What is even more ridiculous is that you arguing against a position I did not take.
Obviously you can’t differentiate between a model being simplistic but useful, and a model that is simplistic to absurdity and is totally fallacious.
The market does not fail for it has no collective purpose or goal that one can objectively determine and then measure its success in obtaining that goal. People say it fails when they don’t like the results according to their own value judgement. That includes these government accountants who call themselves economists.
There’s nothing amusing about that screed. I’d wager that Wenzel has never read a paper of any of the three economists who won the prize, in fact, I’m guessing if he’s read anything about them it’s from the citation of the Nobel committee (or perhaps, a post on Marginal Revolution at most). Seriously, the piece of full of hot air but there’s really not much substance behind the rant.
One general trend I’ve got from this thread is quite simple, it’s OK to trash mainstream neoclassical models (these papers are arguing against the very models of idealised markets that the Austrians kick up such a fuss about), except of course when doing involves going against Austrian political dogma.
Listen, The mainstream economists that rely on differential equations are a joke. They are a mockery to the science of economics and a total embarrassment to the entire scientific community. They have produced nothing but failure after failure.
It is invalid to use mathematical equations to describe every type of system. Curiously, It seems that only economists do not understand this point. It must be some inferior complex disorder.
They also apply no scientific method and by you claiming they do actually exposes your sheer ignorance on what the scientific method is.
You never answered my question about the “static” mainstream models, what does the D in DSGE stand for?
Obviously you can’t differentiate between a model being simplistic but useful, and a model that is simplistic to absurdity and is totally fallacious.
Models are just models, even if one is a very poor fit to reality it can serve as a useful benchmark for further theorizing (and could you tell me which of these models are so “fallacious” as to be absurd and why you believe this?) Whether a model is a good fit of reality depends on its application, I agree that policy makers are guilty of applying overly simplistic (ISLM) models to fit a complex reality but I’m not so sure one generalise this to the whole of macro. (And if one does, the question remains, why are they doing this? Perhaps it’s not possible to do better)
The market does not fail for it has no collective purpose or goal that one can objectively determine and then measure its success in obtaining that goal.
Now you’re quibbling over terminology. As Solid Choke pointed out, in welfare economics, market failure has a very specific meaning. By the way, nobody denies that welfare economics is based on various value judgements, any textbook will be pretty explicit about this.
Listen, The mainstream economists that rely on differential equations are a joke. They are a mockery to the science of economics and a total embarrassment to the entire scientific community. They have produced nothing but failure after failure.
Can you cite example of who you’re talking about? Can you provide some sort of line of argumentation to justify these statements? You haven’t thus far, and until then I’m going to write these comments of as typical Austrian blather about math they haven’t learned being used in papers they haven’t read (I’ve done a course in differential equations, I passed with a top grade and I can barely make sense of Diamond’s paper, so clearly that isn’t the extent of the math he’s using. This generalises quite well).
It is invalid to use mathematical equations to describe every type of system.
No it isn’t. The question is which mathematical tools we’re using and what type of system we’re describing.
What the hell does this even mean? What are you even talking about? Economics and politics are two entirely separate spheres. The first thing you’re introduced to, in any elementary economics course, is the positive/normative distinction (even before supply and demand). Politics involves ideologies, how things should be; economics explains how things are. Do you understand?
It’s called intellectual disagreement. If you want to show that the Austrian critique of welfare economics is mistaken, then go right ahead. But saying that we’re not allowed to disagree is no argument at all; it’s pure stupidity. And finally, saying that DSGE model’s are dynamic simply because it begins with the word dynamic is laughable. Mainstream economics has re-defined certain terms (varies from the commonly understood definitions), such as “competition,” “market failures,” and “dynamic.” The term “dynamic,” in mainstream economics, means that it incorporates the element of time (logical time), but this is not what Austrian’s mean when they use the term “dynamic” (continuous change and uncertainty).
Leontief’s input output model, for example, is “dynamic” according to mainstream terminology, but an Austrian would claim that it is both completely static and barren (there is no entrepreneur in his model, there can be no malinvestments, capital is homogenous, money is stable, value is denoted in money terms (the numéraire) and each productive process takes “A” unit period of time to produce (identical). In addition to this, the inputs are used in fixed proportions to outputs, and equilibrium is replaced by a steady-state).
OK, no offence, and I don’t wish to be condescending here. But…come on! How can you expect to refute a whole literature with “one liners”, moreover, there isn’t really a ridicule of the concept of free markets in economics, the general presumption is that they’re efficient (welfare theorems) albeit prone to “fail” at time or under certain circumstances (externalities, asymmetric information).
No worries. One liners serve a purpose. IMHO, they are thought provoking and attention capturing. You may or may not win the argument with one line. But at least we can begin to have an argument. Check out my liner down near the models thread below…
Models are just models, even if one is a very poor fit to reality it can serve as a useful benchmark for further theorizing (and could you tell me which of these models are so “fallacious” as to be absurd and why you believe this?
One of my favorite one liners / quotes:
“All models are wrong, but some are useful.” - George Box
If you have a good one liner, you can provide quick insight without a digression. For some audiences, digression my be necessary.
Esuric: Mainstream economics has re-defined certain terms (varies from the commonly understood definitions), such as “competition,” “market failures,” and “dynamic.” The term “dynamic,” in mainstream economics, means that it incorporates the element of time (logical time), but this is not what Austrian’s mean when they use the term “dynamic” (continuous change and uncertainty).
I’d like to emphasis Esuric point, that much of the terminology has be re-defined, or even ill-defined. One of the ones that bug is the mainstream use of “market-based”. In my econ class, “market-based” includes tired pricing and price controls by government, the use of taxes to thwart undesired activity, the use of government to create a market place (ex. carbon credits). These are far from market-based solutions.
Just because there is a “whole literature” about something, doesn’t mean it has any substance. There is a “whole literature” about all the religions you don’t believe in, and yet they are all full of hot air. When Stalin reigned, there was a whole literature about why although God doesn’t exist, Stalin is right up there to replace Him. There is a whole literature about alchemy, witchcraft, magic, raising the dead, phlogiston, the ether, homeopathic medicine, the list is endless. But they are all toatlly wrong. Surprising that an educated person would fall for this version of the appeal to authority fallacy.
Gifted men [and women?] can find a fatal flaw in some overblown nonsense and epitomize it in one line. Of course this requires mastery of the nonsensical field, insight as to why it’s wrong, and a way with words. Murray Rothbard was particularly good at this, according to Walter Block. There are others, in other fields.
I like Rothbard’s one liner about why Communism must fail: Who is going to take out the garbage?