Archive for the 'research' Category

The Quality of Research as a Public Good

March 28, 2011

Why do scientists submit their papers to journals instead of publishing them online, which would be both cheaper and allow everyone to access the paper? The answer is here, in an interesting piece at The Economist’s Free Exchange Blog. According to the author, journals are not read but journal publications are a proxy for quality and facilitate making decisions about tenure.

I agree. What journals effectively do is to establish a quality standard. In peer review the aim is to establish a high quality journal by accepting good and rejecting bad papers. The high quality of science is beneficial for everyone since a scientist’s finding serves as an input for another scientist’s paper or eventually translates into a new product sold on the market. In effect, quality of research is a public good. The question is: who should pay for its provision? Taxpayers, readers of the journals, universities, or the authors of the papers themselves?

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Latest INET Press Coverage

December 2, 2010

Must-read on economic models before and after the crisis.

To keep things simple, economists leave out large chunks of reality. Before the crisis, most models didn’t have banks, defaults or capital markets, a fact that proved problematic when the financial crisis hit. They tend to include only households, firms, central banks and the government. They also commonly use a single equation to represent each player, impairing the models’ ability to explain the unexpected outcomes that can emerge when millions of different people interact.

Full article in today’s WSJ

Yes, absolutely right, most economic models are DSGE models as described in the quote above. Take the preferences of a representative agent and an aggregate production function, derive the first-order-conditions, and the economy flies away on its optimal trajectory. Such models are mathematically beautiful and there is nothing wrong with them per se. The problem, however, is that in most economics’ curricula students learn only about this particular type of model, and nothing else. They are rarely told that there are other models as well (e.g. stock-flow consistent Post-Keynesian models, or Santa Fe’s complexity models).

INET’s “letting a thousand flowers bloom” approach is absolutely crucial in moving the profession forward, but I expect that if mainstream economists stick to their DSGE models (which seems to be Mark Gertler’s position), most of the flowers (like Doyne Farmer and David Tuckett) will bloom outside of economics.

Introduction to Econophysics

October 13, 2010

aus der FTD-Serie Neustart der Ökonomie: Eine brilliante Einführung in die Physik der Ökonomie und die geniale Arbeit von Thomas Lux.

Mehr dazu:

Mishkin on Iceland

August 28, 2010

Prof. Frederick Mishkin wrote a paper on Iceland’s financial stability, lauding Iceland’s financial system shortly before its collapse. In this short video (about 2 min., part of the upcoming documentary Inside Job) he explains why the paper does not mention that Mishkin was paid $ 124.000 to write the paper, and how the title changed from “Iceland’s financial stability” to “Iceland’s financial instability”. Definitely worth a look!

Temporary Crisis or Paradigm Shift?

October 19, 2009

economist-228x300What’s wrong with economic theory asked The Economist in July 2009. Since then a lot of ink has been spilled on this issue. The most stimulating discussion — in my opinion — is Colander, Föllmer, Haas, Goldberg, Juselius, Kirman, Lux and Sloth who have written in more detail about the failure of the economic profession in terms of a misallocation of research efforts and the failure to communicate the limitations of the standard macro-models. Their paper is available at IDEAS.

In the UK her majesty the Queen asked how economists could not see the crisis coming and reactions to the question came from Geoffrey Hodgson and colleagues and Tim Besley and colleagues. In a nutshell, Besley tells us that the economists “lost sight of the bigger picture” while Hodgson blames a prefernce for mathematical technique over real-world substance.

In Germany there has been some kind of Methodenstreit which is summarized in Carta. More details are on Rudi Bachmann’s homepage. For those who understand German, the plea for economic policy, as seperated from economic theory and more oriented towards the real world, signed by about onehundred German economists and published in FAZ (5. Mai 2009, Rettet die Wirtschaftspolitik). A comment on the FAZ-article appeared in Handelsblatt, and, as far as I know, there was a session about this at the annual meeting of the Verein fuer Socialpolitik.

Last but not least, the activist magazine Adbusters launched an issue on Though Control in Economics, which is nice for bedtime reading but the criticisms (for example the neglect of environmental degradation) are, I think, familiar to economists.

