Archive

This research project creates a computational model of the current financial crisis to discover the essential elements needed to reproduce the crisis, while investigating alternative policies that may have reduced its intensity and strategies for recovery.

This research project uses spatial cross-sectional variation in addition to time series variation to estimate fiscal multipliers; the impact of anti-predatory lending laws on housing prices, default rates, and foreclosures; and the impact of raising wages during recessions.

This research project explores how the output of firms outside of the financial sector is affected by the health of the banks and other financial institutions.

This research project focuses on the effect of the technological changes that led to the British Industrial Revolution in the eighteenth century on the market for skilled workers.

This research project will examine the long-term costs of macroeconomic instability in a major metropolitan area and the direct impact of macroeconomic shocks on technological discovery.

This research project investigates the influence of economic doctrines on policy norms in recent decades through analysis of the history of the Nobel Prize in Economics.

This research project explores ways to influence policy, starting with selected UK regulators, pension funds, and asset management groups, by testing the feasibility of “emotional finance” solutions to the prevention of future financial crises.

This research project explores and documents the development of graduate economics training in the leading centers of doctoral education in the United States.

This research project uncovers the economic forces which reshaped the evolution of the imperial examination system in traditional China, using a new dataset from archival sources of ancient Chinese Books.

This research project examines the relationship between the creation of money, price formation, and income flows, assuming no restrictions to the volume of credit, while abstracting from the existence of speculative crises and the role of the public sector in the process of monetary creation.

This research project shows what economists can learn from political philosophers in thinking about economic inequality while also investigating the philosophical significance of recent empirical work on inequality, within economics and elsewhere.

What it will mean for the U. S. economy to go over the “fiscal cliff.”?

INET researchers have continued their innovative work and are finding larger platforms and eager audiences for it.

Your average economics textbook presents the neat image of a discipline with many useful conceptual paradigms for viewing the world. But it almost never gives any sense of how these ideas developed.

Economics is very theoretically comfortable with what may be termed `Keynesian’ waste.

The Risk Society

The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate.

Doing Capitalism in the Innovative Economy

We derive generalization error bounds — bounds on the expected inaccuracy of the predictions — for traditional time series forecasting models.

The European periphery is qualitatively dierent from the core.

Ireland has experienced a series of interlocking banking, fiscal, unemployment and political crises since 2007.

You know the country is in a financial mess when even establishment figures such as Rachel Lomax are calling for revolutionary thinking

In a previous post we queried whether the theory of the consumer as developed in the first three chapters of Mas-Colell, Whinston and Green (and indeed other comparable texts) provides anything by way of content beyond what is implied by the abstract description of consumers as agents who are maximizing something. [We did not discuss chapter four, on aggregation of demand, to which we may return later]. As we noted then, a comparable point can be made about the theory of the firm.

The Institute for New Economic Thinking has openings for 2-4 Postdoctoral Fellows in New York City.

Did the industrial revolution increase the relative demand for skilled labor, or decrease it?

How do economists make their models work? By assuming that investors have rational expectations and that every market participant is alike. However, things quickly get messy once economists start to acknowledge that people are different, interact with each other, and change heuristic forecasting strategies based on recent performance.

For one more time traveling closer to home – Mainz! It’s been the annual meeting of the German Society of the History of Science (the kind of academic club one has to be nominated for membership).

For nineteenthth century figures such as Bentham and Jevons, the concept of utility was associated with satisfaction or pleasure experienced.

So, my new students’ training is essentially about understanding urban “territories” and “societies” through fieldwork. And my contribution is, supposedly, to highlight the economic dimension of all this.

When they told me I was expected to teach “Introduction à l’économie” this year, I thought, OK, this is straight. Every economist knows how to do that.

The Eurocrisis has many dimensions—bank solvency crisis, sovereign debt crisis, political unity crisis, and economic/unemployment crisis—but time after time it has been the liquidity crisis dimension driving events, and ECB response to the liquidity crisis driving institutional evolution. The reason is simple. Liquidity kills you quick.

Contemporary mainstream economics has widely “poisoned the well” from which people get their ideas about the relationship between economics and ethics.

