tag:blogger.com,1999:blog-6837159629100463303.post374787496396484572..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: Keen, chaos, and equilibriumJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger87125tag:blogger.com,1999:blog-6837159629100463303.post-91340197155406670962016-10-09T21:17:32.561-07:002016-10-09T21:17:32.561-07:00"It's not on wikipedia."
This is yo..."It's not on wikipedia."<br /><br />This is your argument?! LOL!<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-34312999991778280062016-10-09T16:04:12.136-07:002016-10-09T16:04:12.136-07:00Yes, my model does have predictive value. Apparent...Yes, my model does <a href="http://informationtransfereconomics.blogspot.com/2015/09/prediction-aggregation-redux.html" rel="nofollow">have predictive value</a>. Apparently you can't be bothered to even check the predictions link right there on the front page.<br /><br />RE: progressive curve fitting<br /><br />It's not <a href="https://en.wikipedia.org/w/index.php?search=progressive+curve+fitting" rel="nofollow">on wikipedia</a>.<br /><br /><a href="https://en.wikipedia.org/w/index.php?search=progressive+curve+fitting" rel="nofollow">https://en.wikipedia.org/w/index.php?search=progressive+curve+fitting</a><br /><br />And note that wikipedia does have a lot of things I don't know from math. For example, I didn't know what the <a href="https://en.wikipedia.org/wiki/Chapman%E2%80%93Robbins_bound" rel="nofollow">Chapman-Robbins bound was</a>. So if progressive curve fitting was a thing and I didn't know about it, it could very likely have appeared. But it doesn't. Because you made it up.<br /><br />I've actually used many different methods to make forecasts from the information transfer framework. Progressive curve fitting is not one. Curve fitting, yes. But that is what all of science is as I mentioned above.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-57785994829793737562016-10-09T11:16:35.405-07:002016-10-09T11:16:35.405-07:00"No idea what "progressive curve fitting..."No idea what "progressive curve fitting" is; is it something you've made up?"<br /><br />Watching you play dumb is not very edifying. :-)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-55526944966991690662016-10-09T11:06:46.023-07:002016-10-09T11:06:46.023-07:00"No idea what "progressive curve fitting..."No idea what "progressive curve fitting" is; is it something you've made up?"<br /><br />It's what your model does.<br /><br />"..the predictions are amazing for economics."<br /><br />Yes, it's very good at predicting the past - even then only once you have enough data points.<br /><br />"If you think my model is useless, the problem is in you because you can't accept any kind of model is useful."<br /><br />A model is only of use if it has predictive value. Yours doesn't. Most models don't. They are continually defeated by reality, by radical uncertainty. Models really only have a value as pedagogical machines. They assist in the understanding of the way an economic process might work and then only within the confines of their ceteris paribus conditions.<br /><br />From what I've seen of your model and others, you would be better off with a psychic. If your model is so good why don't you back it with serious money. <br /><br />As a kid I used to make model aeroplanes. One I didn't get to make was the Lancaster bomber. The prototype weighed over 16.5 tonnes and could carry a 10 tonne payload. I wonder how effectively a 200 gm plastic model would have performed in a bombing raid over Germany? (Ooops, don't mention the war.)<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-31035244290949478822016-10-09T09:30:12.603-07:002016-10-09T09:30:12.603-07:00No idea what "progressive curve fitting"...No idea what "progressive curve fitting" is; is it something you've made up?<br /><br />Not sure what your standard for "way off" is either. For a 2 parameter model, the predictions are amazing for economics.<br /><br />Because economic variables are stochastic processes, it is actually impossible to have a model that never updates a forecast as new data arrives. What you want to aim for is the least number of updates and my version above updated every 10 years. That's an improvement over the best Econ models that update every couple of quarters.<br /><br />Additionally, the parameter values converge (the changes get smaller and smaller with each update), and the prediction error is on the order of the irreducible error in the measurement.<br /><br />In fact, those facts mean my model is the best possible model of interest rates. You can't do better than irreducible measurement error. For a linear subset of a two dimensional plane (the data is a flat graph) there must be at least 2 parameters. And those parameters converge to a single value.<br /><br />I apparently will never satisfy your desires for my model because you make up new kinds of math and add new kinds of requirements. You've now reached a point where no model that meets your requirements can possibly exist. A psychic telling you the values of the interest rate for the next thousand years is the only "model" that can make you happy.