Lars Syll — Assumptions

Those of you who have lost a job, or who have struggled to find a job on leaving school, college, or a university, are well aware that unemployment is a painful and dehumanizing experience. You may be surprised to learn that, for the past thirty-five years, the models used by academic economists and central bankers to understand how the economy works have not included unemployment as a separate category. In almost every macroeconomic seminar I attended, from 1980 through 2007, it was accepted that all unemployment is voluntary.
Roger Farmer

Lars P. Syll’s Blog
How ‘New Keynesian’ economics betrays Keynes

The financial and economic crisis also spells a crisis for certain areas of economics, or approaches to economics. Financial economics and macroeconomics are particularly vulnerable. They are the subject areas where the consequences of the standard assumptions have been most damaging, because they are actually least valid. Financial market traders are not remotely like Star Trek’s Mr Spock, making rational calculations unaffected by emotion or by the decisions of other people. Macroeconomics – the study of how millions of individual decisions aggregate into economy-wide measures – is essentially ideological. How macroeconomists answer a question like ‘What will be the effect of cutting the budget deficit on growth next year?’ depends on their political views. This is not remotely a scientific area of the discipline. The consensus about macroeconomics during what’s been described as ‘the Great Moderation’ of the 1990s has entirely broken down.
Diane Coyle

It's the assumptions, stupid.

The perils of using Mickey Mouse models

Lars P. Syll | Professor, Malmo University