tag:blogger.com,1999:blog-6837159629100463303.post3325859381579887957..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: Neo-Fisherism and causalityJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-6837159629100463303.post-5673017871701304162016-04-15T12:25:27.077-07:002016-04-15T12:25:27.077-07:00First, that is just the Fisher equation (i = π + r...First, that is just the Fisher equation (i = π + r, which is fine), not the neo-Fisher result Williamson is talking about which is about the output gap and zero (or low) interest rates depressing inflation. <br /><br />As I said at the top of the post, I do think if you look at the mean values, rational expectations does deliver the neo-Fisher result.<br /><br />However, the issue is that the neo-Fisher result does not conserve information (you can destroy information, but the neo-Fisher result <b>creates</b> information which is not allowed -- I can't figure out the original distribution from the normal distribution resulting from the central limit theorem).<br /><br />Check out this picture:<br /><br /><a href="https://en.wikipedia.org/wiki/Central_limit_theorem#/media/File:Central_limit_thm.png" rel="nofollow">https://en.wikipedia.org/wiki/Central_limit_theorem#/media/File:Central_limit_thm.png</a>Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-31035431005639099652016-04-15T12:15:47.851-07:002016-04-15T12:15:47.851-07:00Welcome to the strange world of rational expectati...Welcome to the strange world of rational expectations :)<br /><br />In that model of expectations:<br /><br />E[π<i>t+1</i>] = π<i>t+1</i> + ε<i>t+1</i><br /><br />with ε having zero mean. Therefore<br /><br />E[π<i>t</i>] = H(π<i>t+1</i>)<br /><br />I am not here to defend the idea of rational expectations. It's just that the neo-Fisher model assumes rational expectations, and if you follow the rest of the argument I present you can see that creates a contradiction.<br /><br />My personal opinion is that this shows rational expectations (or any expectations that have future macroeconomic values in them) are wrong. However, as presented, I've stuck to the more limited conclusion that rational expectations at infinity (or simply far in the future) are wrong.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-13140215805266471202016-04-15T11:26:59.305-07:002016-04-15T11:26:59.305-07:00... and that guy (w/ the circuit sim) has a bunch ...... and that guy (w/ the circuit sim) has a bunch more stuff on his website (mostly physics related):<br /><a href="http://www.falstad.com/mathphysics.html" rel="nofollow">http://www.falstad.com/mathphysics.html</a><br />Unfortunately you need to have a "Java enabled browser" to see most of it in action. He gives a link for the plugin, but it's not clear to me which plugin I need (for Firefox)... and Chrome sounds like they dropped support... it's probably opening a whole can of worms... but I would like to see his other stuff!Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-78985850537428757442016-04-15T11:26:17.275-07:002016-04-15T11:26:17.275-07:00Inflation in Brazil is 10% and the rate on 10 year...Inflation in Brazil is 10% and the rate on 10 year gov bonds is 5%. Why is the neofisherian result a surprise? Why doesn't neo fisherism make sense in such a scenario? Until real rates are positive it seems totally logical to me it's what i'd expect. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-55374219793044290662016-04-15T11:18:20.508-07:002016-04-15T11:18:20.508-07:00Nice post too BTW. Nice post too BTW. Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-34573972282866095402016-04-15T05:03:51.611-07:002016-04-15T05:03:51.611-07:00That's actually right... Carroll mentioned tha...That's actually right... Carroll mentioned that it was actually liquor in his talk.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-73928846227661814602016-04-15T04:19:58.612-07:002016-04-15T04:19:58.612-07:00".....assuming the model of future expectatio...".....assuming the model of future expectations depends on the actual value of inflation in the future...."<br /><br /><br />How can expectations of future inflation be a function of actual future inflation?<br /><br />It's illogical. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-27538474367972869972016-04-14T23:43:20.443-07:002016-04-14T23:43:20.443-07:00In looking at it more closely, I think it is actua...In looking at it more closely, I think it is actually a Kahlua and cream shot -- ha!Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-45044257265412066042016-04-14T20:44:00.239-07:002016-04-14T20:44:00.239-07:00I love that coffee cup entropy picture! I've u...I love that coffee cup entropy picture! I've used that myself on a few occasions. I first saw Sean Carroll present it. I was showing it to people at a St. Patrick's day party when they were pouring black & tan's (kind of ironic for St. Patrick's day... I think the <a href="https://en.wikipedia.org/wiki/Black_and_Tans" rel="nofollow">Black & Tan's</a> were the the English backed adversaries of the Irish in 1916)... but anyway, as you can imagine I was the life of the party ... ("Did you hear that colossal bore droning on about entropy?"). =)Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.com