Lars P. Syll — Wren-Lewis on the New Classical Counter Revolution

Lars Syll marshals support in disagreeing with Simon Wren-Lewis.

Lars P. Syll’s Blog
Wren-Lewis on the New Classical Counter RevolutionLars P. Syll | Professor, Malmo University

Simon Wren-Lewis — Whatever happened to the General Theory

My paper in the Review of Keynesian Economics is out. It is a special issue on the relevance of the General Theory 80 years after its publication. My paper is about the New Classical Counter Revolution (NCCR). At first this may seem an odd fit, but I think quite the opposite. If we go back 40 years, macroeconomics as it was then practiced could be justifiably described as being a development of that great work. In contrast students today would not see the General Theory as the foundation of macroeconomics. The change in view is the result of the NCCR.

I also think that many heterodox economists, who tend to read this journal, have failed to come to terms with the NCCR. They are critical of course, but often they fail to address the obvious question: why was the NCCR so successful? Revolutions may be plotted by a small number of individuals to whom you can ascribe (fairly or unfairly) ideological motives, but you also need to account for why the revolution succeeds. Do heterodox economists think that generations of PhD students who continue to ignore their arguments are being forced to do so against their will?

My paper is in part an attempt to begin to answer this question.…

Mainly Macro
Whatever happened to the General Theory
Simon Wren-Lewis | Professor of Economics, Oxford University

Lars P. Syll — Macroeconomic ad hocery

Lars gives new meaning to "Lucas critique." Smackdown.

Lars P. Syll’s Blog
Macroeconomic ad hocery
Lars P. Syll | Professor, Malmo University

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”

Lars P. Syll —Do people have rational expectations?

If we want to have anything of interest to say on real economies, financial crisis and the decisions and choices real people make [in a non-ergodic world not amenable to stochastic modeling], it is high time to replace the rational expectations hypothesis with more relevant and realistic assumptions concerning economic agents and their expectations.

The post shows why.

Do people have rational expectations?
Lars P. Syll | Professor, Malmö University