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.
A model describes a world. There are many possible worlds that can be described, limited only by imagination. Every novel is a conceptual model of a fictional world. These models of fictional worlds are assessed in part on plausibility in comparison with the real world of readers' experience.
There is no difficulty in constructing a conceptual or formal model of possible worlds in which money is neutral or any combination of assumptions that economists make.
The question is how closely these models correspond to the real world of experience, e.g., in comparison with data.
The issues arise in cases where economic models can be shown to correspond in part to the world of real experience and conclusions are drawn from this that the model corresponds to other aspects of the world of real experience.
Some conventional economists would prefer not to look at this but rather to point to how well designed the model is and how it matches the real world of experience sometimes.
2 comments:
In what universe can money ever be neutral? Are people just waking up to this now? Long run, short run, medium run, makes no difference.
How could money ever be neutral? Talk to any Joe in the street and you'll get more sense than from a trained mainstream economist.
A model describes a world. There are many possible worlds that can be described, limited only by imagination. Every novel is a conceptual model of a fictional world. These models of fictional worlds are assessed in part on plausibility in comparison with the real world of readers' experience.
There is no difficulty in constructing a conceptual or formal model of possible worlds in which money is neutral or any combination of assumptions that economists make.
The question is how closely these models correspond to the real world of experience, e.g., in comparison with data.
The issues arise in cases where economic models can be shown to correspond in part to the world of real experience and conclusions are drawn from this that the model corresponds to other aspects of the world of real experience.
Some conventional economists would prefer not to look at this but rather to point to how well designed the model is and how it matches the real world of experience sometimes.
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