tag:blogger.com,1999:blog-6837159629100463303.post5263839098625246113..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: The effect of expectations in economics (third addendum)Jason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-6837159629100463303.post-75957436912013683892015-07-21T10:56:23.611-07:002015-07-21T10:56:23.611-07:00Hi Bill,
According to the EMH, the first one shou...Hi Bill,<br /><br />According to the EMH, the first one should have already been priced in :)<br /><br />Those events would be an interesting place to look for the impacts of monetary policy ...Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-3465661516144943472015-07-19T01:36:34.736-07:002015-07-19T01:36:34.736-07:00Good point about the equivalence of "rational...Good point about the equivalence of "rational expectations" and pure ad hockery. :)<br /><br />BTW, as far as the fall in the price of gold goes, there are at least two historical episodes of the discovery by Europeans of large amounts of gold. The first is the discovery by the Spanish conquistadores of the gold of the Incas. It did not cause as much of a drop in the price of gold as might have been expected, because most of it was absorbed by the Indian and Chinese markets. The second is the discoveries of gold in the ground in the 1890s, which were instrumental, during a time when most of the Euro-American world was on the gold standard, in bringing an end to the Long Depression. I suppose that there was inflation during the 1890s, but maybe less than might be expected, because the depression made for slack in their economies.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-41134205147206973902014-05-06T14:14:53.999-07:002014-05-06T14:14:53.999-07:00Here's the cheeky post ...
http://information...Here's the cheeky post ...<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2014/05/good-ad-hoc-vs-bad-ad-hoc.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2014/05/good-ad-hoc-vs-bad-ad-hoc.html</a>Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-10739116574897013762014-05-06T13:50:41.726-07:002014-05-06T13:50:41.726-07:00Thanks. And I'll have to read that.
I should ...Thanks. And I'll have to read that.<br /><br />I should have said the worst kind of ad hoc. Ad hoc can be good (as e.g. Paul Krugman defends <a href="http://krugman.blogs.nytimes.com/2012/03/02/the-microfoundation-thing-wonkish/" rel="nofollow">here</a>).<br /><br />As mathematics is somewhat unbounded you can quite literally come up with anything. The kind of ad hoc that's "good" is when you restrict your palette ... in Krugman's case, to supply and demand curves. In macro, the data is seriously limited. There just isn't enough data to allow theorists to invent new mechanisms on the fly. Actually, this paragraph sums up my original intent with this blog:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2013/04/an-informal-abstract-addition-why-now.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2013/04/an-informal-abstract-addition-why-now.html</a><br /><br />There appear to be no limitations on what "expectations" can do in economics. Rational expectations says that expectations can do anything you can get your model to do -- and with DSGE models, that is pretty much anything. According to Sumner, it doesn't seem matter if you show the price of gold falls to p' via the "hot potato effect" or just say it falls to p' simply by announcing the mining discovery. The former explanation comes from supply and demand, the latter is just assuming the answer.<br /><br />Assuming the answer is what I mean by the worst kind of expectations. I'm going to do a cheeky post about this with some pictures I found :)Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-69834447161361204022014-05-06T09:16:46.819-07:002014-05-06T09:16:46.819-07:00Jason, I notice that you link to one of my favorit...Jason, I notice that you link to one of my favorite Sumner articles: "HPE explained." I refer to that one a lot, and used case 7 as a basis for exploring a difference between Sumner and Sadowski on one side and Nick Rowe on the other:<br /><br />http://banking-discussion.blogspot.com/2014/03/toms-epsilon-example.html<br /><br />This has come up several more times, and I'm more inclined than ever to agree with Nick on that particular debate.<br /><br />I'm really enjoying your series here on expectations. Can you elaborate a bit on exactly what you mean by "worst ad hoc theoretical model?" Can you think of a similar example in another discipline? Thanks.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.com