<br /><br />If you think my model is useless, the problem is in you because you can't accept any kind of model is useful. I have no interest in meeting your impossible requirements but I would like you to understand that they are unreasonable. Either you have some assumption that Econ isn't understandable by humans, or you don't understand the requirements you've set for models.<br /><br />And since you obviously don't understand the requirements you've invented, I wonder how you came up with them in the first place?<br /><br /><br /><br />Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-22788924464026883512016-10-09T00:50:30.645-07:002016-10-09T00:50:30.645-07:00Yes that's the model and thanks for the explan...Yes that's the model and thanks for the explanation.<br /><br />However, I would prefer to use the progressive curve fitting. I have no problem with curve fitting per se. The thing is that you tout this as a predictive model. If you were to say here is my ten year prediction based on data to date and hold the model there and see what happen in the data over the prediction period of the model, I would say fine. But your model updates its prediction as each new data point appears and over a period of time it appears that your model is a close fit to the data. Whereas if you look at the three static graphics, the prediction is way off compared to the run of subsequent data. <br /><br />So what is the value of your model?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-4171629695839076572016-10-08T11:45:53.637-07:002016-10-08T11:45:53.637-07:00I believe you are speaking of this model of the in...I believe you are speaking of <a href="http://informationtransfereconomics.blogspot.com/2015/08/interest-rates-and-predictions.html" rel="nofollow">this model</a> of the interest rate, and while it does adjust to data as it comes in, the point is that it predicts behavior for the next ten years before it happens -- that data isn't fit (and <a href="http://informationtransfereconomics.blogspot.com/2014/05/out-of-sample-predictions-with.html" rel="nofollow">it doesn't truly *need* to be adjusted</a> either). All of the model details down to the actual code used to run it <a href="http://informationtransfereconomics.blogspot.com/2015/08/information-equilibrium-as-economic.html" rel="nofollow">are in the paper</a>.<br /><br />However let's address your pejorative use of "curve fitting". As in "this seems to me to be a kind of curve fitting" -- as if models could be more than curve fitting? I've seen this critique coming from various places around the internet. It seems to be distantly related to a valid critique taken to such a simplified level that it no longer makes sense. <br /><br />All science everywhere is curve fitting. <a href="https://www.researchgate.net/profile/Luc_Arnold/publication/279458907/figure/fig6/AS:294355056250886@1447191122562/Fig-8-Upper-panel-Radial-velocities-of-HD164595-with-the-best-fit-orbital-solution.png" rel="nofollow">Orbits of planets</a>. <a href="http://www.mit.edu/~hasell/IMAGES/ZEUS_f2_q2x.jpg" rel="nofollow">High energy particle physics</a>.<br /><br />There is no part of quantitative science where parameters weren't fit to the data.<br /><br />Now I think the curve fitting critique evolved from a genuine critique called <a href="https://en.wikipedia.org/wiki/Overfitting" rel="nofollow">overfitting</a>. This is where your model has too many parameters given the number of data points. A good rule of thumb is that you should have 20 data points per parameter.<br /><br />In the interest rate example, the model has 2 parameters. It is fit to 10 years of monthly interest rate data (120 data points, which it describes fairly well) and extrapolated out another 10 years. That has an extremely good <a href="https://en.wikipedia.org/wiki/Akaike_information_criterion" rel="nofollow">Akaike information criterion</a> (there exist technical measures for your gut feelings about what things "seem"). Since "underfitting" is good in science (explaining a lot of data variance with few parameters), we actually just call this a good model instead.<br /><br />I'd recommend removing "curve fitting" from your vocabulary and replace it with "overfitting".<br /><br />The models I've put together with only 5 parameters have explanatory power on par with DSGE models with 40+ parameters. So while overfitting is a decent critique against mainstream economic theories, you can't just regurgitate it for use against the information transfer model-- it doesn't apply.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-8569071005452946912016-10-08T02:04:40.836-07:002016-10-08T02:04:40.836-07:00What I really really want is for you to explain ho...What I really really want is for you to explain how you run your models.