There is no One Model to Rule Them All

I like the influence that physicists are having on economics. Moving towards agent-based modelling in some areas of the discipline is a great idea. But, in addition to lending their novel insights, some seem to enjoy piling on economics generally. Generally you have to take the good with the bad but Mark Buchanan’s latest article is so shockingly bad that I can’t help picking on it. Read more

Recent unemployment is entirely cyclical?

The Treasury has just released a crop of Working Papers. Great to see and will read them with interest.

I had a quick read through the first one, which is on “Recent Unemployment Experience in New Zealand

It’s an interesting paper and worth a read. But they reach a surprisingly strong conclusion, where I think a more nuanced interpretation is required: Read more

The arguments about “macroeconomic methodology”

There has been a series of posts by people discussing a new book, “Big Ideas in Macroeconomics“.  Ryan Decker points out a good post by Steven Williamson that has links to other posts.  I haven’t read the book, in fact I haven’t ordered it yet (but intend to) – but I don’t really intend to talk about the book, so I think I’ll be ok.  Instead, I am going to discuss the posts – as I’ve been reading them as they have come out.

The first post was over at Uneasy Money, a blog I really enjoy if you don’t already read it :)

Read more

On GDP and policy

Excellent article over at Aeon (we linked to earlier in the week, but it deserves its own post), I’d suggest you head over and give it a read.  To quote one passage:

Kuznets lost the argument about measuring social welfare over economic activity back in the 1930s. Now it’s time to put these two concepts in the balance again, not least because so many critics of GDP fault it for not measuring well-being. It was never meant to. Yet while we have always known this, economists have routinely used GDP growth as shorthand for well-being. And while this has a sound rationale, there are good reasons for thinking that the gap between social welfare and economic activity, as measured by GDP, is widening.

The article also mentions the usefulness, and shortcomings, of social indicators – such as the one Statistics New Zealand has put together (related discussion from Donal, Shamubeel, and me).  I think the article puts into perspective how careful we have to be with measurable goals, and why we need to be a little clearer on the limits of our knowledge and what this means for policy – both about trade-offs and how these translate into welfare.

I would recommend the entire article, there is really too much in it for me to fairly summarise anything :)

Update:  This piece on Partha Dasgupta at MR University is also relevant.