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More Reasons for Despair: Angels on Pinheads

by Migeru Thu Mar 5th, 2009 at 05:16:10 AM EST

So, I was getting my periodic dose of Krugman's blogging when I hit this

NYTimes.com: Roots of evil (wonkish) (Paul Krugman Blog, March 3, 2009)

As Brad DeLong says, sigh. Greg Mankiw challenges the administration’s prediction of relatively fast growth a few years from now on the basis that real GDP may have a unit root — that is, there’s no tendency for bad years to be offset by good years later.
After picking up my jaw from the floor, I composed the following comment (now awaiting moderation):
As if there was a need for more evidence that, as Jamie Galbraith put it, "most economists teach a theoretical framework that has been shown to be fundamentally useless".

The unit root is only a problem in a linear approximation to the real thing. It is entirely possible that Mankiw’s ivory tower only contains linear approximations. He might be well advised to go back to grad school and read up on nonlinear dynamical systems…

Is this what a macroeconomics debate among DeLong, Mankiw and Krugman looks like!? Unit Roots!!?? If so, I think we're well and truly screwed.

I remind everyone that Mankiw was one of Bush the Lesser's top economic advisors, and that he's one of the most influential professors or economics in the world, as his textbooks are widely used.


In case you're wondering, a unit root is an instability in a linear autoregressive time-series-forecasting model, leading to secular growth of the series as noise is amplified. Only someone who has spent too much time playing with linear algebra could pretend that "GDP may have a unit root" is a macroeconomic argument.

This is part of the Reasons for Despair series. Previous instalments:

Display:
As a mathematician, my mind boggles.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 05:23:15 AM EST
To say something positive about the original angels on pinheads debate, at least it did not go something like this:

  • How many angels can exist on the same pinhead?

  • Well, that depends on what commission I get for everytime the same space is sold.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Thu Mar 5th, 2009 at 05:29:23 AM EST
The Angel Regulatory Authority may have something to say about that...

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 05:32:19 AM EST
[ Parent ]
There is one?  You know?  There is a God?

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Mar 5th, 2009 at 12:02:36 PM EST
[ Parent ]
It also depends on whether the autoregressive process for the number of angels has a unit root.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 05:34:56 AM EST
[ Parent ]
I think I must be an autoprogressive, then

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 05:41:18 AM EST
[ Parent ]
I'm wondering whether "Autoprogressive" might not be a good name for "moving average".

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 05:42:29 AM EST
[ Parent ]
is a latte liberal driving a Toyota Prius.
by Magnifico on Thu Mar 5th, 2009 at 05:49:21 AM EST
[ Parent ]
A neocon must be an autoregressive, then?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 05:51:41 AM EST
[ Parent ]
A hummer which has just run out of gas and is maintaining momentum solely because of the flatulence and blubber of its designated driver.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 5th, 2009 at 10:01:02 AM EST
[ Parent ]
I think you are confusing this with autoerotic

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Mar 5th, 2009 at 12:03:55 PM EST
[ Parent ]
We have created a consumer society. At least in the United States before the financial meltdown, two-thirds of the economy was consumer-driven.

The consumer goods are basically crap, but yet people still want them. American consumers aren't buying right now. Even with, say 25% unemployment, there is still going to be a consumption demand as the crap goods people have bought over the past decade start living out their by-design short life span and start to break and fail. Once this kicks in, Americans who still can consume will and, I think, could trigger the fast growth.

The problem I see with all calculations of recovery is that no one is taking into consideration the climate. Not the business climate, the real climate that our carbon-burning consumer driven economy is destroying for comfortable human habitation.

When the climate is actually considered, I think all bets of a fast growth and therefore a fast recovery are off, probably way off. But then, I'm not a pinhead economist or an angel, so what do I know?

