tag:blogger.com,1999:blog-7439628176985419293.post2413288119881210965..comments2023-11-02T08:28:40.590-04:00Comments on Twenty-Cent Paradigms: The State of MacroBill Chttp://www.blogger.com/profile/01081319025032071808noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7439628176985419293.post-11531722752627956052010-05-18T10:29:40.310-04:002010-05-18T10:29:40.310-04:00Thanks for the comment. In some ways it is tellin...Thanks for the comment. In some ways it is telling how much we're still leaning implicitly on old-fashioned Keynesian thinking to interpret the crisis and recession. <br /><br />I'm more willing to forgive the absence of finance from standard DSGE models - I don't think every econ model should include everything, though its important to bear in mind their limits (which are too often forgotten). <br /><br />It will be interesting to see if economics is able to incorporate some of the issues you mention into existing frameworks or whether more fundamental change occurs.Bill Chttps://www.blogger.com/profile/01081319025032071808noreply@blogger.comtag:blogger.com,1999:blog-7439628176985419293.post-52438664000625263052010-05-18T00:41:35.648-04:002010-05-18T00:41:35.648-04:00Only within the smugly cloistered confines of self...Only within the smugly cloistered confines of self-referential dsge modlers could anyone talk about "victory". The global financial crisis has sunk these models spectacularly, not least because of their absurd equilibrium underpinnings. The models were totally incapable of providing a language to even think about the crisis since there was no financial sector. They failed in modeling economies as self-equilibrating: The only reason we have an economy left at all now is thanks to quite extraordinary, extra-model policy interventions. The models do not provide any language for understanding capitalism as a process that inherently generates instability that can only be righted by government interventions that in themselves may provide the seeds for further inefficiencies and instabilities. If salt or freshwater represents the state of macro, that state is terminally ill. We're going to have to look elsewhere for understanding.pclembnoreply@blogger.com