tag:blogger.com,1999:blog-6837159629100463303.post4001990878152169662..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: A simple example of information equilibriumJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-6837159629100463303.post-74479194245006057752015-02-12T22:19:32.893-08:002015-02-12T22:19:32.893-08:00Cheers, Jamie. I could re-phrase "reject the ...Cheers, Jamie. I could re-phrase "reject the neo-Keynesian comprimise" instead as "believe in the existence of high unemployment equilibria", which is logically equivalent but isn't defined with reference to other economic 'schools' of thought. I didn't mean to offend and I think a diversity of viewpoints is lacking in macroeconomics, espeically given how uninformative the data is. Economists in general -- and subscribers to these different schools -- should probably be much more equivocal.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-20329171215832467452015-02-10T03:49:47.991-08:002015-02-10T03:49:47.991-08:00Thanks for this reply and your subsequent post. I...Thanks for this reply and your subsequent post. I've read the post and will need to think about how to structure my reply but I will reply.<br /><br />It's probably better to come back to Post-Keynesian economics after a broader discussion. I think you are doing Post-Keynesian economists a disservice if you think they are defined by what they are against. They are, however, very bad at putting forward their case in a way that appeals to anyone apart from other Post-Keynesian economists so the world draws the same conclusion as you.Jamienoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-63921480741876120262015-02-08T12:59:27.761-08:002015-02-08T12:59:27.761-08:00Sorry Jamie, my original comment here failed to sh...Sorry Jamie, my original comment here failed to show up for some reason.<br /><br />I would say that the information transfer model lives on the concrete steppes and that I said exactly that about Paul Krugman in this post:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2014/11/the-information-transfer-model-and.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2014/11/the-information-transfer-model-and.html</a><br /><br />Regarding the post-Keynesian economics, it seems to be a broad umbrella and the only thing in common is that they reject the neo-Keynesian comprimise with the neoclassicals and the economy won't always return to a 'natural rate' of unemployment per Keynes General Theory.<br /><br />If you have any good recommendations of blogs to follow to understand what it is about a little better, that would be great.<br /><br />For awhile I followed Edward Lambert at Angry Bear, who talks a lot about effective demand (another big post-Keynesian principle). He also seemed to be a neo-Fisherite, so I'm not sure where he really falls. I stopped following him <a href="http://angrybearblog.com/2014/08/effective-demands-sobering-effect-on-the-feds-punchbowl.html" rel="nofollow">when he said</a> that he just made up a formula on his blog.<br /><br />Again, any recommendations would be welcome.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-85378715476955831342015-02-08T12:32:12.517-08:002015-02-08T12:32:12.517-08:00There will be moar cat videos soon.There will be moar cat videos soon.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-44498279642010654242015-02-08T11:14:08.364-08:002015-02-08T11:14:08.364-08:00https://www.youtube.com/user/nsah703/videoshttps://www.youtube.com/user/nsah703/videosTom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-40069809087542406322015-02-08T10:07:09.531-08:002015-02-08T10:07:09.531-08:00No offense Jason... and this isn't about your...No offense Jason... and this isn't about your post here, but I was curious to see what else you had there and I have to say... most boring youtube channel ever. ;^)Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-2171758889584920972015-02-07T19:01:28.290-08:002015-02-07T19:01:28.290-08:00Hi Jamie
I wrote up a response as a whole new pos...Hi Jamie<br /><br />I wrote up a response as a whole new post:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2015/02/why-focus-on-supply-and-demand.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2015/02/why-focus-on-supply-and-demand.html</a><br /><br />I hope I answered all of your questions or addressed your arguments. If I missed anything, feel free to bring it up. I just realized I've done 400 posts. Needless to say, I enjoy talking about this stuff -- especially addressing critical takes.<br /><br />BTW, Lee Smolin is a theoretical physicist -- most well known for being the developer of loop quantum gravity (a competing theory against string theory to understand how quantum mechanics and gravity fit together).<br />Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-90802835682421949302015-02-07T07:29:26.550-08:002015-02-07T07:29:26.550-08:00Second, mainstream economists and you seem to focu...Second, mainstream economists and you seem to focus on trying to forecast the future using your favoured equations but you don’t ever talk about cause and effect between the variables in the equations. However, in business and government systems, understanding cause and effect is as central to a ‘scientific’ approach as using observables.