by Magnifico on Thu Mar 5th, 2009 at 05:47:37 AM EST


Diversity is the key to economic and political evolution.
by Cat on Thu Mar 5th, 2009 at 05:55:06 AM EST
If reality doesn't match my model, reality must be wrong.
by Colman (colman at eurotrib.com) on Thu Mar 5th, 2009 at 06:16:05 AM EST
Worse: if there is a model that breaks my political opponents' forecast, their forecast must be wrong.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 06:17:54 AM EST
[ Parent ]
Worse: humans - collectively, still dumber than yeast.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 5th, 2009 at 08:08:57 AM EST
[ Parent ]
We already knew Mankiw was engaged in that, though.  Remember the stimulus debate, when he completely twisted a paper Christie and David Romer had authored, and used it to argue against spending and for tax cuts?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 5th, 2009 at 09:53:15 AM EST
[ Parent ]
Krugman might be right on this theoretical point, but he would probably loose a specific wager. This depression is a "non-unit" reaction to the aggressive recent boom, not a prelude to a way up yet. Obama can't be the president long enough anyway. And he does not look that smart as I could marginally imagine.
by das monde on Thu Mar 5th, 2009 at 06:17:11 AM EST
What does "Unit Root" mean?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Mar 5th, 2009 at 07:43:55 AM EST
I looked at the Wikipedia page  and had one of those moments where it's all going in my eyes and all my brain is seeing is Blah blah blah, as if I'd just switched it off till I'd reached the end of the page.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 5th, 2009 at 08:10:16 AM EST
[ Parent ]
Which part of
a unit root is an instability in a linear autoregressive time-series-forecasting model, leading to secular growth of the series as noise is amplified
don't you understand?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 08:13:44 AM EST
[ Parent ]
Thank s for colour coding my lack of understanding. I think I'm ok as long as I stick to the black bits. ;)

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 5th, 2009 at 08:39:52 AM EST
[ Parent ]
Okay...

In the analysis of time series, there is a large class of models called ARMA, for Autoregressive, Moving-Average. These are based on assuming that a certain linear function of the process and some of its lagged (past) values [this would be the autoregressive part] is equal to another linear combination of an underlying "white noise" process and some of its lagged values [this would be the moving-average part].

These linear combinations of lagged values can be used to construct certain "characteristic polynomials". If the polynomial for the autoregressive part has a root of absolute value greater than 1, then the model is numerically unstable and it amplifies the "white noise" explosively.

If the characteristic polynomial has a root of absolute value equal to 1 (a "unit root") then the model does not amplify the noise explosively, but it does amplify it leading to "secular growth". "Secular variation" is a variation that is not part of an oscillation and so is not expected to reverse itself eventually. It is a term borrowed from perturbation theory in celestial mechanics.

Unit roots can be removed by looking at the iterated differences of the process. For instance, instead of looking at GDP, look at GDP growth. I think Mankiw's point reduces to "maybe GDP growth is not the right thing to look at, and you should instead look at the year-on-year changes in GDP growth". Somebody has been spending waaaay too long thinking about linear filters and signal processing.

Like I said in another comment, as a mathematician watching a debate among leading economists, I am flabbergasted.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 09:01:27 AM EST
[ Parent ]
Thanks, that turns the Blah down to a copeable level, and will even make it dissappear after a couple more slow read-throughs.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 5th, 2009 at 09:03:43 AM EST
[ Parent ]
If the characteristic polynomial has a root of absolute value equal to 1 (a "unit root") then the model does not amplify the noise explosively, but it does amplify it leading to "secular growth". "Secular variation" is a variation that is not part of an oscillation and so is not expected to reverse itself eventually. It is a term borrowed from perturbation theory in celestial mechanics.
Does this then mean that a "unit root" is the only instance that would give rise to a "Goldilocks Economy?"  Further, that a "unit root" is required for such analysis to produce a plausible claim that the system being analyzed is or can be stable?  

This would seem to be:

1.) Rather improbable

2.) Highly self serving if one's goal is to justify the existing system.

3.) Possibly the only assumptions that could give rise to a theory that could be successfully taught to most economics students.

How many grad students in economics are familiar with/competent in non-linear dynamics?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 5th, 2009 at 12:16:53 PM EST
[ Parent ]
ARGeezer:
Does this then mean that a "unit root" is the only instance that would give rise to a "Goldilocks Economy?"
Mankiw is using the "GDP may have a unit root" gambit to try to suggest that the Obama stimulus will not succeed in restoring the economy to its long-term growth trend, but instead the economy will lock into a "low GDP growth" mode.

