Archive

In the case of utility, it’s all in the name.

The crisis has exposed the failure of economic models to deal sensibly with endogenously generated crises propagating from the financial sectors to the real economy, and back again.

Okay, so here is the statement, but what does it mean? Felix Salmon offers an unnamed advisor’s flowchart. Let’s see if Money View thinking can do better.

Last week Goldman Sachs published a note in favor of the Fed’s adopting a formal nominal GDP target, while Fed-watchers caught a whiff of a possible change in policy in the works.

Till is right. It’s not the historian’s task to question the legitimacy of the decisions of the Nobel Committee.

Goodhart brings back on the table the 2% minimalist federal fiscal counterpart to monetary union: “As has been exemplified in the recent crisis, it is problematical to try to issue money without the power to support that via taxation. Equally without access to money (notably via taxes), the power to undertake counter-cyclical, or cross-country, stabilisation is limited. So, the second proposal is to revisit the exercise that was done, some twenty years ago, to assess what fiscal changes might be needed to accompany a single currency.”

It’s Nobel Prize time again. And what a beautiful prize this year it is!

Plumbing Matters

The Globe and Mail published a long piece about the dismal science, covering a lot of ground from moral philosophy to rational expectations, from Adam Smith to this year’s Nobel laureate Thomas Sargent, from the Post-Autistic Economics movement to the Institute for New Economic Thinking. Excerpts:

The optimism embedded in the efficient market hypothesis has been one of the main sources of the recent turmoil

Focus on quantities

First ECB, then EFSF

The financial crisis of 2007-2009 should have been sufficient empirical evidence to indicate that the axiomatic basis of the mainstream theory needs to be replaced.

The future of macro, he says, may well make “the formation and revision of expectations an object of analysis in its own right.”

The reputation of economics and economists, never high, has been a victim of the crash of 2008.