In this well-crafted but controversial essay, Paul Krugman reviewed the field of macroeconomics and financial economics in retrospect: from the neoclassical view of the market economy to the Great Depression and heydays of Keynesianism; from the rise of monetarists and the rebirth of the free-market economics to the debate between the freshwater and the saltwater school; from the heydays of EMH, rational expectation and RBC to the upsurging movement of behavioral finance and "frictions" macro.
On the policy side, he also pointed out, that conceited economists and policy makers often got the problems so wrong that the current state of the dominant views has to change. Perhaps we need to re-embrace Keynes as the pendulum continues to swing.
via Mankiw. Here is some alternative view.
Friday, September 4, 2009
Wednesday, September 2, 2009
FT Business Books of the Year
15 books are on the long list competing for the prize:
This Time is Different, by Carmen Reinhart & Ken Rogoff
The Match King, Frank Partnoy
Lords of Finance, by Liaquat Ahamed
The Myth of the Rational Market, by Justin Fox
House of Cards, by William Cohan
In Fed We Trust, by David Wessel
Animal Spirits, by George Akerlof and Robert Shiller
Free, by Chris Anderson
Waste, by Tristram Stuart
Supercorp, by Rosabeth Moss Kanter
How the Mighty Fall, by Jim Collins
Why Your World is About to Get a a Whole Lot Smaller, by Jeff Rubin
Clever, by Gareth Jones
Imagining India, by Nandan Nilekani
Good Value, Stephen Green
Saturday, August 29, 2009
Thursday, August 20, 2009
The "myths" on instrumental variables?
Although the IV approach has been extremely influential in dealing with the endogeneity problems arised in many empirical studies nowadays (a notable example being that, to examine the effect of education on wage rate, Joshua Angrist of MIT and Alan Krueger of Princeton used America’s education laws to create an instrumental variable, say, quarter-of-birth, based on years of schooling), it is far from uncontroversial.
From the latest issue of the Economist, "Two recent papers—one by James Heckman of Chicago University and Sergio Urzua of Northwestern University, and another by Angus Deaton of Princeton—are sharply critical of this approach. The authors argue that the causal effects that instrumental strategies identify are uninteresting because such techniques often give answers to narrow questions. The results from the quarter-of-birth study, for example, do not say much about the returns from education for college graduates, whose choices were unlikely to have been affected by when they were legally eligible to drop out of school. According to Mr Deaton, using such instruments to estimate causal parameters is like choosing to let light 'fall where it may, and then proclaim[ing] that whatever it illuminates is what we were looking for all along.' "
However, "proponents of instrumental variables also argue that accurate answers to narrower questions are more useful than unreliable answers to wider questions." This sounds true, however, just as Prof. Deaton argues, and it also seems to me, that instrumental variables may encourage economists to avoid “thinking about how and why things work”. More deeply, "striking a balance between accuracy of result and importance of issue is tricky".
From the latest issue of the Economist, "Two recent papers—one by James Heckman of Chicago University and Sergio Urzua of Northwestern University, and another by Angus Deaton of Princeton—are sharply critical of this approach. The authors argue that the causal effects that instrumental strategies identify are uninteresting because such techniques often give answers to narrow questions. The results from the quarter-of-birth study, for example, do not say much about the returns from education for college graduates, whose choices were unlikely to have been affected by when they were legally eligible to drop out of school. According to Mr Deaton, using such instruments to estimate causal parameters is like choosing to let light 'fall where it may, and then proclaim[ing] that whatever it illuminates is what we were looking for all along.' "
However, "proponents of instrumental variables also argue that accurate answers to narrower questions are more useful than unreliable answers to wider questions." This sounds true, however, just as Prof. Deaton argues, and it also seems to me, that instrumental variables may encourage economists to avoid “thinking about how and why things work”. More deeply, "striking a balance between accuracy of result and importance of issue is tricky".
Tuesday, August 18, 2009
John Roberts: In Praise of Weak Incentives
In a previous lecture at LSE, John Roberts, the John H. and Irene S. Scully Professor in Economics, Strategic Management and International Business in the Graduate School of Business at Stanford University, argued that the current financial crisis was largely caused by strong, misaligned incentives for bankers, resulting in calls for redesign of these pay schemes. He also showed that economic research over the last several years has suggested a number of contexts where weak incentives are desirable.
You can watch this lecture online.
You can watch this lecture online.
Wednesday, August 5, 2009
Problems with Chinese Characteristics
Contrary to popular thinking, Yasheng Huang, a professor at MIT Sloan School of Management, argues that China owes its astonishing economic growth not to far-sighted government policy but to hundreds of millions of entrepreneurial peasants. In the following lecture, Prof. Huang reveals not only how small-scale rural businesses created China’s miracle but how that nation’s recovery from the global recession and righting the massive East-West trade imbalance depend on this same under-acknowledged sector.
Many of his ideas in this lecture are coming from his earlier published book, Capitalism with Chinese Characteristics, which was selected by the Economist magazine as one of the best books published in 2008.
Many of his ideas in this lecture are coming from his earlier published book, Capitalism with Chinese Characteristics, which was selected by the Economist magazine as one of the best books published in 2008.
Measuring Economic Growth from Outer Space
A new idea of measuring economic growth is proposed in a recent paper: satellite data on lights at night. This new measurement can be readily applied to countries as well as to cities. What's more, the framework can be applied to countries with the lowest quality income data, resulting in estimates of growth that differ substantially from established estimates. A longstanding debate is also considered: do increases in local agricultural productivity increase city incomes? For African cities, we find that exogenous agricultural productivity shocks (high rainfall years) have substantial effects on local urban economic activity.
Sunday, August 2, 2009
Paul Romer: A Theory of History, with an Application
"One miracle of cities is that they sometimes renew themselves brilliantly. This could be a whole new form of that." –Stewart Brand
In the talk, Romer suggests that we rethink sovereignty (respect borders, but maybe create new systems of administrative control); rethink citizenship (allowing perhaps for voice without residency as well as residency without voice); and rethink scale (instead of focusing on nations, focus on new cities). If nations are willing to experiment along these lines, they can create new places, places that can give more people access to the kind of rules that they would like to live and work under, and places that can sustain the historical process of entry and innovation in national systems of rules.
In the talk, Romer suggests that we rethink sovereignty (respect borders, but maybe create new systems of administrative control); rethink citizenship (allowing perhaps for voice without residency as well as residency without voice); and rethink scale (instead of focusing on nations, focus on new cities). If nations are willing to experiment along these lines, they can create new places, places that can give more people access to the kind of rules that they would like to live and work under, and places that can sustain the historical process of entry and innovation in national systems of rules.
Romer has already launched a website, Charter Cities, for further exploration and eventual application of this idea.
Introducing Strategy Research Initiative
The Strategy Research Initiative began as an informal gathering of mid-career strategy scholars in the hinterlands of Nova Scotia in 2007. The goal of the gathering was to create an organization of like-minded colleagues dedicated to the creation of institutions designed to advance research in strategy.
This site also features two completed and useful initiatives: the Strategy Reader and the Empirical Primer.
Subscribe to:
Posts (Atom)