What do you mean by "goldilocks economy", anyway?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 12:20:51 PM EST
[ Parent ]
Mankiw is using the "GDP may have a unit root" gambit to try to suggest that the Obama stimulus will not succeed in restoring the economy to its long-term growth trend, but instead the economy will lock into a "low GDP growth" mode.

That is a confusing statement. He uses the argument to say, that the US will grow only with the long term average growth rate. E.g. With 3%, when this was the average growth in the last 20 years, and will not sprint with e.g. 5% to make up the difference to what would have been the GDP without the crisis.

I think Mankiw is right on this and Krugman is wrong. There was a massive misallocation of capital and training to people. Capacities are not only underused, but as there is need to reallocate and retrain, capacities have been destroyed. Not completely. There maybe some catchup, but I think Krugman is too optimistic. You have read Stiglitz' 'Globalisation and its discontent'. If I remember correctly, he makes exactly the same point. Even if the long term growth trends aren't damaged by the reform, the IMF has asked e.g. Asian countries to do, the reduction in the GDP base will hurt long time.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 12:32:40 PM EST
[ Parent ]
I had read about half of 'Globalisation and its discontents' when I either loaned it or misplaced it, so I haven't finished it.  Nor can I re-check what I previously read.  Does Mankiw argue for any particular value for the root?  Some small amount above unity?

This all seems sort of like what we would have expected if Ptolemy had been capable of Fourier analysis when he was accounting for retrograde motions of planets with epicycles.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 5th, 2009 at 12:57:28 PM EST
[ Parent ]
I have read only Krugman's response. Not the original statement.

There is written in the end:

But to invoke the unit root thing to disparage growth forecasts now involves more than a bit of deliberate obtuseness. How can you fail to acknowledge that there's huge slack capacity in the economy right now? And yes, we can expect fast growth if and when that capacity comes back into use.

And what I say is, that this capacity isn't there or at least not fully, because it is not capacity in producing the things, that are demanded in the future.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 01:34:44 PM EST
[ Parent ]
Thanks.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 5th, 2009 at 02:11:16 PM EST
[ Parent ]
Martin:
He uses the argument to say, that the US will grow only with the long term average growth rate. E.g. With 3%, when this was the average growth in the last 20 years, and will not sprint with e.g. 5% to make up the difference to what would have been the GDP without the crisis.
You have a point there. However, to be able to grow at 3% average rate, the economy has to be able to grow at, say, 5% sometimes.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 01:19:03 PM EST
[ Parent ]
But the point Stiglitz makes is that because there was unused capacity in the economy there was a contraction, and that such unused capacity represents an opportunity cost (i.e. it cannot be "saved up"). In other words, there is no economic jump start when you re-employ the unused capacity.

What Krugman claims in your quote is that as long as there is unemployment, there is "unused capacity" (remember that Krugman is a semi-classical Keynesianist - he assumes that labour is the critical limiting factor in the political economy. In other words, he assumes an empty world).

So to try to translate what you quote from Krugman above: "Mankiw is saying that growth will remain at the current level. But that is bollocks, because there is unused capacity in the economy, which can be employed to produce capital goods, which can be used to increase the production of goods. Which means that if the unused capacity is employed in this fashion, growth will be higher than it is now."

Of course, once you realise that we in fact do not live in an empty world, the entire exchange becomes surreal, because Mankiw's concept of "long-run [exponential] growth" becomes self-defeating, and Krugman's insistence that labour is the only limiting factor in the economy becomes nonsense.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 03:02:49 PM EST
[ Parent ]
What do you mean by "goldilocks economy", anyway?
Like the porridge preferred by Goldilocks: not too hot, not too cold but just right.  The term was used back in the 90s in the popular press to describe the Greenspan economy, at least when we were not dealing with a bubble.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 5th, 2009 at 12:41:15 PM EST
[ Parent ]
That's like saying someone is a nice person, apart from the rape, torture and genocide.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 5th, 2009 at 02:17:56 PM EST
[ Parent ]
I didn't realise we had users like that here ;)

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 5th, 2009 at 02:42:17 PM EST
[ Parent ]
Yes, the wikipedia articles are atrocious. Maybe I'll rewrite them :-)

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 08:40:04 AM EST
[ Parent ]
You have a real ability to clearly express truly complex issues for a more general audience.  Too bad that is so little valued in our world.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 5th, 2009 at 12:19:43 PM EST
[ Parent ]
And you have a PhD in Economics? Grew Mankiw would be ashamed.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 08:12:34 AM EST
[ Parent ]
the most sophisticated mathematical concept in my PhD dissertation, by choice, is the %.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Mar 5th, 2009 at 08:28:46 AM EST
[ Parent ]
I was snarking. Like I say in the story, to say "GDP may have a unit root" is not a macroeconomic argument.