<br /><br />I remember seeing one last year, for inflation (I think, not sure). The graphic was dynamic and showed the model prediction against the data - the graphic showed the curve of the model prediction changing with each new data point. At least, that's what I thought was happening. Consequently, the model prediction followed the data quite well. However, this seems to me to be a kind of curve fitting - recalibrating the model on the run. Is this what happens or am I entirely off beam?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-26409650496095659132016-10-07T16:15:00.902-07:002016-10-07T16:15:00.902-07:00Feel free to respond with I wanna rock! or I'l...Feel free to respond with <i>I wanna rock!</i> or <i>I'll tell you what I want, what I really really want</i>.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-86597642118702957432016-10-07T16:13:23.098-07:002016-10-07T16:13:23.098-07:00No, you did not say that. Here is what you said:
...No, you did not say that. Here is what you said:<br /><br /><i>"The model then looks at the real world and empirically observes I(A) ≈ I(B). " [quoting me]<br /><br />Some of the time - not all of the time.<br /><br />And the times that it doesn't, how does your model deal with them (you know, the real world)?</i><br /><br />In your comment, <b>"them"</b> obviously refers to the times when we don't have I(A) ≈ I(B). (Which I have now responded to, twice).<br /><br />Now you are saying "them" actually refers to policy responses to negative outcomes. Now you didn't actually say this, you're just changing the subject. But I'll respond anyway. <br /><br />I don't ignore policy responses because I(A) > I(B) -- that makes no sense. What do you think I(A) > I(B) means? I literally have said that I(A) > I(B) in the context of recessions means that you need <a href="http://informationtransfereconomics.blogspot.com/2014/10/coordination-costs-money-causes.html" rel="nofollow">coordinated government policy to overcome the tendency to not fix a change in entropy</a>.<br /><br />In general, I've defended the use of fiscal stimulus (when k ~ 1, i.e. inflation is low and the ISLM model is a good approximation), monetary policy is useless when k ~ 1, and consider a UBI to be the best policy to <a href="http://informationtransfereconomics.blogspot.com/2015/04/thinking-positive-is-thinking-different.html" rel="nofollow">maximize exploration of the state space</a>.<br /><br />You obviously don't know my views. You just make things up about what I or my models say. This isn't constructive. You should really sit down with yourself and figure out exactly what you want.<br /><br />1. Do you want to fight against right-wing, "neoliberal", or "classical economics" views that bring things like austerity and take away government programs for the poor?<br /><br />2. Or do you want to discuss mathematical economic theory?<br /><br />By attacking a fellow traveler with regards to leftist politics, you apparently don't want #1. And by refusing to learn the mathematics of the model, you apparently don't want #2.<br /><br />What, sir, do you really want?Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-26345394794838841922016-10-07T13:23:56.826-07:002016-10-07T13:23:56.826-07:00And like the neoclassical economists, you don'...And like the neoclassical economists, you don't want to deal with it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-57209839980385972092016-10-07T13:21:45.534-07:002016-10-07T13:21:45.534-07:00"And the times that it doesn't, how does ..."And the times that it doesn't, how does your model deal with them (you know, the real world)?"<br /><br />I wasn't referring to whether your model had a solution or not. I was alluding to policy responses to ameliorate the ensuing unemployment, which you don't seem to pay any attention to because "...I(A) > I(B) doesn't seem to matter very much".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-11158635666864322272016-10-07T13:11:35.595-07:002016-10-07T13:11:35.595-07:00There theories of frictional unemployment and ther...There theories of frictional unemployment and there are theories of frictional unemployment.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-39169256919189602322016-10-07T11:55:28.064-07:002016-10-07T11:55:28.064-07:00For someone who doesn't "understand all a...For someone who doesn't "understand all aspects of" my model, and doesn't "aim to become an expert in" my model, you certainly say a lot about it.<br /><br /><i>And the times that it doesn't, how does your model deal with them (you know, the real world)?</i><br /><br />I answered this in my comment above which you apparently did not read all the way through:<br /><br /><b>But when it does, the model is bounded by the differential equation ... dA/dB ≤ k (A/B) ... which can be used to <a href="https://en.wikipedia.org/wiki/Gr%C3%B6nwall%27s_inequality" rel="nofollow">estimate stochastic differential equations</a>.</b>Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-51182475168377567862016-10-07T07:41:09.058-07:002016-10-07T07:41:09.058-07:00"who objects to that?"
