Dead Ideas

Over the fold, the conclusion of my book, with Release Candidate title “Zombie Economics: How Dead Ideas Still Walk Among Us”. I plan a proper post on the whole bookblogging experience, but until then, I’ll thank everyone who’s commented, or just read this exercise with interest and make one (maybe) last request for help. Can anyone recommend a book on Thatcher’s economic reforms that would be a good suggestion for further reading? I’m currently suggesting Anderew Glyn’s Capitalism Unleashed, but I’d like to add something from a centrist or Thatcherite perspective, as long as it’s readable and not too objectionable for words.

There’s a near-complete draft of the whole book here.

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I sent off the draft MS of my Zombie Economics book to the publisher last week, but there is still time for improvement. Over the fold is the second, and final part of the privatization chapter.

You can read most of the book (not always the final draft) at my wikidot site.

As always, comments and criticism much appreciated.

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I just sent a draft manuscript of my Zombie Economics book off to the publisher at Princeton UP. It’s pretty much in beta stage now.The aim is to have it come out in the Fall List.

Thanks heaps for all the praise and criticism. The praise has kept me motivated, and the criticism has been at least as valuable.

I’ve got some more sections of the privatisation chapter and the afterword to post here for comments, and I’m now going to circulate the draft in the older version of the same process. I’m also updating the draft at wikidot (lagging a little on this).

I’m on the final chapter of my long-promised Zombie Economics, dealing with ideas refuted by the Global Financial Crisis. My target this time is privatisation – more precisely, the idea that privatisation will always yield an improvement over public ownership, and, therefore that market liberalism is an advance on the mixed economy that developed in the during the post-1945 long boom.

As always, comments, criticism and suggestions much appreciated.

Updated In response to comments, I’ve added a bit more material on the 1970s and the background to privatisation.

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Another section of my book-in-progress, this time on the implications of trickle-down. I’m getting lots out of the comments, even if I don’t respond to everything, so please keep them coming.

One thing that would be really useful to me is references to publications (probably popular, rather than journal articles) by prominent academic economists that clearly espouse some of the implications of trickle-down discussed here. More than most of the ideas I’m criticising, trickle-down economics tends to be a background assumption rather than something which comes out into the open, and I want to avoid the suggestion that I’m attacking a straw zombie here.
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I’m pushing hard now to finalise a draft of my book-in-progress,

It’s currently titled Zombie Economics:Undead Ideas that Threaten the World Economy. The title is pretty much locked in, but the subtitle is still open for change if anyone has any suggestions. You can read the first few chapters (not quite an up-to-date draft) at wikidot.

The chapter I’m working on now is Trickle-Down Economics, which seems a fairly soft target after the challenge of presenting a critique of the “micro foundations” approach to macroeconomics. But, there are still plenty of difficulties starting with the point that, of course, no-one espouses Trickle-Down Economics under that name. On the other hand, while the view that pro-rich policies will benefit everyone in the long run is widely held, I don’t know of a good general term that describes it.

Anyway here’s the opening section. As always, comments and criticism much appreciated.

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It’s been slow going, but I’ve finally finished the draft chapter of my book-in-progress that looks forward to a new research program for macroeconomics, an absurdly ambitious task, but one that needs to be tackled. Of course, what I’ve written isn’t fundamentally new – it’s a distillation of points that Old Keynesians, post-Keynesians and some behavioral economists have been putting forward for a while. But I hope I’ve got some positive contribution to make. More than ever, comments are much appreciated.

Update In response to comments, I’ve fairly substantially revised the section on “avoiding stagflation”. While I don’t back away from the points I made previously, I took for granted some things that I’d mentioned in other places in the book. The result made for a fairly unbalanced treatment with an excessive focus on the role of labor militancy. I’ve now tried to put this into proper context. I don’t expect that will satisfy everybody, but this is closer to what I meant to say all along.End update
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Work on my book-in-progress has been slowed by other commitments. Among other things I’m fighting privatisation proposals from a Queensland Labor government that seems to have learned entirely the wrong lessons from the global financial crisis. Here’s a section on the GFC and the failure of the micro-foundations approach to macroeconomics. As always, comments much appreciated

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In response to some comments, I’ve written a little bit about the representative agent assumption in Dynamic Stochastic General Equilibrium Models. I argue that, given the underlying DSGE assumptions, you won’t get very much extra by including heterogeneous agents.