Going back to sophisticated mathematical concepts... you're an X, too!

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 08:31:20 AM EST
[ Parent ]
Sorry - the rights to the name Mr X are already taken, for that is how all my Finnish fans know me, and have done for the last 30 years.

You can't be me, I'm taken
by Sven Triloqvist on Thu Mar 5th, 2009 at 12:34:40 PM EST
[ Parent ]
Jerome
the most sophisticated mathematical concept in my PhD dissertation, by choice, is the %.
Does this not run the severe risk that others than your review committee and adviser could understand what you had written?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 5th, 2009 at 12:24:33 PM EST
[ Parent ]
Strike others than, replace by even.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Mar 5th, 2009 at 12:52:31 PM EST
[ Parent ]
the most sophisticated mathematical concept in my PhD dissertation, by choice, is the %.

Which, to judge by the way(s) newsies and politicians treat it, is head and shoulders above the level of abstraction commonly found in our ruling classes.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 03:06:25 PM EST
[ Parent ]
I've been meaning to post the summary of my PhD for ages, but I've lost tje English version and have notten around to re-translate it. But here it is in French:


L'indépendance de l'Ukraine

Jérôme GUILLET
sous la direction de Jacques SAPIR

L'Ukraine est-elle indépendante? Derrière cette question qui cache des enjeux cruciaux pour la stabilité de l'Europe (une Ukraine réellement indépendante marquerait la fin définitive de l'ère impériale de la Russie), se trouvent d'abord les questions plus générales : qu'est-ce qu'un pays indépendant? et quelle politique doit être suivie pour qu'il le reste?

Ce travail va donc se concentrer sur la question théorique de définir précisément ce qu'est l'indépendance d'un pays, et va chercher à caractériser le concept plus ambitieux d'indépendance procédurale (par parallélisme avec la rationalité procédurale définie par Herbert Simon) d'un pays: il s'agit de se placer dans une perspective dynamique, en cherchant à comprendre ce qui peut donner un sens durable, une légitimité, et une viabilité à l'indépendance d'un pays, au delà de la simple affirmation formelle de son existence. Nous nous baserons évidemment largement sur le cas de l'Ukraine, pour laquelle cette question se pose avec acuïté, et dont la situation quelque peu atypique permet d'apporter des éclairages fort intéressants: nos recherches sont donc orientées vers le cas d'un nouveau pays accédant à l'indépendance et cherchant à la préserver face principalement à un voisin plus puissant.

Une première approche théorique nous mène à définir les dépendances entre pays, ces pouvoirs dont un pays peut disposer sur un autre. Après avoir souligné l'importance de la réversibilité et la délimitation précise de ces interdépendances, nous avons notamment fait la différence entre les pouvoirs de coercition (ou interdépendances instrumentales), qui correspondent à l'usage de la force pour imposer une contrainte à l'autre, et sont par nature agressifs, et les pouvoirs coopératifs (ou interdépendances situationnelles ou emphatiques), qui nécessitent des relations de confiance plus étroites et plus cordiales entre les deux pays, et qui renforcent celles-ci dans le même temps, favorisant par là l'indépendance via la coopération.
Il est apparu que dans le cas de l'Ukraine, la question fondamentale allait être celle des relations bilatérales avec la Russie, avec, à côté des enjeux diplomatiques ou militaires, le problème crucial de la gestion des fortes dépendances économiques existantes. Cela encourageait à approfondir l'approche économique de la question de l'indépendance, et en particulier à utiliser une théorie économique particulièrement bien adaptée à l'étude de relations entre deux agents: la théorie des jeux.

