An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Mark Buchanan makes the very debatable point that modelling with supercomputers will improve economics. The big and blindingly obvious problem there is that there is a huge lack of agreement as to what to feed into the computer. E.g. do we give it an MMT view of economics or a market monetarist view or what?
I agree with Mark that DSGE models are a dead end. I admit that I am not familiar with agent-based modelling, but I would guess that they have the same problem that overlapping generations models have - small tweaks to the "micro" behaviour mean large changes to the "macro" behaviour of the model.
This is a great technology for a video game, or for teaching models. You are telling a story about a fictional world.
But it will be very hard to impossible to fit to real-world data. But that is what the mainstream wants to do. To do that, you need to stick with an aggregated model, like a Stock-Flow Consistent model.
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Mark Buchanan makes the very debatable point that modelling with supercomputers will improve economics. The big and blindingly obvious problem there is that there is a huge lack of agreement as to what to feed into the computer. E.g. do we give it an MMT view of economics or a market monetarist view or what?
I agree with Mark that DSGE models are a dead end. I admit that I am not familiar with agent-based modelling, but I would guess that they have the same problem that overlapping generations models have - small tweaks to the "micro" behaviour mean large changes to the "macro" behaviour of the model.
This is a great technology for a video game, or for teaching models. You are telling a story about a fictional world.
But it will be very hard to impossible to fit to real-world data. But that is what the mainstream wants to do. To do that, you need to stick with an aggregated model, like a Stock-Flow Consistent model.
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