Talk Elections

Given the unfortunate globalized situation of the world economy, in fact the Fed can control all other central banks because of the interlocking system, and, by extension, the IMF.

If the Fed were to monetize the Greek debt, the Euro area would have to inflate by a similar amount (in theory) or face appreciation of the Euro, which is after all destructive to their economy.  Basically the Fed can do what it likes, and other central banks have to follow precisely.

So, I would suggest that the Fed print enough dollars to maintain the Greek debt, and to intervene as necessary to equalize yields on Spanish, Italian, French, etc. debt (to German yields).

People that are voting yes to this question shouldn't be taken seriously in a sub forum like this.

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?

I agree with the above posts. Anyone voting yes should be ashamed of themselves.

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.

Other than that you were a Econ professor I don't know anything else about you so you at least have nothing to worry about from me.

Interesting though, good to know. Surprised you don't jump into threads and comment a little more often.

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 :)))

So can you give me some examples of topics you would find fun. I'll keep it in mind for the future because I tend to like talking to people that have a lot to offer more than talking to people that are just going to put there small partisan talking point line in and then run off.

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

How are you defining "political economy" because if I'm not mistaken that is a term that can mean wildly different things?

Decision theory as in more like game theory or more like behavioral economics?

What kind of experiments?

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

Interesting.

Not to poo poo something in your post, but 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,

There is a difference between "interest rates" and "compound interest."

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.

Not really. Interest rates can be fixed, but that is besides the point. The formula(without even imputing specific interest rates) most definitely is economics and it can be applied to a host of things like growth, inflation and prices, etc. Just in the case of growth we can apply it many different ways. We could look at the effect on one country or compare two. So lets compare to. Lets say we have country A and B and the spread between the two's growth rates never equals 0. Now lets say both countries started with the exact same GDP and population(and thereby the same GDP per capita). If we were to figure out that over time A always averaged at least slightly higher growth rates than B we could safely assume that as time approached infinite eventually the standards of living of even the some of the poorest people in A would be higher than some of the most well off in B.


Just pointing out that there is at least some mathematical(and non behavioral) laws of economics(and I would argue that there is a ton of mathematical(non behavioral) laws in mathematics.

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.

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

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

Nor is it a psychiatric asylum, sorry.

To me, economics is about analyzing human behavior with the most predictive models/formulas you can possibly achieve given the current state of knowledge/technology (or, if you want a more formal textbook definition, the science of resource allocation in a world of scarcity).

The formulas/models achieve a level of knowledge about human behavior, but do not necessarily cause or direct human behavior in any way, shape or form. However, it is interesting how certain ideas/theories/philosophies/models can drive human behavior after becoming widespread/accepted (and even without people realizing this is happening). It reminds me of that famous line from Keynes about everybody being the slave of some defunct economist.

Politico, human behavior comes from pointing a gun at them.  'Economics' is just a very funny attempt to mask what is really going on.

By the way who is the other non-brainwashed person who voted with me on my scheme?

The only other person on the forum who appreciates your trolling efforts.

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, but the truth is that for most things you need both. To underestimate the effect that the math has on future behavior is I think completely missing the point.


How about inflation? MV = PY is a completely mathematical construct and correctly shows the relationship between the money supply and inflation. Explain to me how that is behavioral in nature.

How about fractional reserve banking? The formula for maxing out the depository leverage in banks is entirely mathematical and isn't dependent upon behavior at all(except for maybe the fed increasing monetary base). That formula can accurately predict the point in the money supply where it has fully leveraged out its base.

I could go on and on! Also I would argue that behavioral analysis is only as much as a factor in economics as people engage in the way you don't expect them to. When the math is pointing to expected behavior and they engage in that then the math is the driver. Example: Fed lowers base rates. Mortgage rates come falling down dropping the price of home ownership down. The mathematical economist would argue that home buyers would sky rocket approximately to the degree that cost of servicing that mortgage falls. Sure enough the behavior followed exactly that. So what was the driver there? Human behavior driving the economy or the effect of mathematical laws changing human behavior?

