December 2011

Satyajit Das: The Cultural Transformation of the World of Finance

When Satyajit Das started to work at a commercial bank, the world of finance was simple: banks made money by lending it. That was 44 years ago, and the tools of the trade have changed quite a bit since then. In this INET interview with Robert Johnson, Das describes some of the cultural changes that transformed the world of finance from the perspective of a practitioner and shows how traders of the "School of Hard Knocks" were replaced by a generation of traders that came straight from business school and overly relied on models and financial theory.

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Bringing in the Gunslinger: Nicholas Wapshott on Keynes vs. Hayek

Keynes and Hayek were defining figures in 20th century economics. In this INET interview, Nicholas Wapshott talks about his book, Keynes Hayek: The Clash that Defined Modern Economics, and about the intellectual clashes between two foundational economic thinkers. He details how the "gunslinger," Hayek, was brought in to London to bring down the "panther," Keynes. Things were about to get ungentlemanly.

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Stephen Marglin: Occupy Harvard, Economics and Ideology

Students staged a walkout of the intro economics class at Harvard, as a protest against the bias they perceive in the course (here is their open letter). Every other year, Harvard Professor Stephen Marglin teaches Economics: A Critical Approach (syllabus here), as an alternative intro course for Harvard freshmen. The video below shows Marglin at a teach-in, given to students at Occupy Harvard on December 7, 2011. Read more

Stephen Kinsella: Irish Crisis Demands New Economic Thinking

30 Ways to Be an Economist is INET's grantee interview series - INET grantees talk about how they do their work, and how they came to be doing it. This week: Stephen Kinsella - Irish Crisis Demands New Economic Thinking. Read more

Nobel Prize Lectures of Thomas Sargent and Christopher Sims

Here the Nobel Prize Lectures given in Stockholm:

United States Then, Europe Now 
Thomas J. Sargent, New York University, New York, NY, USA

Statistical Modeling of Monetary Policy and its Effects
Christopher A. Sims, Princeton University, Princeton, NJ, USA

Stephen Kinsella - Irish Crisis Demands New Economic Thinking

About the Interview

Most "state of the art" macro models trivialize financial flows and largely neglect the interaction between finance and industry. That is why they failed at predicting and illuminating the collapse of the Irish economy. Stephen Kinsella sets out to provide a remedy: starting from a web of balance sheets, stock-flow-consistent models make it possible to trace the financial flows connecting firms and banks, households and government. Kinsella moves beyond mere simulation, and empirically calibrates a stock-flow consistent model of the Irish economy with the goal to inform policy -- this is new economic thinking. Read more


Michael Spence: The Next Convergence

India and China are set to converge to lifestyles and consumption levels similar to those enjoyed by the industrialized countries. The rise of these new economic giants puts enormous strain on the earth’s biosphere. At the same time, their rise poses challenges to the structure of employment in the United States and other industrialized economies, as low-value-added jobs migrate to emerging markets. These are the central themes of this INET interview and of Nobel Laureate Michael Spence’s book “The Next Convergence: The Future of Economic Growth in a Multispeed World”.

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Steve Keen: How He Saw "It" Coming, and Others Did Not

The two intersecting lines of supply and demand penetrate economics textbooks like Einstein's mass-energy equivalence penetrates physics textbooks. The theory behind the two lines is inherently flawed, says Steve Keen.

It is not possible logically to derive from individuals and their preferences the aggregate demand and supply curves presented in economic textbooks -- unless one is willing to make a host of unrealistic assumptions, such as that all people are alike. That is why the theory is flawed, according to Steve Keen, Professor of Economics at University of Western Sydney in Australia. Read more

Cosma Shalizi: Why Economics Needs Data Mining

30 Ways to Be an Economist is INET's grantee interview series - INET grantees talk about how they do their work, and how they came to be doing it. This week: Cosma Shalizi - Why Economics Needs Data Mining. Read more

Cosma Shalizi - Why Economics Needs Data Mining

About the Interview

Cosma Shalizi urges economists to stop doing what they are doing: Fitting large complex models to a small set of highly correlated time series data. Once you add enough variables, parameters, bells and whistles, your model can fit past data very well, and yet fail miserably in the future. Shalizi tells us how to separate the wheat from the chaff, how to compensate for overfitting and prevent models from memorizing noise. He introduces techniques from data mining and machine learning to economics -- this is new economic thinking. Read more