tag:blogger.com,1999:blog-2761684730989137546.post1298321485622083161..comments2024-03-28T07:50:06.102-04:00Comments on Mike Norman Economics: Brian Romanchuk — Why We Should Be Concerned About The Forecastability Of Economic Modelsmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-2761684730989137546.post-79438375953805469432018-04-24T04:21:22.946-04:002018-04-24T04:21:22.946-04:00Part 2
In order to be applicable HC3, requires a ...Part 2<br /><br />In order to be applicable HC3, requires a lot of auxiliary assumptions, most prominently a well-behaved/differentiable production function.#2 Taken together, all axioms and auxiliary assumptions then crystallize to supply-function/demand-function/equilibrium or what Leijonhufvud famously called the Totem of Micro.#3<br /><br />The methodological fact of the matter is that ALL models that take just one NONENTITY into the premises are a priori false.#4<br /><br />So, because these premises are NOT “certain, true, and primary” they cannot be used for model building: expected utility, rationality/bounded rationality/animal spirits, constrained optimization, well-behaved production functions, supply/demand functions, simultaneous adaptation, equilibrium, first/second derivatives, total income=value of output, I=S, real-number quantities/prices, ergodicity. Every theory/model that contains just one NONENTITY goes straight into the wastebasket.<br /><br />The standard microfoundations approach with all its variants and derivatives up to DSGE is methodologically false. The same holds for Keynes’ macrofoundations and all After-Keynesian variants.<br /><br />To put NONENTITIES into the premises is the defining characteristic of fairy tales, science fiction, theology, Hollywood movies, politics, proto-science, and the senseless model bricolage of scientifically incompetent economists.#5<br /><br />Egmont Kakarot-Handtke<br /><br />* http://www.bondeconomics.com/2018/04/forecastability-and-economic-modelling.html<br /><br />#1 The solemn burial of marginalism<br />https://axecorg.blogspot.de/2016/04/the-solemn-burial-of-marginalism.html<br /><br />#2 Putting the production function back on its feet<br />https://axecorg.blogspot.de/2016/09/putting-production-function-back-on-its.html<br /><br />#3 Equilibrium and the violation of a fundamental principle of science<br />https://axecorg.blogspot.de/2017/06/equilibrium-and-violation-of.html<br /><br />#4 The future of economics: why you will probably not be admitted to it, and why this is a good thing<br />https://axecorg.blogspot.de/2016/01/the-future-or-economics-why-you-will.html<br /><br />#5 How to restart economics<br />http://axecorg.blogspot.de/2016/01/how-to-restart-economics.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-61668718436823516792018-04-24T04:20:11.366-04:002018-04-24T04:20:11.366-04:00Infantile model bricolage, or, How many economists...Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?<br />Comment on Brian Romanchuk on ‘Forecastability And Economic Modelling’*<br /><br />“The highest ambition an economist can entertain who believes in the scientific character of economics would be fulfilled as soon as he succeeded in constructing a simple model displaying all the essential features of the economic process by means of a reasonably small number of equations connecting a reasonably small number of variables. Work on this line is laying the foundations of the economics of the future . . .” (Schumpeter, 1946)<br /><br />The future is now and economists still do NOT have the paradigmatic simple core model but a heap of in incommensurable and contradicting constructions. Pluralism may have its merits elsewhere but is the worst thing that can happen in science. As the ancient Greeks already observed: “There are always many different opinions and conventions concerning any one problem or subject-matter…. This shows that they are not all true. For if they conflict, then at best only one of them can be true.” (Popper)<br /><br />Fact is that, in economics, ALL models are axiomatically false. It holds: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle, 300 BC) Fact is that the premises of current model are neither certain, true, nor primary.<br /><br />Brian Romanchuk’s SIM model is a case in point. He enumerates his key premises as follows.<br />• The model is a straightforward three sector model, with a household sector, business sector, and government. <br />• The household consumption function is defined in terms of a pair of propensity to consume parameters (out of income, out of wealth). …<br />• The business sector is constrained to break even, …<br />• Government policy is specified in terms of government consumption and a fixed tax rate.<br /><br />Brian Romanchuk starts with macrofoundations, which is correct. But then he assumes a consumption function, which is a NONENTITY, and break even for the business sector, which kills the model already at this early stage because a zero profit economy is the most idiotic NONENTITY of them all.<br /><br />Let us contrast this with the standard microfoundations approach. The whole analytical superstructure of Orthodoxy is based upon this set of hardcore propositions a.k.a. axioms:<br />• HC1 There exist economic agents.<br />• HC2 Agents have preferences over outcomes.<br />• HC3 Agents independently optimize subject to constraints.