My name is Jeffrey M Doyle. I ATTENDED THE UNIVERSITY OF MICHIGAN, ANN ARBOR AND MICHIGAN STATE UNIVERSITY, RECEIVING MY Ph.D. IN 1977.

FOR OVER THIRTY YEARS MY [AND OTHERS] IDEAS WERE DISMISSED AS UNPROVEN AND NOT RELEVANT. TODAY MOST
OF WHAT I PROPOSED IN A 1977 PH.D. DISSERTATION HAS NOT ONLY GAINED ACCEPTANCE BUT IS BEING ACTIVELY
PROMOTED AND PUT INTO PRACTICE. BETTER LATE THAN NEVER.

IN TERMS OF OUR ECONOMY, WE ARE CURRENTLY IN THE WORST SHAPE SINCE THE GREAT DEPRESSION OF 1929. HARD
CORE, DEEPLY ENTRENCHED ADVOCATES OF NARROWLY DEFINED ECONOMICS WILL STAUNCHLY DEFEND THEIR
ICONIC VIEWS-EVEN IN THE FACE OF ONE DISMAL FAILURE AFTER ANOTHER. GALILEO’S REWARD FOR PROVING THAT
THE EARTH ORBITED THE SUN INSTEAD OF THE OPPOSITE SCENARIO ESPOUSED BY THE VATICAN, LED TO A LIFETIME OF
HOUSE ARREST.

Hence, while mainstream economics may be defined in terms of the “rationality-individualism-equilibrium” nexus, heterodox economics may be
defined in terms of a “institutions-history-social structure” nexus. Note that there is a different emphasis in distinguishing mainstream and
heterodox economics in this way than is involved in distinguishing them as closed-system and an open-system approaches respectively. It is
often claimed that neoclassical theory is appropriate as a tool only under certain limited conditions, where there is “perfect” or “near-perfect”
competition. While there is a large body of neoclassical analysis of imperfect competition, this terminology may be seen as incorporating the
assumption that non-competitive markets represent minor deviations from an ideal or perfect norm

Ahh I see, you aren’t criticising the actual method of dynamic optimisation – just the way mainstream economists currently do it (insofar as the assumptions they make surrounding what is optimised and knowledge). Is that it?

Investors don’t need to know precisely the right natural rate of interest; they just have to know that the Fed is inflating. And that’s not hard to figure out from monetary aggregates. Any reason they wouldn’t get it right on average?

The Callahan argument sounds like it reduces to the Carilli and Dempster argument, but I’ll have to give it a look.

But it doesn’t.

There’s three arguments to make here.

One is this: it’s more that each entrepreneur are in a sort of “prisoner’s dilemma” — even if they see the bubble, there’s still only one way they can respond to it. Murphy talks about that briefly in this audio interview, and Brian Stanly argues the point here</a.

And a third, related point, is Gene Callahan’s point that in a time of easy credit creation, even the rational entrepreneur has no choice about paying for the resources whose prices have been bid up in the bubble – if the owner of Sensible Software wants to stay in busines then, astute though he might be about what the central bank is doing, he has no choice but to pay the prices for his resources that have been bid up by Dotty Dotcom. Read his argument here: ‘But What About Expectations’ in the article ‘Times are Hard: On the Causes of the Business Cycle.’

Excuse my ignorance (once again) – but what’s wrong with Euler equations. I realise that sometimes the stability conditions can be a bit restrictive, but apart from that I’ve always thought they were quite elegant.

I need to get a copy of Cowen’s macro textbook sometime.
If you haven’t read it, Larry White’s Theory of Monetary Institutions is also very good.

I’d be more a fan of the Austrian story if I could be convinced that it didn’t rely on businessmen being persistently stupid in misperceiving a monetary inflation as a real change in time preference. I don’t mind political models based on voters being persistently stupid (see Caplan) as the costs of stupidity there are externalized. I don’t like models of high consequence individual behaviour based on stupidity.

See Caplan, and follow his link to Cowen.