…stochastic calculus porn…
That’s Arnold Kling on the state of modern macroeconomics.
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I prefer the uncut version
“I thought that it was a critical part of macroeconomic theory that was poorly developed. But the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men’s urge for mathematical masturbation.”
Hm, ‘stochastic calculus porn’ applies to where mathematical finance has been putting its efforts, not what macroeconomic has been doing. There is very very little stochastic calculus in macro. I cannot name one important macro paper that uses stochastic calculus.
I agree stefan. The Nobel economics prize was just awarded to an individual–Paul Krugman–who won by stepping back from the bleeding mathematical edge.
The same applies to the economics of changing one’s mind paper that helped Kydland and Prescott win the Nobel prize at an earlier date. The math behind the undergraduate analysis of the ‘time inconsistency’ problem is rather simple.
When you don’t have something deep, novel, or interesting to contribute to the discussion, you can always make it look impressive by throwing in some crazy complex mathematical model. To me, the mathematical wanking seems like a clear case of incentives:
To succeed in academia as an economist, you’ve either go to be brilliant or use math to fake it.
When you don’t have something deep, novel, or interesting to contribute to the discussion, you can always make it look impressive by throwing in some crazy …
I thought I was about to read colorful sound bites.
GoodnessOfFit is right. You guys are just opening the kimono on your math insecurities.
If you want a solid basis for critiquing modern macro, it isn’t because of “stochastic calculus porn”–which, as someone else has already pointed out, isn’t used in macro at all—it should be because of the penchant of economists to linearize their models. This allows one to use well-understood mathematical and computational tools, but at the cost of obliterating the linkages between economic decisions and risk.
Building meaningful linkages between macro and finance is hard but you cannot succeed if you don’t even try.
The main thing is that almost no one can keep track of the logical linkages and moving parts in their arguments without using math. It’s just too hard. And almost no one can trace the impact of a change of assumptions in any but the simplest theory without using math.
The relevant question is whether the field makes good importance/feasibility tradeoffs. It’s all too easy to work on something important that you can’t make progress on or to embellish a lot of unimportant stuff just because you are able to.
Its funny that people complain so much about stochastic calculus porn. I would say that the Black-Scholes model is the single most empirically successful model in all the social sciences. Its also the only part of economics that anybody actually uses.
And the more cheap mesos is very good for you.
It is enlightening !
are you sure thinkful of all
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