Should the Fed take over the IMF?

[ag]

Agreed. This is a spectacularly stupid post. However, unfortunately, I've committed myself not to use stupidity as criterion for removing posts on this board.

[ag]

Agreed. This is a spectacularly stupid post. However, unfortunately, I've committed myself not to use stupidity as criterion for removing posts on this board.

Ag you still haven't answered what type of micro econ professor you are? What kinds of classes do you teach? Is it all Intro to Micro or are you more in a sub field?

Given what else I have revealed on this forum, you might as well ask me what my real name is ))

Ok, researchwise, political economy, mostly. Teachingwise, advanced micro theory (both graduate and undergraduate), sometimes also public finance.

[ag]

I do, when it is fun ) Unfortunately, too much macro/finance talk here - both, especially finance, have a tendency of boring me fast .  Also, when things get outright imbecilic, as they sometimes do, I am forced to merely insist on decorum: doing anything else might involve myself breaching it ))

[ag]

Political economy, decision theory, experiments, and quite a bit more ))

[ag]

Modeling political institutions, mostly.
All economics is behavioral. Both games and individual decisions are fun.
Econ experiments of all sorts.

[ag]

care to explain to me how the laws of compound interest are "behavioral"?

Sure. Interest rates are prices. Prices are an equilibrium phenomenon, but, fundamentally, they arise from individual behavior. So, in the end, to explain interest rates you need to build a model of behavior. Change the way people discount the future or form habits, and you will get very different predictions about interest rates. You will also get very different predictions about what sorts of contracts would be signed (so, what sort of interest you'd be compounding and how).

Formulas are just some squiggles on a piece of paper. Their meaning and applicability derive from how we understand the world. And, as economists, fundamentally, we understand the world in terms of human behavior.

[ag]

The formula for compounding interest only makes sense if you understand what the interest is, doesn't it? What if we can forecast changes in interest rate over time, we will use a different formula, won't we? The formula by itself is not economics (no formula is): it's the meaning that makes it interesting.

[ag]

Derivatives can also be applied to a host of situations, but that doesn't make them economics. And I don't know, how many times have I written 2+2=4 in solving econ problems - but that's not econ either. By itself, this formula is as applicable to many phenomena that has nothing to do w/ economics (this is just a computation of some quantities growing at a constant rate: could be physics, could be biology). Only knowing when to apply it makes it economics: and that's about behavior.

[ag]

As for growth rates: all modern models of growth try to explain it by using human behavior. Mechanical explanations are not interesting to economists.

[ag]

Jesus christ, guys, this isn't the men's room at the Republican National Convention.

Nor is it a psychiatric asylum, sorry.

[ag]

I just don't agree with you! You can run around saying that the behavior is the key condition for econ. And I can run around saying that the math is a key condition

Well, I guess, that's exactly why I had to study econ and math for most of my life: to appreciate the distinction ))

Math is an indispensable tool in econ, of course (in any science, for that matter). It is impossible to even understand most basic modern research in econ without firm grounding in math. If you were to find yourself in my class, you'd, probably, think I am doing math, not econ: I am making abstract mathematical statements and proving theorems most of the time. I am, mostly, a hardcore theorist - I never really work on data, unless I have myself generated them in the lab. But I know enough math (happen to have been a math major in college) to know it is not what I am doing )))

Math, by itself, is just a sequence of logical statements. But the sequence has to start somewhere. In the end, underneath everything, if it is an economic model, there would have to be some theory of how the world is - and, hence, since we study consequences of human actions, a theory of human behavior. MV=PY is an accounting statement: it's not economics on its own. For it to be econ, you have to appreciate what is M, V, P and Y - and, depending on your theory of what humans do, these things will change.

Naive fascination w/ math is not uncommon when people start studying economics. I know where you are coming from: been there, done that myself ))

[ag]

Can we go ahead and ban him from the economics sub-forum?

Whom, opebo? His Lordship is so charming, I would really hate to do that. Just take him w/ some sense of humor.

[ag]

Also MV=PY is a governing relationship of the money supply and inflation just like Newtons laws of motion.

Well, this just shows two things: you don't understand the meaning of the above expression and you don't understand the Newton's laws, or, for that matter, what are the laws of nature in general.

V, by definition, is equal to PY/M - that's what velocity of money is, so the equation is, by itself, just a definition of V. It's not an experimental observation (like the laws of nature). It's "true" in the abstract, just from definition of V, but it does not, by itself, tell us anything about how the world is. Without further content, it would be perfectly consistent with anything whatsoever happening in the world, even with increase in money supply leading to deflation (if V were decreasing, for instance, or if Y were increasing). By itself, it can't be used to distinguish between the views of yourself and those of opebo )) This equation is not the content of the quantity theory, but, rather, an artifice used to explain it.

PS Obviously, economics is not mathematical justification of human behavior: human behavior needs to mathematical justification. It is an attempt to understand behavior (and its consequences), not the other way around. And, of course, knowing and using math makes that understanding easier.

[ag]

Can we go ahead and ban him from the economics sub-forum?

Whom, opebo? His Lordship is so charming, I would really hate to do that. Just take him w/ some sense of humor.

Not to mention I'm the only non-right-winger who posts in there.

Well, on that definition the world consists of 7 bln. right-wingers and Your Lordship ))

[ag]

You provide the formula for defining velocity of money, but the velocity of money also represents the degree of which reserve leveraging has occurred in the economy.

Laws of nature are empirical observations. What non-trivial (i.e., not definitional) empirical observation are you making here? Suppose I were to make a claim that increasing M is bound to increase Y without an effect on prices, how would that contradict your formula?

In fact, is it possible for this formula not to be true in any alternative universe, as long as V, by definition is just PY/M? What observation would falsify it? Now, ask the same questions about Newton's laws, and you will see the difference.

My PS, basically, said that what we are doing, as economists and social scientists, is studying human behavior, not justifying it. What is so non-sensical about it?

[ag]

(Would you mind showing the "empirical evidence" for this rather amazing claim?)

Which claim?