Mathematics and the ‘Whiz Kids’

Two Nobel laureates, an election, and a shaky economy. The message? We can do a whole lot better.

What do you get when you put two of the most well known and most widely cited economists in the world, both Nobel laureates, on stage together? A healthy dose of economic reality.

China released quarterly GDP figures this week. Wen Jiabao emphasized the parts of the release that pointed toward stabilization, and one can certainly find some logic to that view.

The British Corn Returns data provided the empirical basis for the fierce debate around the introduction and repeal of the 19th century British Corn Laws. Contemporary readers, like David Ricardo and Thomas Malthus, followed them as closely as stock market prices of today. Much of 19th century political economy rested on contemporaries’ interpretations of this data.

INET co-founder George Soros has been awarded the Adam Smith Award by the National Association for Business Economics (NABE), an association of business economists.

MWG introduces the theory of consumer behavior by presenting two distinct approaches to modeling consumer behavior, the preference-based approach (based upon unobservable preferences generating a utility function) and the choice-based approach (based upon observable choice behavior), and attempting to establish connections between the two.

What makes a good model?

a lack of US growth may lead to a fall in the dollar’s popularity, and the result could be a global liquidity shortage.

In this post, I would like to explore the views of preferences and behavior outlined in MWG Ch.1, and specifically the view of rationality developed in this first chapter.

Climate change policy is caught in a stalemate between those who fear the environmental consequences of not doing enough and those who fear the economic consequences of overreacting. But controversy over the extent and sources of climate change need not stand in the way of a positive economic policy response.

Everyone wants to ring-fence something, but they can’t agree on what: Vickers, Liikanen, Volcker.

Everyone wants to ring-fence something, but they can’t agree on what:

Recent empirical findings suggest that macroeconomic variables are seldom normally distributed.

Ambiguous private information leads to informational inefficiency of asset prices in rational expectations equilibrium.

The purpose of this Chartbook is to present a summary of evidence about changes in economic inequality – primarily income, earnings, and wealth – for 25 countries covering a 100 year period from 1911 to 2010.

A Response to the INET Euro Council Report

Euro Crisis Report

In this initial blog post we wish to situate microeconomics as a field of social enquiry.

Can economics be morally centered? And perhaps more importantly, should it be?

The blog is intended for any student taking an advanced microeconomics course, any faculty member teaching such material, or indeed anyone interested in microeconomics and its role in the discipline.

Excerpts from a draft introduction of Till Düppe’s and Roy Weintraub’s new book, under revision for Princeton University Press, presently carrying the working title “Finding Equilibrium: Arrow, Debreu, McKenzie and the Transformation of Economic Theory

INET co-founder William H. Janeway has been granted the honorary award of Commander of the Order of the British Empire (CBE) for services in education and for his support of the University of Cambridge.

While a substantial literature in economics and finance has concluded that women are more risk averse than men, this conclusion merits reconsideration.

“The aim would not be to unravel a hidden coherent structure of the philosophical, theoretical, political dimensions of his work, but to give a sense of the contingencies that his work was subject to – both in terms of its origins and its receptions. Don’t make up an Arrow that he himself was not aware of.” -Till to me, email conversation on Kenneth Arrow, summer 2012

Last Thursday, the Fed announced its anticipated third round of balance-sheet expansion, at a fixed rate of about $40B per month “until [substantial] improvement [in unemployment] is achieved in a context of price stability”.

Excerpts from “Retrospect and Prospect,” the concluding remarks Bob Coats presented at (or maybe wrote after) the History of Economics conference held in 1972 at Bellagio to commemorate and reassess the 1870s “marginal revolution” (full proceedings here).

New economic thinking is creating change in Germany.

Robert Solow, “Notes on Coping.” In Szenberg ed. Eminent Economists: their Life Philosophy, 1992, p270

Monday marked the one-year anniversary of the start of the Occupy movement, and INET Executive Director Rob Johnson went on CNBC to discuss the significance of the milestone.

Yesterday, I had my first introductory economics seminar with my new students.

Would having more women in leadership have prevented the financial crisis?

Many public debates about climate change now focus on the economic “costs” of taking action.

While Europe faces the specter of overwhelming debt, another deficit lies at the heart of the inability to find a solution: a deficit of trust.

