Peter Cooper — The Macro-Institutional Delimitation of Economic Complexity

What Peter is calling attention to in this post is addressed in sociology in terms of the interaction of the micro, mess and macro levels. Each is influenced by the others and in turn influences the others.

What is the difference between the macro, meso, and micro levels. Complex social systems are comprised of individuals or agents that are the elements of the system, the relationships such as affiliations and institutions that group individuals, and the system itself. A complex social system is a web or network of element that are configured in nodes with the overall context of the structure and function of the system in which they are embedded.

Failure to any of the relevant aspects of a system into account in an explanation will limit the explanation. Obviously, everything cannot be considered in an explanation, whose purpose is simplification for modeling. However, failure to include relevant aspects of the system or failure to model them correctly relative to the system will vitiate the explanation.

Economics has not yet come to grips with this approach, at least for the most part. This is actually stated as part of the methodological assumptions for methodological convenience. Sociologist, on the other hand, admit that modeling general cases in complex social systems is usually not possible to achieve, and so they are more modest in their approach to analysis and explanation.

heteconomist
The Macro-Institutional Delimitation of Economic Complexity
Peter Cooper

David Glasner — John Cochrane, Meet Richard Lipsey and Kenneth Carlaw

So [John] Cochrane wants to take this bickering out of the realm of punditry and put the conflicting models to an objective test of how well they perform against the data. Sounds good to me, but I can’t help but wonder if Cochrane means to attribute the academic ascendancy of RBC/New Classical models to their having empirically outperformed competing models? If so, I am not aware that anyone else has made that claim, including Kartik Athreya who wrote the book on the subject. (Here’s my take on the book.) Again just wondering – I am not a macroeconometrician – but is there any study showing that RBC or DSGE models outperform old-fashioned Keynesian models in explaining macro-time-series data? 

But I am aware of, and have previously written about, a paper by Kenneth Carlaw and Richard Lipsey (“Does History Matter?: Empirical Analysis of Evolutionary versus Stationary Equilibrium Views of the Economy”) in which they show that time-series data for six OECD countries provide no evidence of the stylized facts about inflation and unemployment implied by RBC and New Keynesian theory. Here is the abstract from the Carlaw-Lipsey paper.

David Glasner also cites Brain Arthur on complexity economics, for which he acknowledges MNE.

Uneasy Money
John Cochrane, Meet Richard Lipsey and Kenneth Carlaw
David Glasner | Economist at the Federal Trade Commission

JKH also posted today at MR on John Cochrane.

John Cochrane’s “Monetary Policy with Interest on Reserves”