Nous nous plaçons explicitement dans l'optique d'une utilisation stratégique de la théorie des jeux, en nous inspirant en cela des travaux de Thomas Schelling. Nous présentons donc dans une deuxième partie quelques modèles élémentaires de cette théorie (dilemme du prisonnier, "Chicken", "Called Bluff"), dont nous tirons un certain nombre de concepts et attitudes qui peuvent servir à défendre l'indépendance d'un pays face à un adversaire principal bien identifié: la détermination, la crédibilité, la provocabilité, le pacifisme.
Nous présentons également des modèles asymétriques plus adaptés au cas de l'Ukraine face à la Russie. Ceci nous permet d'abord de mettre en évidence a priori la place centrale des phénomènes de réputation, avec la nécessité de disposer de capacités de dissuasion afin d'établir une crédibilité, d'essayer de peser sur l'ordre du jour des discussions, et de bien maîtriser les flux d'information en provenance de et vers l'autre. Puis, en nous plaçant dans l'optique d'une politique d'indépendance de long terme, ceci nous  mène à insister sur les dangers de la confrontation, et le besoin d'établir des mécanismes de coopération durables, inscrits dans des régimes internationaux, qui permettent de protéger l'indépendance de manière plus paisible en établissant une prévisibilité des comportements de chacun. Cette prévisibilité doit être construite sur les objectifs de long terme du pays, c'est-à-dire autour d'un projet national, avec un Etat légitime et crédible, notamment en tant que cadre institutionnel de l'activité économique, institution politique permettant l'émergence d'une opinion collective prédominante, et de ce fait représentant légitime de la nation et des ses intérêts.
L'utilisation des modèles de la théorie des jeux pour étudier le cas concret de l'Ukraine montre qu'il est possible de les appliquer aux conflits réels dans lesquels est impliqué le pays, et qu'ils servent à décrire les grandes phases de ces conflits, et leur dynamique: le passage de la confrontation à la coopération ou inversement, le poids des contraintes subjectives telles que fierté, honneur national, volonté de ne pas s'incliner, les possibilités de lier des conflits entre eux ou non pour arriver à des compromis plus globaux, et les attitudes plus ou moins agressives rendues possibles par les rapports de force existant.

Enfin, nous cherchons dans la troisième partie à évaluer point par point et dans son ensemble le déroulement des relations de l'Ukraine avec la Russie au cours des trois premières années de l'indépendance, afin d'analyser la politique d'indépendance ukrainienne. Ceci nous fait aborder trois thèmes principaux entre l'Ukraine et la Russie: la diplomatie, l'énergie, et la monnaie.
L'étude des relations diplomatiques montre que la confrontation l'a emporté sur la coopération pendant cette période, du fait principalement de provocations russes qui vont pousser les ukrainiens à adopter une attitude extrêmement méfiante et peut-être inutilement hostile envers leur grand voisin, afin d'affirmer leur existence sur la scène internationale. Dès le début de 1992, les relations vont se tendre entre les deux pays, autour de quelques questions qui vont focaliser l'attention et servir de base aux nouvelles relations entre ukrainiens et russes: la Crimée et la flotte de la Mer Noire de Sébastopol, les armes nucléaires soviétiques situées en Ukraine, le partage de la dette soviétique, le rôle de la CEI, les questions monétaires (en 1992 seulement), et les livraisons de gaz russe. Sur toutes ces thèmes, les deux pays vont se retrouver en situation de confrontation en 1993, qui va être une année de crise aigüe ; 1994 va permettre une certaine amélioration de la situation, grâce à la pression de la crise économique, et grâce à l'élection en Ukraine du président Kuchma, qui va réussir, par une attitude plus pragmatique, à établir des liens plus sereins avec la Russie. En tout état de cause, il a été difficile pour les ukrainiens de trouver une voie entre "servilité" et "confrontation".
Le dialogue entre les deux pays autour du gaz, enjeu stratégique majeur, a également été traversé de tensions, du fait du désir des russes d'augmenter leurs prix et de l'incapacité des ukrainiens à payer plus, qui les a poussé à utiliser le chantage au gazoduc (où transitent les exportations russes) pour forcer les russes à maintenir leurs livraisons à bas prix. Ce gazoduc est en fait la principale capacité de dissuasion de l'Ukraine face à la Russie, mais celle-ci a été mal utilisée du fait de priorités erronées des ukrainiens. Cette utilisation tactique à courte vue (maintenir les livraisons) d'une arme stratégique, qui n'a pas permis aux ukrainiens de se dégager des marges de manoeuvre comme ils auraient pu le faire a été paradoxalement utile pour la défense de leur indépendance, en affaiblissant tellement le pays que même la Russie ne pourra plus réellement l'aider si elle le souhaitait. Cette faiblesse économique du pays lui a ainsi donné le temps pour renforcer son indépendance politique.
Enfin, nous avons terminé cette étude des relations bilatérales par l'analyse de la séparation monétaire réalisée entre les deux pays en 1992, suite au refus des ukrainiens de réformer leur économie. Cette analyse nous a permis de mettre en évidence les interactions profondes entre affirmation de l'indépendance, construction d'un Etat régulé, et santé de l'économie du pays, ainsi que le rôle central de la monnaie dans ce ballet complexe. Dans ce domaine, et jusqu'à l'arrivée de Kuchma à la présidence, l'Ukraine s'est "punie [elle]-même", en n'ayant pas de projet économique propre, et s'est enfoncée dans une crise économique sans précédent. Cette faiblesse a permis de consolider provisoirement l'acquis international des deux premières années, mais elle n'est pas viable à plus long terme.

