The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
its not like "no economic theory can cope with it", but rather that the economic theory that can cope with it has low social standing within the profession and therefore has relatively few people exploring its implications, bringing it up to date to the evolution of domestic economies and the international order, etc.
Thanks Bruce. Suspicions confirmed on that one! I could never understand the Neo-Liberal line that Keynes' General Theory was based on a closed national economy and therefore had to be abandoned in "our new modern era of cleptocracy" woops, "of globalization." I couldn't understand why it couldn't be recast into a larger model and some effective accounts taken for the effects of international trade. But then I have never disciplined myself to attempt to really understand Keynes. Perhaps I should try. "It is not necessary to have hope in order to persevere."
That is, if Samuelsonian economics is considered to somehow be an "updated, upgraded" Keynesian economics rather than considered to be a bastardized, watered down Keynesian economics, then there is no need to go back and read the original to "know" that the limitations of Samuelsonian economics are automatically also the limitations of the General Theory.
But in reality, most of the shackles in Samuelsonian economics were put in place in order to try to marry a Keynesian macroeconomics with an incompatible neoclassical microeconomics ... Samuelson seems to be, after all, the economist that Joan Robinson was referring to in her of-repeated aphorism, "converted against their will, is unconverted still". I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
The whole Samuelsonian system of putting a watered down version of mechanical Keynesian economics on a foundation of neoclassical microeconomics ... it doesn't hang together, but it was a convenient political compromise within economic departments at the time. Keynesian economics had too much prestige to ignore, and relying on Samuelsonian rather than General Theory macroeconomics meant that there seemed to be no need to fight with the neoclassicals over micro.
Of course, rebuilding the Keynesian aggregate model on incomplete foundations left it struggling to cope with "stagflation", as inflation in a world with neutral money is a quite different process than inflation in the real world.
I never used the Samuelson text itself, but I've used plenty of textbooks that inherit the Samuelsonian model. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
By the way, this thread is making me want to reread The General Theory. Are there other later books you would recommend apart from that, for macroeconomics? When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
A good counterpoint to some of the blind spots of even General Theory macro is Jane Jacobs Cities and the Wealth of Nations. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
And then there is the assumed audience ... some assume that the reader is already well versed in a post-General Theory approach, like Post Keynesian Economics.
JK Galbraith is always good ... so many of his books are useful for one or another question that its hard to narrow him down. For a later Post Keynesian economist of substantial influence, Paul Davidson's Economics for a Civilized Society gives a fairly readable introduction to his approach ...
... its also useful for punching through a lot of the Economist/FT type framing which sometimes show their "broad mindedness" by taking into account critiques from "house dissident" schools like New Keynesian economics ... Paul Davidson is a bit of a one-trick pony on intrinsic uncertainty, but its a critical point that traditional marginalist economics is incapable of addressing effectively. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
For Veblen, Theory of Business Enterprise, although Veblen is always to be read a chapter at a time, make notes of what you think he was saying, and then reread the chapter, to find the points where he was in fact saying something else. He's the opposite of an "accessible" writer.
For Galbraith, A Short History of Financial Euphoria would seem to be especially relevant. And of course, Paul Krugman considers The New Industrial State to "not be real economic theory", which is a strong recommendation in its own right. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
The New Industrial State is a "special theory", about the post WWII corporate-dominated monetary economy of the United States. And being a special theory, it can go further into its particular topic area than a general theory can. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
Her books are not stocked by online booksellers in the UK, but they sell for a couple of quid second-hand on Amazon.co.uk...
The Guardian: Obituary: Jane Jacobs (April 28 2006)
Influential fantasies about the perfect urban settlement had aggregated in the US over the previous 75 years into the dominant planning concept that she mocked as the "Radiant Garden City Beautiful", RGCB. "Cataclysmic money" was spent razing extant if tatty inner city zones, with their diverse uses, their self-generated social and economic energy vibrating on crowded sidewalks. They were to be replaced with RGCB public projects, segregated by income (therefore by colour: Jacobs was a fierce civil rights activist), with dwelling towers soaring above ornamental planting; by isolated civic and cultural precincts; by shopping malls dominated by retail cartels; by car parks linked by expressways. Together, these would aggregate into the city as a work of art, the vision of heroic egotists in generational revolt against the 19th century.Everything would be provided: Jacobs thought everything "was the worst thing we can provide" and cited a preacher's prophecy that there would be gnashing of teeth in hell. A child asked: "What if you don't have teeth?" "Teeth will be provided." "That's it," Jacobs said, "the spirit of the designed city: Teeth Will Be Provided for You." ... Jacobs met her arch-enemy, New York City master-planner and builder Robert Moses, who overrode residents to obliterate entire districts for automobile access to Manhattan. She recalled him, in a fury at her attempt to thwart his grand designs, yelling, "There is nobody against this - NOBODY, NOBODY, NOBODY, but a bunch of ... a bunch of MOTHERS!" and stomping out. She protested against his expressway ambitions through the 1960s, and was arrested on charges of riot and criminal mischief. The Janeites won that battle, too; Roger Starr, NYC housing administrator, acknowledged that despite Jacobs's homespun manner, "What a dear, sweet character she isn't."
