Tuesday, March 22, 2016

Cameron Murray on reforming economics with response from Jason Smith


Cameron Murray joins the debate.
What is needed is a way to structure the exploration of economic analysis by arranging around economic problems around some core domains. Approaches from various schools of thought can be brought into the analysis where appropriate, with the common ground and links between them highlighted.

Unless the community of economic reformers can make the effort to reconstruct the way economic is taught, and make the tough decisions about how to structure new core texts, including what to leave in and what to leave out, then change will remain elusive. We can’t call for change in the challenging tribal social environment of economics without offering an attractive alternative - one that embraces the best from each of the schools of thought and finds common ground without creating a new set of outsiders.

Fresh Economic Thinking
Reforming economics: The Challenge
Cameron K. Murray
Despite being completely out of the mainstream, the information equilibrium framework does not have to subscribe to a specific school of economic thought. I actually thought this is what you were supposed to mean by framework (other economists disagree and include model-specific results in what they call frameworks). In fact, I defined framework by something that is not model specific:
One way to understand what a framework is is to ask whether the world could behave in a different way in your framework ... Can you build a market monetarist model in your framework? It doesn't have to be empirically accurate (the IT framework version is terrible), but you should be able to at least formulate it. If the answer is no, then you don't have a framework -- you have a set of priors.
This is what pushed me to try and formulate the MMT and Post-Keynesian (PK) models that use "Stock Flow Consistent" (SFC) analysis as information equilibrium model. The fact that I criticized an aspect of SFC analysis upset the MMT and PK tribes (see the post and comments) led me to not end up posting the work I'd done.

But in the interest of completeness and showing that the information equilibrium framework allows you to talk about completely different schools of economics with the same language, let me show the model SIM from Godley and Lavoie as an information equilibrium model.
Information Transfer Economics
Information equilibrium: a common language for multiple schools
Jason Smith

5 comments:

Brian Romanchuk said...

Macroeconomics is the state that it is in because of politics -- real world, and academic. Until the politics changes, the field will be a mess.

We will get a good undergraduate textbook the day that there are some straightforward things everyone agrees that could be put into it. Unfortunately, there is not a lot meeting that description. National accounts, some econometric stuff, and that's about it.

Brian Romanchuk said...

Addendum: the mainstream doesn't even agree whether raising the policy rate will raise or lower inflation; how are they going to get everyone else on board?

Neil Wilson said...

"National accounts"

I'm not so sure about the national accounts. The problem is that they are national, and the denomination they are in isn't national. So you end up with a reporting currency distortion (as you do with any company accounts).

The national accounts reinforce the idea of a rigid border, and there really isn't one. The idea of an 'external sector' is a bit of a misnomer in a freeish capital and trade world.

Brian Romanchuk said...

Sigh. Once Lars P. Syll objects to econometrics, all we have left for the textbook is "Economists generally agree on how to spell economics."

Neil Wilson said...

Perhaps they'll finally agree that economics is actually just a brand name for politics - designed to fool a population.