Cette étude de l'exemple ukrainien a permis de souligner plusieurs éléments fondamentaux de l'indépendance d'un pays: le contrôle du territoire, l'existence d'un projet national qui légitime l'indépendance, l'acceptation des interdépendances avec les autres pays, qui fondent la stabilité nécessaire à une indépendance réelle durable, et la nécessité d'une économie solide, encadrée par des institutions (dont la monnaie) acceptées et un Etat organisé, qui permet à la fois de perpétuer et de justifier l'indépendance.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Mar 5th, 2009 at 03:47:39 PM EST
[ Parent ]
... macroeconomist has tried to reject the hypothesis that there is a unit root, and failing to reject that hypothesis, accepts it.

A whole subindustry of macro modelling based on acceptence of the Null Hypothesis because you failed to reject it.

Then if the unit root fails to be rejected for levels, they try to reject it for changes, and then for rates of acceleration, until they get a level where the unit root is rejected.

Anyway, say the unit root fails to be rejected for levels and is rejected for changes. Then they model is in terms of changes, and if there is a "shock" that picks up the system and puts it at a higher or lower level, the model in terms of changes picks up from there, and there is no tendency to revert to the original path in terms of levels.

Scientifically, what does it mean? They are not trying to give a cause and effect explanation for how the economy works, so the question does not make sense ... you can't expect things to mean something scientifically when people are not even trying to construct scientific explanations.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Mar 7th, 2009 at 08:54:33 AM EST
[ Parent ]
The Unit Root should consist of units, or measures, which are governed by a set of rules declared by economists. Units may be increase or decrease as often and wherever an economist decides. For example, a corollary unit would enable an economist to make a corollary sub-unit to any unit already made. Or an autoregressive time-series forecasting would require the economist to do what its name implies. Or an opposite secular growth would enable an economist to declare reverse playibility on the other economists. (Remember, the economist would declare this unit oppositely by not declaring it.)

And we must all wear masks.

by Lupin on Thu Mar 5th, 2009 at 08:13:45 AM EST
That makes as much sense as Mankiw :-)

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 08:14:18 AM EST
[ Parent ]
To quote Bill Watterson,the purpose of academic writing is to "inflate weak ideas, obscure poor reasoning, and inhibit clarity."

And we still must wear masks. :-)

by Lupin on Thu Mar 5th, 2009 at 08:21:29 AM EST
[ Parent ]


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Thu Mar 5th, 2009 at 09:58:06 AM EST
[ Parent ]
You may find this from today's NY Times apropos:

Ivory Tower Unswayed by Crashing Economy

Yet prominent economics professors say their academic discipline isn't shifting nearly as much as some people might think. Free market theory, mathematical models and hostility to government regulation still reign in most economics departments at colleges and universities around the country. True, some new approaches have been explored in recent years, particularly by behavioral economists who argue that human psychology is a crucial element in economic decision making. But the belief that people make rational economic decisions and the market automatically adjusts to respond to them still prevails.
...
 James K. Galbraith, an economist at the Lyndon B. Johnson School of Public Affairs at the University of Texas, who has frequently been at odds with free marketers, said, "I don't detect any change at all." Academic economists are "like an ostrich with its head in the sand."

