Economic Wisdom
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Syriza and the French indemnity of 1871-73

Syriza and the French indemnity of 1871-73 | Economic Wisdom | Scoop.it
European nationalists have successfully convinced us, against all logic, that the European crisis is a conflict among nations, and not among economic sectors. Today’s Financial Times has an article...
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Should the ECB Helicopter Adjust Its Dropping Zone? | By Pierre Monnin

“Let us suppose that one day a helicopter flies over this community and drops an additional $1000 in bills from the sky…” This pleasant image conveyed by Milton Friedman’s famous metaphor is taken to new heights by Mario Draghi, who promised to inject €60 billion of new money per month in the Euro Area! Unfortunately, Mario’s helicopter is not the same as Milton’s. Friedman made us dream of a helicopter dropping money all over us, Draghi chose a specific dropping zone: public and private debt markets! According to him, his targeted money drop, i.e. the ECB’s new expanded asset purchase programme, should strengthen Euro Area demand enough to bring about “a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term”.[1] Draghi’s plan might work. Willem Buiter[2] recently provided a rigorous analysis of Friedman’s parable, extending it to the case of a central bank dropping money by buying sovereign bonds. Buiter shows that, under very plausible conditions, central banks can always use quantitative easing to boost aggregate demand, even in the severest of liquidity traps. He concludes that “helicopter money drops could raise aggregate […]
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The complete guide to getting into an economics PhD program

The complete guide to getting into an economics PhD program | Economic Wisdom | Scoop.it
Back in May, Noah wrote about the amazingly good deal that is the PhD in economics. Why? Because: You get a job. You get autonomy. You get intellectual fulfillment. The risk is low.
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Noahpinion: If you get a PhD, get an economics PhD

Noahpinion: If you get a PhD, get an economics PhD | Economic Wisdom | Scoop.it
Mohammed Ait Lahcen's insight:

If you get a PhD, get an economics PhD :-)

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Destructive Creativity

Destructive Creativity | Economic Wisdom | Scoop.it
Plain ordinary macro has worked fine.
Mohammed Ait Lahcen's insight:

"...basic macroeconomics — IS-LM type macro, the stuff that’s in Econ 101 textbooks — has performed spectacularly well in the crisis."

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Noahpinion: Are macroeconomic methods politically biased?

Noahpinion: Are macroeconomic methods politically biased? | Economic Wisdom | Scoop.it
Mohammed Ait Lahcen's insight:

Modern macroecocnomics is based on DGSE modeling. DGSE models are microfounded, meaning that they try to explain macroeconomic phenomena as aggregates of optimal decisions made by rational agents. Since it's quite impossible to model the whole economy in details, economists use many simplifying and unrealistic assumptions (as in real business cycle models). As explained in this article, the problem with this imposed simplification is that it may be biased in some way and the models based on it may give policy recommendations which are not quite politically neutral ! 

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Mark Blyth and Eric Lonergan | Why Central Banks Should Give Money Directly to the People | Foreign Affairs

Mark Blyth and Eric Lonergan | Why Central Banks Should Give Money Directly to the People | Foreign Affairs | Economic Wisdom | Scoop.it
In the decades following World War II, Japan’s economy grew so quickly and for so long that experts came to describe it as nothing short of miraculous. During the country’s last big boom, between 1986 and 1991, its economy expanded by nearly $1 trillion.
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Synthesis Lost

Synthesis Lost | Economic Wisdom | Scoop.it
So much for the classical verities.
Mohammed Ait Lahcen's insight:

"...the neoclassical synthesis... has failed the test. What does this mean?"

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Noahpinion: The swamps of DSGE despair

Noahpinion: The swamps of DSGE despair | Economic Wisdom | Scoop.it
Mohammed Ait Lahcen's insight:

"Almost every DSGE result you see is the result of linearization, If you drop linearization, very funky stuff happens. In particular, equilibria become non-unique, and DSGE models don't give you a good idea of what will happen to the economy, even in the fictional world where the DSGE model's assumptions are largely correct"

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There Is No Invisible Hand

One of the best-kept secrets in economics is that there is no case for the invisible hand.
Mohammed Ait Lahcen's insight:

" After more than a century trying to prove the opposite, economic theorists investigating the matter finally concluded in the 1970s that there is no reason to believe markets are led, as if by an invisible hand, to an optimal equilibrium — or any equilibrium at all." !!!

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