INET co-founder George Soros is calling on Germany to lead Europe out of its economic doldrums or get out of monetary union altogether.

I thought I was on to an inside reference when re-reading the General Theory when Keynes calls Marx, Edgeworth and others simply by name, but refers to “Professor Pigou” in several instances.

This work studies the interactions between income distribution and monetary and fiscal policies in terms of ensuing dynamics of macro variables (GDP growth, unemployment, etc.) on the grounds of an agent-based Keynesian model.

Mid August, with the Olympics over, Paralympics and Premiership starting (that’s Soccer for the American readership), it is well and truly the quiet period for most of academia.

When Felix Salmon looks at the global equities market he sees a world of free-for-all electronic warfare that likely would be more recognizable to Isaac Asimov than Milton Friedman.

In a recent interview, INET Advisory Board member and Executive Director for Financial Stability at the Bank of EnglandAndy Haldane took aim at the economics profession.

This week Bernanke spoke to the International Association for Research in Income and Wealth, and, as Bloomberg Businessweek notes, he was singing a different tune.

A Response to Heiner Flassbeck’s questions about the Institute’s Council on the Euro Crisis

“You can’t get out of debt by adding more debt.”

How to explain the current recession facing the US and the world? Does so-called “austerian” logic provide the solution? Or is it doing more harm than good?

Where’s the next economic crisis?

Paul De Grauwe raises very important questions on the institutional structure of Europe and how it must be modified to fortify the euro zone.

In what sense are central banks really independent? From whom are they independent? For whom in society do they deliver?

How must the European institutional structure be modified to fortify the euro zone?

In Friday’s FT, former Morgan Stanley trader Douglas Keenan traces banks’ LIBOR manipulations back to 1991, when he observed, from the futures desk, LIBOR fixings come in at levels different from where he new the market to be.

If the meetings of European historians of economics are urbane and cosmopolitan, the meetings of American historians are, by contrast, frank and toilful.

The International Human Dimensions Programme on Global Environmental Change (IHDP) recently published the Inclusive Wealth Report 2012, in which the authors propose a measure of wealth based on the stock of capital present in a country, as opposed to the flow measure of GDP.

what role central bankers should play to bring the needed change>

Has the servant’s servant become the master’s master?

A few weeks ago, I attended the H2S 4th workshop on “Cross disciplinary ventures in postwar American Social Sciences,” (research program outline here).

In support of a European Banking Union, Done Properly: A Manifesto by Economists in Germany, Austria and Switzerland

Last weekend, I was in Tübingen - very close to my home town: the same smell, the same surreal Swabian idyll that makes you think of Hölderlin and Hesse rather than DSGE.

A few days ago, I began researching on the history of a subfield of economics which was born in the sixties, then thrived and institutionalized itself in the early seventies.

[We are inaugurating something new in this blog: a jointly written post!]

How will climate change influence economic sustainability?

How representation of data can contribute to, or dispel the false certainty of statistical and econometric technique.

“We choose this stochastic structure for computational reasons. This reduces the dimension of the variables. With (such and such) alternative, the computational burden would have dramatically increased.”

Are we doomed to repeat the past? Even when we know better? Or do we not know better even when we should?

Stock flow consistent macroeconomic models suffer from the lack of a coherent estimation method due to the complicated nature of the modeling process.

The Great Recession seems to be a natural experiment for macroeconomics showing the inadequacy of the predominant theoretical framework — the New Neoclassical Synthesis — grounded on the DSGE model.

Background paper for a presentation to the Seattle University School of Law Berle IV Symposiun, “The Future of Financial/Securities Markets,” London June 14-15, 2012.

This paper tracks the development of sectoral saving and borrowing in the US economy over the past 50 years.

Revised text of a presentation at the Conference on Microfoundations for Modern Macroeconomics, Columbia University, November 2010. I would like to thank Amar Bhidé, Roman Frydman, and Andy Haldane for helpful comments, and the Institute for New Economic Thinking for research support.

John Kay’s thought-provoking essay The Map is Not the Territory: An Essay on the State of Economics argues that economists have been led astray by excessive reliance on formal models derived from assumptions that bear too little similarity to the world we live in.