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

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 :)))

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

The funny thing is depending on how you are exactly looking at it we may be arguing semantics on the topic. Essentially, saying all economics is behavior is like saying that all of physics is matter, motion, force, and energy; okay fine! The understanding that it is the laws of gravity(for instance) that will govern the coming together of two objects and that is a mathematical formula doesn't negate the fact that in order for the formula to work you have to actually have 2 objects of matter. But also doesn't change the fact that without the mathematical formula all you have is 2 objects, no explanation of why they came together, and no subject that is known as physics either.

So if your distinction is that economics is the mathematical study of behavior, markets and trade and that the subject of that study is behavior, markets, and trade but the study of and the laws that govern markets are mathematical then I'll somewhat agree with that distinction.

But if you are coming to the conclusion that all economics is the mathematical rationalization of behavior I very emphatically disagree. At a fundamental level the laws of economics(whether discovered yet or not) govern markets and trade like the laws of gravity and wind resistance acting on a feather descending to the Earth.


Also MV=PY is a governing relationship of the money supply and inflation just like Newtons laws of motion. Would you call Newton's 3 laws of motion not physics? Of course the laws themselves are not matter, energy, motion, or force, but that is why its the *study* of those things not actually *those things.*

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.

In this case your just wrong. 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. An equation can always be set to have a component equal to the rest, but so...! It is a governing relationship and I do understand the laws of nature.

Of course that formula can distinguish the difference between me and Opebo because he doesn't even believe in its existence nor its effects.



Your PS makes absolutely no sense!

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 :)))

Excessive hyperbole there, ag.  Also fatuous.

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?

Huzzah - now there are four reasonables!

What complete and utter balls.

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

Which claim?

Two claims actually

1-  This

2 - It's logical consequence - that current economics describes said behaviour (in an empirical fashion)

(Also 3 - How can tell the difference between "describing" behaviour and "justifying" it if all we have go on are believes about "human nature"?)

I've tried to explain this before, but your idea of what economics is seems to be based on some strange prejudices. This is sort of like asking us to prove that the Jews aren't running the banks...

Anyway, 2 doesn't follow logically from 1 at all. Although there is quite a bit of truth to it.

3 I don't get. If we aren't justifying, then we aren't justifying?

Well explain it to me again. The last time it struck me as self-falsifying nonsense.

I agree that logically 2 doesn´t follow 1, I should have been clearer, but if it doesn´t, then what are we studying?

As for 3. By attempting to describe reality how can you be sure that you are not justifying it? (The world is x, therefore y is impossible).

My question can be boiled down to this: Why can we believe that mathematics is a good tool for predicting human behaviour. This should especially be asked given the context that faulty equations and assumptions about risk are partly responsible for the financial crisis which the world is currently going through.

You anti-semite comment is ridiculous.

Well, you're asking us to disprove your ridiculous prejudice about economics which anyone who is studying it knows is not true. It'd be sort of like asking me to prove that I don't have polar bears running down my street in the morning.

Obviously we are attempting to describe reality. If we already were there would be no more economic research done. But few scientific fields are done. Economics has only been around for a couple of centuries as anything resembling scientific inquiry, while, say, physics or mathematics have been at it for millennia. I think economics can tell us a lot about human behaviour, but there is still a lot to do.

I'm still not sure what 3 means. I guess in a postmodern sense, that is trivially true of everything. But it's not as if economic research in general is pro some sort of status quo. You observe a phenomenon (unemployment in a country, donations to charity, growth in countries receiving foreign aid, etc) and you then try and explain that phenomenon.

So, why can we believe that mathematics is a good tool for predicting human behaviour? Well, first off I don't think anyone is saying that. Again, you don't seem to be very familiar with how economic research is conducted. Mathematics doesn't explain why people like to have iPads. It can be used to explain how people liking iPads translates into what price iPads are sold for in the market.

While economists do look at the first issue as well on occassion it isn't typically viewed as within the field (that's more the domainof psychology or sociology, at least historically).

The financial crisis was partly due to mathematical modelling built on faulty assumptions. That doesn't necessarily indict using math to calculate things. Me thinking $10 is enough to buy to lunches costin $6 each isn't proof that one can't use math to calculate what to buy.