"I object ..."who objects to that?" <br /><br />"I object to that"<br /><br />right-hoLuis Enriquehttps://www.blogger.com/profile/09373244720653497312noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-7567546445542802972016-10-07T05:38:48.598-07:002016-10-07T05:38:48.598-07:00"keep an eye out though"
I'll be lo..."keep an eye out though"<br /><br />I'll be looking at myself in the mirror, then.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-12425792018750192322016-10-07T04:35:12.972-07:002016-10-07T04:35:12.972-07:00oh sorry, making mistake of commenting on somethin...oh sorry, making mistake of commenting on something I have observed at various points in my life, not on this thread. <br /><br />keep an eye out though, you will see disparaging comments from het econ about frictionsLuis Enriquehttps://www.blogger.com/profile/09373244720653497312noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-88121163284507563742016-10-07T02:15:04.948-07:002016-10-07T02:15:04.948-07:00Correction to above: The data series is
"Priv...Correction to above: The data series is<br />"Private non-financial sector - All sectors - Market value - Percentage of GDP - Adjusted for breaks"Mnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-41798188675234079422016-10-07T02:13:39.884-07:002016-10-07T02:13:39.884-07:00What about the correlation Keen has found between ...What about the correlation Keen has found between private debt and unemployment? See 7:22-8:12 here:<br /><br />https://www.youtube.com/watch?v=iY5rto-ivoA<br /><br />If you want to play with the data on private debt, Keen is using the BIS database:<br />http://www.bis.org/statistics/totcredit.htm<br /><br />He's using the data series "United States - Private non-financial sector - All sectors - Market value - Domestic currency - Adjusted for breaks", I believe. FRED should have the data too, but the link you've found doesn't include debt of non-financial corporations.Mnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-25607902283604066392016-10-07T01:57:59.754-07:002016-10-07T01:57:59.754-07:00Who's objecting to frictions as a factor in de...Who's objecting to frictions as a factor in delaying employment?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-66879706306624587062016-10-07T01:29:59.611-07:002016-10-07T01:29:59.611-07:00what I haven't seen - and it is a few years si...what I haven't seen - and it is a few years since I read lit - is models where hiring and firing by firms is a function of aggregate market conditions. <br /><br />just by the by, I really don't understand this heterodox objection to getting important things into models via 'frictions'. If you are going to have a model in which people can trade things and set prices and take decisions, and you think this world does not operate like a very simple Arrow Debreu model, then your account of the world will include whatever it is that you think explains that. Frictions is just a word for those things. Luis Enriquehttps://www.blogger.com/profile/09373244720653497312noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-23936910319400700082016-10-06T23:12:46.385-07:002016-10-06T23:12:46.385-07:00I think in search and matching models I've see...I think in search and matching models I've seen jobs destroyed by random shocks. And you are unemployed, involuntarily, whilst searching for a new one. Luis Enriquehttps://www.blogger.com/profile/09373244720653497312noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-82165355888490217352016-10-06T19:40:37.512-07:002016-10-06T19:40:37.512-07:00"The model then looks at the real world and e..."The model then looks at the real world and empirically observes I(A) ≈ I(B). "<br /><br />Some of the time - not all of the time.<br /><br />And the times that it doesn't, how does your model deal with them (you know, the real world)?<br /><br /><br />"So I(A) > I(B) doesn't seem to matter very much."<br /><br />Yes, who cares about millions of people who want to work but can't - I guess they're just like the next atom, buzzing about blissfully.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-7066370625634572482016-10-06T17:56:00.702-07:002016-10-06T17:56:00.702-07:00Always admitted that. Forms the basis of the model...Always admitted that. Forms the basis of the model. The fundamental tenet -- you can't receive more information at B than has been sent from A:<br /><br />I(A) ≥ I(B)<br /><br />If I(A) = I(B), you have information equilibrium which can be simulated using dumb particles and the right state space.<br /><br />If I(A) > I(B), then there is information loss due to e.g. correlations of the agents (not maximum entropy).<br /><br />The model then looks at the real world and empirically observes I(A) ≈ I(B). So I(A) > I(B) doesn't seem to matter very much. But when it does, the model is bounded by the differential equation<br /><br />dA/dB ≤ k (A/B)<br /><br />which can be used to <a href="https://en.wikipedia.org/wiki/Gr%C3%B6nwall%27s_inequality" rel="nofollow">estimate stochastic differential equations</a>.<br /><br />So I do admit it! I embrace it with my heart full of love and wonder!<br /><br /><br /><br /><br />... but this has nothing to do with the dimensional reduction that we were talking about at the beginning of this thread. That is a more general argument that if you think e.g. the unemployment rate or NGDP is an interesting measure of something, then either the details of the agents don't really matter too much, or you have a representative agent. I go with the former, because that is consistent with the information equilibrium approach.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-56639610766374432032016-10-06T17:44:03.847-07:002016-10-06T17:44:03.847-07:00This doesn't sound very convincing.
It seems ...This doesn't sound very convincing.<br /><br />It seems to me that you don't want to admit that human behaviour cannot always be described by atomistic behaviour.Anonymousnoreply@blogger.com