Assorted links


Arnold Kling writes:
"Economic activity consists of sustainable patterns of specialization and trade." That is the mantra of the Recalculation Story.

Since my first econ 101, over 50 years ago, my motto has been "economics is about equilibrium patterns of specialization and trade" because it is a good synthesis of the classical and neoclassical traditions. In the past 50 years, however, I have changed its meaning because my idea of equilibrium has been moving away from the properties of a desirable outcome toward the processes that may fail or succeed in achieving it. I take this change as a consequence of how I have been understanding the changes in economics.

The ongoing crisis has prompted Arnold Kling to think again his economics and to talk of a new story, but his use of the word sustainable may be consistent with the idea of equilibrium that I have today. It is not, however, a new language as he claims --it has always been the language of economics. His points 4 to 16 are what economics is about and has been about for a long time. In particular, trade theory and policy have focused on all these points, despite the many difficulties to develop models that can take all of them simultaneously. I remember the great debates of the 1970s --prompted mainly by trade policy reforms in Chile-- that encouraged important developments in the theoretical and empirical analysis of new patterns of specialization and trade.

Thus, I welcome Arnold Kling's interest in contributing to classical and neoclassical economics. This is not what worries me about his story. My concern is that he fails to understand how far his mantra and my motto are from macroeconomics as a theory of national accounting. Although he asks his readers not to think in terms of aggregate demand (he's right because an AD theory is a theory of national accounting), then his only reference to macro theory is in point 3 where he focuses not on AD but on DSGE and Solow's critique of DSGE --ignoring that AD theory has been complemented by AS theory as developed by Solow and others. By saying that Solow has more good points, Kling suggests that his Recalculation story may provide some foundation to AD/AS macroeconomics, or at least that there is some way to think of them as complements. I believe that the survival of AD/AS macro is due only to the lack of an alternative theory and that no new macro theory could be based on the classical and neoclassical tradition.

I don't see much to disagree with in Kling's post, other than it's not the whole story.

As for the Tendulkar story, I'm not sure why, but I found it hilarious.

if it works, why hasn't someone already made an app or a webpage to judge the quality of your existing photo library?

"The estate tax translates into a tax on investment because, in the event of death, a fraction of the payoff will be confiscated."

It's worse than this. Some investments must be liquidated before "maturity" and some are so illiquid that liquidation forces a below value price. Do people still not 'get' the problems with forced liquidation?

There is both an assessment and collection problem with the death tax. And that's even if you believe in the tax.

Another excellent roundup. I always enjoy reading your roundups as I always find a useful article or two which I really enjoy reading. Thank you for the share!

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