"It's business as usual," he said. "I'm not conscious that there is a fundamental re-examination going on in journals."

Mankiw is not only a traditional (conservative) economist, but a flack for the Republican party. You can judge how open he is to ideas from the fact that he shutdown comments on his blog after it quickly became obvious that many who started reading disagreed with him. He brooks no dissent. I'd hate to be in one of his classes.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Mar 5th, 2009 at 08:21:08 AM EST
rdf:
I'd hate to be in one of his classes.
The more I think I learn about the economy the more I think I would not have been able to finish an Economics degree. As we say in Spanish, one would have to take Communion with too many millstones [as hosts].

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 08:27:32 AM EST
[ Parent ]
I've been telling people for years now that the woo-woo people need to worry about isn't astrology or faith healing, it's the crackpot pseudo-maths in conservative academic economics.

Because it's not even maths - it's just propaganda with faked-up equations and a lot of pointless shouting.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 5th, 2009 at 10:08:05 AM EST
[ Parent ]
of Sokal's hoax, replete with favorable references to the Laffer Curve.

Truth unfolds in time through a communal process.
by marco on Thu Mar 5th, 2009 at 10:17:08 AM EST
[ Parent ]
A key factor in Sokal's success was that Social Text was only too happy to publish a paper by a physicist full of quantum gravity jargon.

Economists are not going to be similarly impressed by anything not written by an academic economist.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 10:24:03 AM EST
[ Parent ]
that I diaried a while back: More (Macro)Economics by Physicists

Haven't heard much about them or their ideas since then (perhaps because, as you wrote in your comment, their conclusions were "not surprising".)

Truth unfolds in time through a communal process.

by marco on Thu Mar 5th, 2009 at 10:41:32 AM EST
[ Parent ]
... hearing. Where are new models going to come from without plundering 50 year old and century old physics?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Mar 7th, 2009 at 08:57:15 AM EST
[ Parent ]
On Angels and Pinheads, a fun argument (In French and English) about the consequences of Turing Machine computability on the possibility of planning...

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Thu Mar 5th, 2009 at 08:47:08 AM EST
From: A Space Child's Mother Goose
By:  Frederick Winsor

The Theory that Jack Built

This is the theory that Jack built.

This is the flaw
that lay in the theory that Jack built.

This is the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the constant K
that saved the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the erudite verbal haze
cloaking the constant K
that saved the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the turn of a plausible phrase
that thickened the erudite verbal haze
cloaking the constant K
that saved the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is chaotic confusion and bluff
that hung on the turn of a plausible phrase
that thickened the erudite verbal haze
cloaking the constant K
that saved the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the cybernetics and stuff
that calculates through the chaotic confusion and bluff
that hung on the turn of a plausible phrase
that thickened the erudite verbal haze
cloaking the constant K
that saved the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the button to start the computer
to run the cybernetics and stuff
that calculates through the chaotic confusion and bluff
that hung on the turn of a plausible phrase
that thickened the erudite verbal haze
cloaking the constant K
that saved the summary
based on the mummery
hiding the flaw
that lay in the theory that Jack built.

This is the young grad student who couldn't be cuter
who pushed the button and started the computer
and ran the cybernetics and stuff
and calculated through without the confusion
exposing the bluff that hung on the turn of the plausible phrase
and, shredding  the erudite verbal haze
cloaking the constant K,
wrecked the summary
based on the mummery,
exposing the flaw.
And demolished the theory that Jack built.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Mar 5th, 2009 at 09:52:00 AM EST
Since I like Megeru's sig line, and since Galbraith can talk about economics without employing too much incomprehensible jargon, and since some readers may not know of this interview,...

Video, audio or transcript of Feb 10 interview with Charlie Rose:
http://www.democracynow.org/2009/2/10/economist_james_galbraith_bailed_out_banks

He was also interviewed Oct.'08 by Bill Moyers:
http://www.pbs.org/moyers/journal/10242008/profile.html

by Gary McGowan on Fri Mar 6th, 2009 at 07:20:12 AM EST


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