<br /><br />Take a different fuel-related example. Supposed mainstream economists observe a car at monthly intervals. They measure distance travelled and fuel used. They can see that there is a relation between these observations. Roughly<br /><br />D = m * F<br /><br />where D is distance travelled, F is fuel used and m is the “fuel multiplier”.<br /><br />The key question for me, which economists and you don’t seem to ask, is which of F and D is the cause and which is the effect. Which of the following statements is more accurate?<br /><br />1) An increase in fuel causes the car to travel further<br /><br />2) An increase in the use of the car for travel causes an increase in the fuel.<br /><br />I’d say that the second statement is more accurate. No-one refuels their car and then asks how they might use that fuel. Rather, they decide to travel somewhere and then obtain the fuel required to make the journey.<br /><br />One of the main disputes in macro-economics is between Market Monetarists who seem to think that an increase in money causes an increase in GDP, and Keynesians who seem to think that an increase in animal spirits causes an increase in GDP which, in turn, causes an increase in the supply of money required to allow the GDP to take place. This is central to any policy response. In my fuel analogy, Market Monetarists think that the Central Fuel Provider can make the car travel further by putting more and more fuel in the tank. In fact, all that will happen is that the fuel tank will fill up and then flood the service station with the surplus fuel. <br /><br />Does the information transfer model have anything to say about cause and effect?<br /><br />Finally, I asked you some time ago if you had looked at any heterodox economics. One of the reason for this is that Post-Keynesian economists emphasise the importance of building economic theories from the observables and cause-effect relationships in the operational economy e.g. how does the banking system really work. If you read Nick Rowe’s blog, he often refers to “people of the concrete steppes”. Many of the people he’s referring to think of themselves as Post-Keynesians. Also, Post-Keynesians often say things like “Paul Krugman is right but for the wrong reasons”. I have seen you saying similar things.Jamienoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-34454657301759944012015-02-07T07:27:50.191-08:002015-02-07T07:27:50.191-08:00Hi Jason,
I like this post. I haven’t commented ...Hi Jason,<br /><br />I like this post. I haven’t commented for a few months but, as a reminder, I’m not an economist or a physicist. My background is in business and government. I’d like to make a couple of comments.<br /><br />First, on January 27, you wrote a post where you quoted someone called Lee Smolin. Here is one of the quotes:<br /><br />“The observables of economics are accounting and other records. One should then try to construct a theory of economics that involves only observables. The importance of this kind of operational principle in physics and other sciences have been paramount”<br /><br />I agree with this 100%. In fact, I cheered out loud when I read it. This principle is paramount not only in science but in business and government and any other real-world endeavour.<br /><br />However, it’s not paramount in mainstream economics which appears to be built on a series of dubious mental ‘gadgets’. Take supply and demand curves. When Apple offers to sell us an iPad for $500, we observe the demand at that price during a specific time period. We don’t observe the demand at a price of $400 or $600. We can use the mental gadget of supply and demand curves to speculate what the demand would have been at different prices, but we can’t observe these alternative reality demands. <br /><br />In fact, we don’t necessarily observe either supply or demand at $500 either. It’s perfectly possible that there was a higher demand but Apple didn’t have access to the production capacity to meet that demand. It’s also possible that Apple manufactured additional iPads but could only find demand for the ones which were sold. Only Apple knows the actual ‘observed’ supply and demand. All that economists can observe is what was actually sold (or purchased, as actual sales always equal actual purchases).<br /><br />It’s even worse when we consider assets such as shares in Apple. An increase in price can lead to an increase in demand, while a decrease in price can lead to demand falling through the floor. How does that fit with supply and demand curves? <br /><br />What I don’t understand in your blog is why you seem to see supply and demand curves as central to macro-economics. I can understand your fuel pump example without involving supply and demand curves. Indeed, supply and demand curves seem irrelevant to me so they only confuse the message of the example. Similarly, I don’t see the relevance of supply and demand curves to observations (actually estimates rather than observations) of GDP, money supply and inflation.<br /><br />Your arguments would work better for me if you stuck rigidly to observables. There are three reasons for this. First, they would be simpler and easier to understand. Second, they would be more consistent with Smolin’s view on observables. Third, they would be more compelling for non-economists like me who are doubtful about economists’ tendency to create whole mental worlds from dubious gadgets and to ignore observations which are inconsistent with those gadgets.Jamienoreply@blogger.com