But, I intend to say in the “Where next” section, it seems likely that heterogeneous and boundedly rational individuals, interacting in imperfect and incomplete markets will generate ’emergent’ macro outcomes that are not obvious from the micro foundations. Of course, this is going to be a prospectus for a theory, not the theory itself.

In the meantime, comments on my snippet would be much appreciated.

Update Looking at the responses, I think just about everyone has missed the point, which suggests that maybe I didn’t make it very well.

I’m not saying that heterogeneity doesn’t matter, but that introducing (tractable) heterogeneity into a DSGE model isn’t likely to yield radically different predictions about macroeconomic outcomes. If that’s correct, then if you think DSGE models work well (for some evaluative procedure), you can be relaxed about using representative agents. And if you don’t think DSGE models work well, the representative agent assumption isn’t the problem, or at least it isn’t the only problem.

Since my statement of the situation didn’t help much, I’ll present it as a question instead. Can anyone point me to a DSGE-style model that derives strongly non-classical results from the introduction of heterogeneity? Or, failing that, does anyone have a convincing argument that such results should emerge?

I’m aware of course that, in general, anything can happen with aggregation across heterogeneous agents, so I’m not much interested in arguments for agnosticism starting from that point. End update

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Another section from my book-in-progress. The book-so-far can be viewed here.
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My still-in-progress book (outline here) will have a chapter on privatisation. That reminded me of some thoughts on school privatisation and for-profit education that I thought might be of interest here. The near-total failure of the for-profit education ventures that proliferated in the 1990s is striking and to some extent mysterious. In part, I suspect that the whole enterprise (at least as regards school education) was based on a misdiagnosis of the problems of the public school system, focusing on organizational factors, rather than the more intractable effects of steadily growing inequality. The limited success of the charter schools movement would point in that direction. But I argue below (from a piece I wrote for Campus Review in Australia a couple of years ago) that there are more fundamental problems with the for-profit approach. Your thoughts appreciated.

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More bookblogging! It’s all economics here at CT these days, but normal programming will doubtless resume soon.

Most of what I’ve written in the book so far has been pretty easy. I’ve never believed the Efficient Markets Hypothesis or New Classical Macro and it’s easy enough to point out how the occurrence of a massive financial crisis leading to a prolonged macroeconomic crisis discredits them both.

I’m coming now to one of the most challenging section of my book, where I look at why the New Keynesian program (with which I have a lot of sympathy) and ask why New Keynesians (most obviously Ben Bernanke) didn’t, for the most part, see the crisis coming or offer much in response that would have been new to Keynes himself. Within the broad Keynesian camp, the people who foresaw some sort of crisis were the old-fashioned types, most notably Nouriel Roubini (and much less notably, me) who were concerned about trade imbalances, inadequate savings, and hypertrophic growth of the financial sector. Even this group didn’t foresee the way the crisis would actually develop, but that, I think is asking too much – every crisis is different.

My answer, broadly speaking is that the New Keynesians had plenty of useful insights but that the conventions of micro-based macroeconomics prevented them from forming the basis of a progressive research program.

Comments will be appreciated even more than usual. I really want to get this right, or as close as possible
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Over the fold, yet more from my book-in-progress, Zombie Economics: Undead ideas that threaten the world economy. This is from the Beginnings section of the Chapter on Micro-based Macro, and covers the breakdown of the Phillips curve and the rise of New Classical and Rational Expectations macro. This (along with the bits to come on DGSE models) is probably the section on which my own background is weakest, so feel free to point out my errors.

I’ve now posted drafts of the first three chapters (+Intro) at my wikidot site, so you can get some context. In particular, before commenting on omissions, take a quick look to see that the point hasn’t been covered elsewhere.

Micro-based macro is here

I’ve got a lot out of comments and discussion so far, and I hope some of this is reflected in what you are reading.

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Another installment of my slowly-emerging book on Zombie Economics: Undead ideas that threaten the world economy. This is from the Beginnings section of the Chapter on Micro-based Macro. I’ve now posted drafts of the first three chapters (+Intro) at my wikidot site, so you can get some context. In particular, before commenting on omissions, take a quick look to see that the point hasn’t been covered elsewhere.

Micro-based macro is here

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