<br />• HC4 Choices are made in interrelated markets.<br />• HC5 Agents have full relevant knowledge.<br />• HC6 Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states. (Weintraub)<br /><br />HC3 introduces marginalism which is the all-pervasive principle of Orthodoxy. HC3, though, and HC5 and HC6 are plain NONENTITIES.#1<br /><br />See part 2AXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-16943935022506508102018-04-23T10:16:52.319-04:002018-04-23T10:16:52.319-04:00I updated this post with Brian's next. Here is...I updated this post with Brian's next. Here is a clickable link.<br /><br /><a href="http://www.bondeconomics.com/2018/04/triviality-of-parameter-uncertainty-and.html" rel="nofollow">http://www.bondeconomics.com/2018/04/triviality-of-parameter-uncertainty-and.html</a>Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-61646651264579476132018-04-23T08:59:07.476-04:002018-04-23T08:59:07.476-04:00“No economic laws of motion have been forthcoming....“No economic laws of motion have been forthcoming.”<br /><br />The laws in this regard are created by us Tom... they don’t evolve from the apes by random chance... <br /><br />We pass a law authorizing $50k per high school graduate for college education then that is what is going to happen ...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-32237565303448936952018-04-23T08:52:54.327-04:002018-04-23T08:52:54.327-04:00“ideologically-driven lies. ”
Yes and I submit th...“ideologically-driven lies. ”<br /><br />Yes and I submit that ideology is libertarianism .... not neoliberalism.... the neoliberals are just stupid not lying..Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-24435918924818669642018-04-23T02:22:58.622-04:002018-04-23T02:22:58.622-04:00@Matt Franko: I agree. The only time economics can...@Matt Franko: I agree. The only time economics cannot predict anything is when irrefutable facts (like those you mentioned above) are buried by ideologically-driven lies. <br /><br />Financial speculation is a casino, but fiscal policy is not. When, for example, the federal government taxes too much money out of the economy, we can predict with 100% certainty that the result will be a recession. <br /><br />When the federal government creates money out of thin air to upgrade the national infrastructure, we can predict with 100% certainty that jobs will be created, and the infrastructure will be improved (unless contractors steal all the money and hide it in offshore accounts).<br /><br />When a federal government creates its spending money out of thin air, simply by crediting accounts, we can predict with 100% certainty that even if federal taxes were lowered to zero, there would be infinite money for Medicare, Social Security, Food Stamps, etc.<br /><br />When a “national debt” is denominated in a nation’s own sovereign currency, we can predict with 100% certainty that the “national debt” will not be a problem. <br /><br />And so on. <br /><br />Uncertainty in economics only occurs when bullshit enters the picture, or when we speak of market speculation.Konradhttps://www.blogger.com/profile/01739209449391854796noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-62033134062718392182018-04-22T22:13:02.689-04:002018-04-22T22:13:02.689-04:00You just have to LOVE the way Egmont Kakarot-Handt...You just have to LOVE the way Egmont Kakarot-Handtke blows up other people's arguments by linking to his own website. <br /><br />Brilliant. Reminds me of Peter Dow<br /><br />https://rationalwiki.org/wiki/Peter_DowNoah Wayhttps://www.blogger.com/profile/12012500819097539976noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84561969876432043812018-04-22T17:54:55.869-04:002018-04-22T17:54:55.869-04:00This comment has been removed by the author.Ryan Harrishttps://www.blogger.com/profile/04815033054435303399noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-19836131518442564782018-04-22T13:25:55.785-04:002018-04-22T13:25:55.785-04:00"not capable of predicting the future "
..."not capable of predicting the future "<br /><br />Well I predict that if the US were to establish a JG then there would no longer exist involuntary unemployment...<br /><br />I predict that if the US established free university, that there would no longer be any unnecessary student debt...<br /><br />I predict that if the US implemented a UBI, then there would no longer be those without adequate provision...<br /><br />etc....<br /><br />?????????<br /><br />(FD: I am not a libertarian...)Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-33926454418529250592018-04-22T11:53:15.749-04:002018-04-22T11:53:15.749-04:00Note on ‘Brian Romanchuk — Why We Should Be Concer...Note on ‘Brian Romanchuk — Why We Should Be Concerned About The Forecastability Of Economic Models’<br /><br />Tom Hickey maintains ‘No economic laws of motion have been forthcoming.’<br /><br />This is incorrect. See on Wikimedia<br />Elementary production-consumption economy, Four Basic Economic Laws<br />https://commons.wikimedia.org/wiki/File:AXEC107.png#{{int:filedesc}}<br /><br />See also<br />Science does NOT predict the future (only charlatans do)<br />https://axecorg.blogspot.de/2016/08/science-does-not-predict-future.html<br /><br />The Synthesis of Economic Law, Evolution, and History<br />https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2500696<br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.com