As I navigate trough the web I’m trying to collect the different pieces and sort the various claims of the debate, and this post is a first attempt in this direction. As I’m trying to get my head around it, three questions emerged:

  1. Nature of the crisis: How was the misallocation of research efforts possible? How can so many smart economists fail to come up with models that can explain the current crisis? I think this is a question that can only be answered by looking at the sociology of the profession.
  2. Implications for teaching: How will the economics curriculum change? Are we going to to give our students a copy of Keynes’ General Theory or are we continuing to teach economics as applied mathematics?
  3. Implications for economics: How far does the current situation challenge the core of mainstream economics? Is this just a temporary crisis for economic theory that will go away after a while, or is it the beginning of a larger shift in how we think about economics?

It will take a few years to find the answer to the third question but questions #1 and #2 should be discussed and I hope that I can find some time to think about them more deeply.

Krugman’s LSE Lectures – Go Back and Read Keynes!

September 7, 2009

A large number of public lectures from the LSE are online at their homepage. This is a great chance to see lectures of many well-known personalities (Dani Rodrik, Robert Shiller, Richard Thaler, Amartya Sen, Paul Krugman and Lord Anthony Giddens, just to mention a few). Another great thing is that the LSE is using Twitter to spread the information about new lectures. I will follow!

The most interesting lectures for the economists are surely Paul Krugman’s Robbins lectures on “The Return of Depression Economics”. Krugman made a couple of excellent points that could not be said loud enough.

  1. “The problem is almost all of the economic analysis that is of any use here is decades old, if not generations old. (…) Most of what we’ve done in macroeconomics for the past 30 or so years has turned out to be spectacularly useless, at best” (quoted from the beginning of Krugman’s third lecture, for his detailed argument take a look at his article in yesterday’s New York Times).
  2. Against the conventional wisdom Krugman argues that expanding the monetary base does NOT lead to inflation if you are in a liquidity trap.
  3. The importance of the paradox of thrift which has been forgotten by mosts macroeconomists (see also his blog at the NY Times).

So what do we conclude? Go back and read Keynes!

IS-LM and Solow in Mathematica

July 29, 2009

Great, this is what we should use for teaching macroeconomics:

"The Keynesian IS-LM Model" from the Wolfram Demonstrations Project

"Solow Growth Model" from the Wolfram Demonstrations Project

This semester’s seminars at Bremen University

June 23, 2009

Monday, 06.07.2009
5 pm (Rotunde 3)
Tibor Neugebauer (Uni Luxembourg)
Moral Impossibility in the Petersburg Paradox: A Literature Survey and Experimental Evidence

Tuesday, 30.06.2009
5 pm (Rotunde 2)
Fred Lee (UMKC)
“Heterodox” Production and Cost Theories of the Business Enterprize

Tuesday, 23.06.2009
5 pm (Rotunde 2)
Stephen Kinsella, Edward Nell and Matthias Greiff
Interaction Heterogeneous Agents Produce Endogeneous Inquality

Tuesday, 16.06.2009
3 pm (Rotunde 2)
Christian Cordes (MPI Jena)
Choosing Your Role Models: Social Learning and the Engel Curve

Interacting Heterogeneous Agents Produce Endogeneous Inequality

November 3, 2008

INTERACTING HETEROGENEOUS AGENTS PRODUCE
ENDOGENOUS INEQUALITY


by MATTHIAS GREIFF, STEPHEN KINSELLA, AND EDWARD J. NELL

Here are the slides from my presentation!

Abstract: We model an abstract economy of locally interacting heterogeneous agents in four markets, to understand the generation of power law-type distributions of income inequality and firm size in advanced societies. We
model a macroeconomy with national accounts built from the interactions of agents (workers, capitalists, bankers, and the government) in time through product, labour, bond, and money markets. We show that, without any restrictions on the type of interaction agents can make, and with asymmetric information on the part of capitalists and workers in this economy, power-law dynamics with respect to firm size and income can emerge from simple multiplicative processes originating in the labour market. Using a new data set, we
use only one free parameter to fit the models to firm size and income data for Ireland from 2000 to 2006.

(presented at the EEA annual meeting 2009, New York)

Complexity, Uncertainty, and the Emergence of Cooperation

June 15, 2008

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