Assorted links

1. Watch markets in everything, why not just run faster?

2. The economics of Groupon.

3. The macro learned in economics grad school, though I disagree that ideology is the reason for RBC popularity.

4. Singapore allows political competition on the internet (1/20), ungated version here.


#4 is mislinked.

People complaining about the unrealistic 'assumptions' in RBC models are silly.

1. It's a model, of course there are simplifying assumptions.
2. Keynesian models are filled with unrealistic assumptions too! (see point 1)

Everyone knows this, and when push comes to shove will admit their desired framework has unrealistic assumptions, but it's such an easy debate point to make every time this discussion arises.

And it's worth pointing out that the obvious questions about what happens when you relax certain assumptions is more or less the entire research program of macro. See: heterogeneous agents, search frictions, pricing frictions, bounded rationality, different shocks to DSGEs/VARs, etc, etc.

The basis of a realistic science is and must be realistic premises.

For example, of physics, the major premise, and goal, is universally constant law over time and space. This is real because, without it, you lack a universe at all. Otherwise, the more specific and circumstantial your premises, the more you tread from science to applied science and engineering.

So what are the unrealistic assumptions in the new economics? Are they only valid for some specific non-existent domain? Classically, the rational agent is the realistic premise, and goal, because trade is a science of persons. This is entirely reasonable.

For otherwise, if the economist believes that he is instead a hedonist behaviorially determined, what kind of science is he creating anyway? Or does he believe that he is better than the lesser humans he models?

Well the Keynesian unrealistic assumptions seem to produce accurate predictions. So should we care?



Your link shows nothing of the kind and is frankly ridiculous.

I would think the political influence would be in the opposite direction: towards models that suggest a large role for government.

Incentives for economists do not come from government. They come from Wall Street.



well you said that political influence would push models that suggest a large role for gov and wall street has political influence over gov so they get what they want.

Groupon economics... This is PR.. I would bet the real place Groupon makes money is that a large percentage of Groupon's go unused.

Actually, Groupon would prefer that they are used so customers stay happy and continue to buy more. Groupon makes the same amount regardless of use. The merchant does make free money if they aren't used, but the whole purpose is cheaper customer acquisition (versus traditional marketing/coupons) so the merchant actually wants them to be used as well.


I concur. Without models of some sort, how else would the government justify its role. Wasn't a model of some sort used to sell the stimulus? Of course, "sell" is just a eumphemism for "I won, suckers."

Wait, you forgot to include your usual gratuitous Bush backward-looking cheerleading and whining about those pinko Dems.

Please edit and resubmit.


The Consistency Police

Yeah, Paul Krugman and others have an undying allegiance to debt-exploding fiscal stimulus. That's despite the fact that fiscal stimulus has just not worked for any sustained period of time. In reality, they have an allegiance to big-government first and Keynsian theory helps to validate a case for increasing spending without increasing taxes.

For me, as somebody who is a big advocate of bigger monetary stimulus, I do not like how my view and their view get combined in public discourse. People think I'm advocating running up the credit card to reduce unemployment, like Krugman and others, when I'm really advocating the opposite. I want monetary policy to put people back to work so we actually work and pay down the credit card.

Interesting that such a biased reporter using such a flawed system makes such highly accurate forecasts.


What forecasts would those be?


I like your style. Speaking "truth to bullshit".

Rich, I like yours too: calling bullshit bullshit.


Can you elaborate on the reasons why you think RBC models are so pervasive in modern academic macro?

Regarding #3, I think "Noah Smith" is going to learn that it was a foolish idea to run a public blog during grad school...especially one that criticizes his own program. I imagine the faculty are not too enthused. Apparently he didn't learn anything practical in his Game Theory classes either.

On the "1/20" thing, has anyone actually run into the paywall yet without trying?

If you view an article by clicking a link from a blog it doesn't count against one of your twenty.

"jj" - Well, the profs who taught the classes were cool with it, as are my committee members. But thanks for looking out for me. ;-)

Well, MIles has good judgement. Getting attention from a blog like Marginal Revolution is good, but remember that it might rub recruiters the wrong way.

This is real because, without it, you lack a universe at all. Otherwise, the more specific and circumstantial your premises, the more you tread from science to applied science and engineering.

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