Dating economist perspective iphone core data updating
“[…] five years from now the dynamic stochastic general equilibrium model that central bankers worship like Baal will still be there.There will be a few changes to the parameters, and maybe a constraint or two added like temple lamps, but apparently they never learn.” John Dizard The policy maker’s environment is a multi-faceted one.The literature distinguishes several types, so it is worth starting by describing it to continue later on how economists have thought about it and how they have tried to tackle it. This is the type of uncertainty that is immeasurable and thus not possible to calculate.Typically it relates to the inability of agents or decision makers to reasonably contemplate all the possible states of nature or characterize their probability distributions.Experience, judgement and the acknowledgement of uncertainty are key parts of that environment, and key parts of the policy maker’s outlook.To help assess economic developments and to facilitate policy discussion, though, central banks use a variety of macroeconomic models and econometric tools.In effect, it shone a light on our over confidence and, exposed our very lack of humility.More philosophically, the crisis also suggested that we, as a profession, had perhaps lost touch with an older tradition of economics that had precisely sought to emphasise uncertainty, the limits of information, and the wider social context underlining economic interactions -- as for instance, highlighted by von Mises and Hayek “economic calculation problem” and Hayek’s “fatal conceit” which submits that knowledge is dispersed across society and can never truly be known by any one agent or entity - a fact that the former chief economist of the ECB, Otmar Issing, never failed to remind us of.
Such uncertainty is not, in addition, a temporary phenomenon that we can wait out.
Before the financial crisis many distinguished policy makers and academics treated economics and finance as if it had attained something of a natural science – replete with regularities upon which most economists could, and seemingly did, agree.
Indeed, some even declared the business cycle dead.
financial interactions) and/or were based on unrealistic assumptions.
Examples of the latter include the assumption of “complete” and “efficient” markets as well as of “rational” expectations.
The doubters meanwhile (among them Robert Gordon, Raghuram Rajan, Robert Shiller) were either neglected or – what is worse – labelled luddites.