Influential fantasies about the perfect urban settlement had aggregated in the US over the previous 75 years into the dominant planning concept that she mocked as the "Radiant Garden City Beautiful", RGCB. "Cataclysmic money" was spent razing extant if tatty inner city zones, with their diverse uses, their self-generated social and economic energy vibrating on crowded sidewalks. They were to be replaced with RGCB public projects, segregated by income (therefore by colour: Jacobs was a fierce civil rights activist), with dwelling towers soaring above ornamental planting; by isolated civic and cultural precincts; by shopping malls dominated by retail cartels; by car parks linked by expressways. Together, these would aggregate into the city as a work of art, the vision of heroic egotists in generational revolt against the 19th century.
Everything would be provided: Jacobs thought everything "was the worst thing we can provide" and cited a preacher's prophecy that there would be gnashing of teeth in hell. A child asked: "What if you don't have teeth?" "Teeth will be provided." "That's it," Jacobs said, "the spirit of the designed city: Teeth Will Be Provided for You."
...
Jacobs met her arch-enemy, New York City master-planner and builder Robert Moses, who overrode residents to obliterate entire districts for automobile access to Manhattan. She recalled him, in a fury at her attempt to thwart his grand designs, yelling, "There is nobody against this - NOBODY, NOBODY, NOBODY, but a bunch of ... a bunch of MOTHERS!" and stomping out. She protested against his expressway ambitions through the 1960s, and was arrested on charges of riot and criminal mischief. The Janeites won that battle, too; Roger Starr, NYC housing administrator, acknowledged that despite Jacobs's homespun manner, "What a dear, sweet character she isn't."
No excellent answer pops into my head, which means I have to look into it more deeply.
One might think that 70+ years after the emergence of a General Theory apparently adequate to the task of explaining a complex economy, and which, by extension, should serve as the foundation of computer based models of the economy, that the failure of the field of economics to provide such an updated theory says something fundamental about the nature of the discipline and the great majority of its practitioners---and that what it says is not flattering.
Three questions present themselves:
1.) Were an updated General Theory capable of making verifiable predictions about the international economy developed and written so that it stands alone, without requiring prior understanding of Keynes's General Theory, generally be used as a text for macroeconomics in undergraduate and graduate courses? (i.e., would it be commercially viable?)
2.) Could such an updated General Theory be used, (or have such updated theories been used), to generate computer based economic models with significantly more predictive and explanatory power?
3.) If, as seems likely, both 1. & 2. could be done, what does the fact that they have not been done show?
Historian Christopher Hill, in describing the reluctance of the Puritans to execute Charles I, proposed that there had been a "mind stop" in place that made a necessary step unthinkable. Is that what is happening here? Would production of such a theory and creation of such a model make the author such a pariah that no one is willing to do it?
Just asking? :-) "It is not necessary to have hope in order to persevere."
the General Theory is about those aspects of a monetary production economy for which you can draw a general theory ... rather than, as some people misread it, a "theory about everything in general".
Also, Economics is more like evolutionary biology and ecology and an evolutionary discipline cannot be predictive except in the short term. In this case, the rate of economic innovation is much faster than the rate of speciation which makes "the short term" really short.
I agree that explanatory is much more likely than predictive. Predictions in emergent systems are always precarious. With so many of those able to deal with these questions "in it for the money," for themselves and/or their backers or employers, it would seem that there are massive perverse incentives to keep the discipline as arcane as possible. These folks would not welcome clarity any more than casinos would welcome a ban on scantily clad women plying gamblers with liquor. The last thing they want is a level playing field. The capital markets, especially of the USA and Great Britain, have become the by-product of the activities of casinos we call stock, bond and futures exchanges. The question is how to build support for a restructuring of this socially destructive system. "It is not necessary to have hope in order to persevere."
I suspect such (explanatory, I don't know about predictive) models could already exist, based mostly on Leontieff's Input/Output analysis. Also things like the model developed by the Club of Rome for the Limits to Growth.
I would think such formulations would be most likely to be embedded in the source code of economic models, proprietary and inaccessible to all but those who maintain the model.
What I was getting at was the question of whether there might be some competitive advantage to a better theory that might facilitate adoption of said theory. If so, this might be a disruptive technology that could be exploited towards beneficial ends. More likely is that it would immediately be employed to build more profitable casinos.
The current Neo-Classical Economic Mythology seems to be the bastard offspring of Loki and Fortuna. "It is not necessary to have hope in order to persevere."
by Frank Schnittger - Mar 11 11 comments
by Frank Schnittger - Mar 8 3 comments
by Frank Schnittger - Mar 6 4 comments
by gmoke - Mar 7
by Frank Schnittger - Mar 2 1 comment
by Frank Schnittger - Mar 5 2 comments
by gmoke - Feb 25
by Oui - Mar 26
by Oui - Mar 258 comments
by Oui - Mar 244 comments
by Oui - Mar 246 comments
by Oui - Mar 23
by Oui - Mar 231 comment
by Oui - Mar 211 comment
by Oui - Mar 191 comment
by Oui - Mar 19
by Oui - Mar 18
by Oui - Mar 175 comments
by Oui - Mar 16
by Oui - Mar 165 comments
by Oui - Mar 1510 comments
by Oui - Mar 155 comments
by Oui - Mar 147 comments
by Oui - Mar 1312 comments
by Oui - Mar 12
by Oui - Mar 1113 comments
by Frank Schnittger - Mar 1111 comments