‘Money has three functions; Store of Value, Medium of Exchange, Unit of Account.’

An institution which facilitates exchange by solving the problem of “double coincidence of wants”. Money has three functions; Store of Value, Medium of Exchange, Unit of Account. Development of money involved a movemement away from barter to commodity money, primarily but not exclusively specie money towards fiat paper money. In modern economies we can define money as an asset characterized by its liquidity properties – from M1, the most liquid of monetary aggregates, up to M10 or something which apparantly includes things like famous works of art……………… this is principles stuff.
YOU HAVE NO CLUE AS TO WHAT YOU’RE TALKING ABOUT.

And the marginal value of an extra comment on this thread is quickly approaching zero if it hasn’t already turned negative. So see ya’ll next time.

Not really. I was actually perfectly aware that the original Phillips curve was disliked by the neo-classicists: (Ormerod makes this clear). And my first argument was to do with General Equilibrium. And in response to Michael, Ii am no economist. If Paul Ormerod is grossly misrepresenting published economic papers, then you write to him and tell him. I read what I read in good faith. Same goes with the Phillips curve: if Ormerod has published misleading or false data that proves that the Phillips curve is not true then mea culpa, but as I say, I took this in good faith. But either way the choice is clear: either Ormerod’s data is faked or false or misleading, or the Phillips curve is false.

Finally it really wouldn’t matter what example I chose as (as I think I made clear earlier) along with Hodgson and the ‘post-autistic’ ‘school’ I think that modern (i.e. post-war) economics is fundamentally misguided. So it’s not really the truth or falsity of any specific neo-classical position that I’m objecting to. It’s the whole aim of the profession: to create abstract mathemetical models via the analogy of physics (in which ‘rational’ individuals ‘are’ (the equivalent of) atoms, deterministically following abstract mathematical laws.

To repeat, given that I think that the whole aim of economics is misguided (in that it assumes that ‘human nature’ is the same everywhere and in all cultures, because it assumes that ‘markets’ are the same in all cultures and at all times, and because it assumes ‘mathematical models’ predict behaviour in all times and all cultures), I could have used any example for ‘neo-classical’ economics (to repeat for the thousandth time, Austrian school economists, J.K. Galbraith, earlier economists (Adam Smith for example)) are immune from this criticism.

The mysterious thing about economics is that it simply doesn’t answer (doesn’t even try to answer) the basic questions that one might think it should. What is money (or to be more specific, what are the various things ‘we’ call money, and how did they get that way)? What is a firm? What is a corporation? What are (plural) markets? What is the relationship between the law and the ‘markets’ the law and firms, culture and the law, and how does this relate to broader societal issues? (unionisation, religion, ecology, history, imperialism and empire and so forth).

It’s clear that to answer these questions you would have to have a good grasp of history and of the law (for example, the fact that corporations are a relatively modern invention, that they used to be illegal, that they were created via legal actions, and that these were not neutral decisions but that they served very specific interests, and so on). Also you would need a good grasp of anthropology in order to understand how so called ‘hunter gatherer’ societies did things, and how these developed into the way we do things now. Moreover, sociology and psychology would also be of interest. For example, there are literally volumes of raw data in the sociological tradition which deals with work: how people work, why they work, how firms are created, how they fail, how unions are formed, the relationship between unions and management, white collar crime and its impact on the firm and then on society (e.g. enron) and this mountain of data is almost never referred to by economists. Why not?

You would also be interested in the fact that almost every Western (European) power had huge protectionist tendencies (as it were) until their industries had ‘modernised’ and then they went about ‘opening up’ new markets by invading competing powers (i.e. India, China) and anninhilating their infrastructure and forcing them to buy (e.g.) British produce. Again, one could hardly think of anything that should be more of interest to economists, but they seem to find these facts uninteresting, compared to the joy of semi or non predictive modelling.

Why ever not?

