreement because they're paid to be. This is well-documented historically.

This is *complete* nonsense. No one pays me to think or say anything. No one pays anyone in my department anything to take a particular position.

For a simple example of what nonsense your claim is: the economist’s definition of rationality is that preferences are (1.) complete and (2.) transitive. That’s it. (See any microeconomics textbook for proof. Sometimes (3.) reflexivity is included, sometimes smaller sets of axioms which imply the others are used instead.)

How “political” is that definition?? Did someone rich guy pay Paul Samuelson or Gerard Debreu or Kenneth Arrow to use that definition 80 years ago? Obviously not - moreover Arrow and Samuelson at least were on the political left! (And I simply don’t know Debreu’s politics. He could have been on the left too.)

Your comment is *entirely uninformed* and *totally unfair* to an entire profession.

Re: Four Basic Truths of Macroeconomics

#214

Post by pfortuny »

sokoloff wrote: post #167
jjav wrote: post #161

Earlier quoted context omitted.

The important things people must buy are exactly the same in 1950 and indeed for millenia before. Food, water, shelter, clothing. Luxuries change century to century and within decades but those hardly matter for inflation since those are by definition not necessities.

If you’re trying to measure inflation of necessities , then non-necessities should be excluded. If you’re trying to measure aggregate, broad-based inflation, you need to consider aggregate, broad-based baskets of goods/services. Even with the necessity bucket, things change century to century which I think should not be considered luxury. Electric utility service and internet access I do not consider luxuries, but th…

In fact, you can always decrease necessities by a little... Humans do not live out of necessity but out of convenience.

Re: Four Basic Truths of Macroeconomics

#215

Post by huitzitziltzin »

learnstats2 wrote: post #212
dataking wrote: post #171

Earlier quoted context omitted.

> This is a good example of how so much economics is meant to distract you from what’s important. I think your assumption of malice is unfounded. A likely benign explanation is that Cowen focused on areas there economists are in broad agreement without intent to mislead.

It appears to me that Cowen has set out (his own right-wing understanding of) assumptions underlying macroeconomics, in line with the editorial position of Bloomberg. The assumptions are set in stone before you can begin to do macroeconomics, given to you when you take Macro 101, to lay the foundation of your future work, rather than examined and challenged. I don't think this is exactly malicious, but it bothers me…

> don't think this is exactly malicious, but it bothers me that the field largely operates on unchallenged assumptions

What do you know about the research done by contemporary macroeconomists? Anything? Do you know how it is taught in graduate programs?

If you did, you would know that all macroeconomists have opinions about where their assumptions (basic and otherwise) limit their models and spend their careers trying to extend them and make them more realistic and take them to the data.

I am not a macroeconomist but I will defend how my colleagues approach the subject. You don’t know how difficult it is until you’ve tried to formulate a model that you can actually solve and made an attempt to take it to the data.

The field absolutely does not operate on “unchallenged assumptions.”

Re: Four Basic Truths of Macroeconomics

#216

Post by bingbong70 »

BrandoElFollito wrote: post #182
vladvasiliu wrote: post #139

Earlier quoted context omitted.

There is an exclusionary side to housing. But there's also a stock component to it. If I can buy the same iPhone as you it's because Apple is willing to build more iPhones to follow demand. Cities don't seem to follow housing demand (for a reason or another) hence the shortage and the high prices. > A 2000 sqft house in the middle of nowhere in Wyoming might cost $200k. In SF you'll get far less for the same money. P…

This is one of the reasons companies should be forced to decentralize (as it was the case in Spain, though it was not forced). I am glad to see that some companies moved south of Paris (Thalès, Bouygues, Dassault Systèmes,...) and people working there and living around our in Versailles can bike to the office. If we managed to spread companies in the country, we would have less concentration of elitarism and pepole w…

This would've naturally occurred if the US telecom industry followed through on the rural high speed rollouts they promised for decades.

Re: Four Basic Truths of Macroeconomics

#217

Post by huitzitziltzin »

neilwilson wrote: post #109
sadmann1 wrote: post #92

What are the best introductory books to get more grounded in economics

If you want actual Macroeconomics rather than the myths from this article try https://www.amazon.com/Macroeconomics-William-Mitchell/dp/11...

This is not a good recommendation. Wray and the MMT school have a bizarre set of views which are wildly outside the mainstream of macroeconomic thinking.

Moreover, when serious macroeconomists have tried to engage with MMT on its own terms (which they do!) the MMT people always get evasive and vague in response to the very simple question: “why didn’t your monetary ideas work for Venezuela/Zimbabwe/Weimar Germany?”

There are much better textbooks available. Wolfers/Stephenson is a recent one I’ve thought about using in class.

Re: Four Basic Truths of Macroeconomics

#218

Post by bingbong70 »

huitzitziltzin wrote: post #213
TheOtherHobbes wrote: post #191

Earlier quoted context omitted.

Economists are in broad agreement because they're paid to be. This is well-documented historically. The Mont Pelerin Society was specifically founded to promote a certain view of economics, and the Chicago School was supported financially by some very rich sponsors who wanted a a pet academic alternative to progressive slant of Keynesianism. The "consensus" in neoliberal economics and its core ideas - including "rati…

> Economists are in broad agreement because they're paid to be. This is well-documented historically. This is *complete* nonsense. No one pays me to think or say anything. No one pays anyone in my department anything to take a particular position. For a simple example of what nonsense your claim is: the economist’s definition of rationality is that preferences are (1.) complete and (2.) transitive. That’s it. (See an…

Paul Krugman, I believe, talked about the risk of being blacklisted if one attacks the US monetary system and central bank. I expect there is some truth to his observations about pissing off the money printers.

Re: Four Basic Truths of Macroeconomics

#219

Post by huitzitziltzin »

kqr wrote: post #123
sadmann1 wrote: post #92

What are the best introductory books to get more grounded in economics

I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses, and practitioners rarely suffer from the kind of personal survival pressure that otherwise tends to filter out for people who are right. Not to mention that the entire economy is such a complex system, and my experience with complex systems is that we can't predict them, we like to come up w…

> I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses

Modern academic (and central bank) macroeconomics is literally all about taking macroeconomic models to data. Period. Attend any macro seminar in the field at any university and that’s what you’ll see. In particular: it is directly about “verifying the mechanisms.”

Your complaint is perhaps somewhat ignorant of the way macroeconomics is actually practiced.

Source: an academic economist.

Re: Four Basic Truths of Macroeconomics

#220

Post by rufusroflpunch »

RobertoG wrote: post #179

>>"The third thing to know is that if central banks go crazy increasing the money supply, the result will be high price inflation. There is one exception to this, which was evident in 2008 and 2009 [..]" Japan has been doing that for decades now, and none of the mainstream macroeconomics prediction came true. >>"If central banks simultaneously act to decrease the velocity of money — that is, if they take measures to…

That’s because we measure inflation stupidly, IMO. If there would otherwise be, say 6% price decrease, but central bankers inflate the supply of money to 1% price increase, then they say we had 1% inflation when in reality there was 7% inflation.
Post reply on HN