The “Dow 36,000” guys have just explained that they’re absolutely right, but their timing was just off a little.

By a factor of 4—rather a lot, really.

We’ll know in 18 years whether their new prediction is right.

“I feel so old. Back when I learned economics, they taught you that in free markets prices adjusted to bring supply and demand into line. But, these days we keep hearing about how there are labor shortages that can only be addressed by finding lower paid workers in other countries to take the jobs. According to the NYT, the latest case is Poland, where apparently all the construction workers have gone to work in Western Europe.

What makes this story especially annoying to those of us who learned the old economics is that the wages of workers in the occupations facing shortages have been falling relative to the wages of workers in occupations not facing shortages. Many economists have sought to explain the relative decline in wages for less-educated workers as the result of skill-biased technical change (i.e. computer technology reduces the relative demand for less educated workers), but how do we reconcile a story of skill-biased technical change with recurring shortages of the workers who we supposedly don’t need any more?”

I know that there is a literature on this, but I’m not familiar with it. I think Mark Machina is the guy.

Michael,
You’re right that among some theoreticians Hahn’s outlook is common. However only a small subset of economists do pure theory. So you’re talking about a subset of a subset. Most economist approach their work in the way described.
And yes there’s debate within economics on shock therapy with regard to the speed and timing of reforms. Somehow I don’t that’s what John was referring to.

On the Phillips curve. Some people did used to argue for ditching it. Strangely for branden these people tended to be the New Classicals and RBC theories of late 70’s and early 80’s. There was some decent arguments for this position – the damned thing shifted all over the place which made it a poor guide to policy and had shaky theoretical underpinnings. Things have gotten better. The modern PC can generally be derived from assumptions about firm’s behavior and when combined with a monetary policy makers’ objective function (loosely aqnalogous to the old LM curve) and a log linearized version of the consumers Euler equation (an updated version of the old IS curve) can be used quite succesfully to understand the the dynamics of influence of monetary policy on the economy and business cycle. But yeah, this is a strange example to offer as an argument, since it works in the completely opposite direction then suggested by branden.

In the model of Radner agents actually have the same a priori beliefs, they differ only in information, which subsequently leads to different a posteriori beliefs. In a Radner equilibrium, all agents take into account these informtion differences which is actually demanding. They have private informatin and information about the kind of information others have. And everyone knows that everyone knows that everyone knows…that. And they use the price information to decode that.

One can assume that people are unable to make these calculations (or simply don’t have the knowledge required in the model) and get the simple usual case. What Ormerod writes is misleading to say the least.

“I have no idea what the phrase: ‘without any theoretical support’ means, but it was certainly inferred from empirical data, although it then went onto to become phrased (as it were) as a statistical model/relationship: i.e. as a theory.”

Exactly that. It went from fact to theory and didn’t start as a a priory theoretical construct.

“In any case this is all irrelevant, as Phillips was wrong. There is no link (of the sort he posited) between inflation and unemployment (insofar as there is one it’s inverse:”

You think that his econometric work was wrong?

Ormerod’s (non academic) bibliography doesn’t make it entirely clear. But it seems to be: Radner, R. ‘Competitive Equilibrium under Uncertainty’ Econometrica, 36, 1968.

I have no idea what the phrase: ‘without any theoretical support’ means, but it was certainly inferred from empirical data, although it then went onto to become phrased (as it were) as a statistical model/relationship: i.e. as a theory. And then it was integrated into the ‘neoclassical’ framework by Friedman et al, where it was given a specific ideological bent (as one might expect) to ‘prove’ that Keynesian economics didn’t work.

In any case this is all irrelevant, as Phillips was wrong. There is no link (of the sort he posited) between inflation and unemployment (insofar as there is one it’s inverse: a rise in unemployment is correlated (weakly) with a RISE in inflation). (Ormerod, 1994 chapter 4).

365: ??!? The Phillips-curve was initially a empirical finding without any theoretical support.