Euro austerity – the Latvian experience

31 August, 2012 at 14:23 | Posted in Economics | 1 Comment

 

Advertisements

Rolling in the deep

31 August, 2012 at 13:15 | Posted in Varia | Comments Off on Rolling in the deep

 

Economics textbooks – scandalous intellectual dishonesty

30 August, 2012 at 14:41 | Posted in Economics | 15 Comments

As is well-known, Keynes used to criticize the more traditional economics for making the fallacy of composition, which basically consists of the false belief that the whole is nothing but the sum of its parts. Keynes argued that in the society and in the economy this was not the case, and that a fortiori an adequate analysis of society and economy couldn’t proceed by just adding up the acts and decisions of individuals. The whole is more than a sum of parts.

This fact shows up already when orthodox – neoclassical – economics tries to argue for the existence of The Law of Demand – when the price of a commodity falls, the demand for it will increase – on the aggregate. Although it may be said that one succeeds in establishing The Law for single individuals it soon turned out – in the Sonnenschein-Mantel-Debreu theorem firmly established already in 1976 – that it wasn’t possible to extend The Law of Demand to apply on the market level, unless one made ridiculously unrealistic assumptions such as individuals all having homothetic preferences – which actually implies that all individuals have identical preferences.

This could only be conceivable if there was in essence only one actor – the (in)famous representative actor. So, yes, it was possible to generalize The Law of Demand – as long as we assumed that on the aggregate level there was only one commodity and one actor. What generalization! Does this sound reasonable? Of course not. This is pure nonsense!

How has neoclassical economics reacted to this devastating findig? Basically by looking the other way, ignoring it and hoping that no one sees that the emperor is naked.

Having gone through a handful of the most frequently used textbooks of economics at the undergraduate level today, I can only conclude that the models that are presented in these modern neoclassical textbooks try to describe and analyze complex and heterogeneous real economies with a single rational-expectations-robot-imitation-representative-agent.
That is, with something that has absolutely nothing to do with reality. And – worse still -something that is not even amenable to the kind of general equilibrium analysis that they are thought to give a foundation for, since Hugo Sonnenschein (1972) , Rolf Mantel (1976) and Gerard Debreu (1974) unequivocally showed that there did not exist any condition by which assumptions on individuals would guarantee neither stability nor uniqueness of the equlibrium solution.

So what modern economics textbooks present to students are really models built on the assumption that an entire economy can be modeled as a representative actor and that this is a valid procedure. But it isn’t, as the Sonnenschein-Mantel-Debreu theorem irrevocably has shown.

Of course one could say that it is too difficult on undergraduate levels to show why the procedure is right and to defer it to masters and doctoral courses. It could justifiably be reasoned that way – if what you teach your students is true, if The Law of Demand is generalizable to the market level and the representative actor is a valid modeling abstraction! But in this case it’s demonstrably known to be false, and therefore this is nothing but a case of scandalous intellectual dishonesty. It’s like telling your students that 2 + 2 = 5 and hope that they will never run into Peano’s axioms of arithmetics.

For almost forty years neoclassical economics itself has lived with a theorem that shows the impossibility of extending the microanalysis of consumer behaviour to the macro level (unless making patently and admittedly insane assumptions). Still after all these years pretending in their textbooks that this theorem does not exist – no one of the textbooks I investigated even mention the existence of the Sonnenschein-Mantel-Debreu theorem – is outrageous.

Milton Friedman was right on the value of having your own currency

30 August, 2012 at 10:41 | Posted in Economics | 3 Comments

Countries that have joined the Europen Monetary Union have not only lost their capacity to issue debt in a currency over which they are their own masters. They have also lost the possibility of using their own instruments of economic policy in the form of interest rates and exhange rates.

Because of this they have also almost no other possibility of getting their costs in line than through “internal devaluation” by burdensome austerity measures. Measures that have driven the economies of Greece, Spain, Italy, Ireland and Portugal to the brink of disaster.

Since the countries of the euro area do not have their own currencies they cannot deal with crisis in a proper way. Had these countries had their own currencies they could have devalued their currencies and much more easily been able to restore their competitiveness and adjust to the shock of the financial crises of 2008.

Being “sort of” Keynesian, yours truly don’t often find the occasion to approvingly quote Milton Friedman. But on this issue I have no problem:

If internal prices were as flexible as exchange rates, it would make little economic difference whether adjustments were brought about by changes in exchange rates or equivalent changes in internal prices. But this condition is clearly not fulfilled. The exchange rate is potentially flexible in the absence of administrative action to freeze it.
At least in the modern world, internal prices are highly inflexible. They are more flexible upward that downward, but even on the upswing all prices are not equally flexible. The inflexibility of prices, or different degrees of flexibility, means a distortion of adjustments in response to changes in external conditions. The adjustment taes the form primarily of price changes in some sectors, primarily of output changes in others.

Wage rates tend to be among the less flexible prices. In consequence, an incipient deficit that is countered by a policy of permitting or forcing prices to decline is likely to produce unemployment rather than, or in addition to, wage decreases. The consequent decline in real income reduces domestic demand for foreign goods and thus demand for foreign currency with which to purchase these goods. In this way it offsets the incipient deficit. But this is clearly a highly efficient method of adjusting to external changes. If the external changes are deep-seated and persistent, the unemployment produces steady downward pressure on prices and wages, and the adjustment will not have been completed until the deflation has run its sorry course.

The argument for a flexible exchange rate is, strange to say, very nearly identical with the argument for daylight savings time. Isn’t it absurd to change the clock in summer when exactly the same result could be achieved by having each individual change his habits? All that is required is that everyone decide to come to his office an hour earlier, have lunch an hour earlier, etc. But obviously it is much simpler to change the clock that guides all than to have each individual separately change his pattern of reaction to the clock, even though all want to do so. The situation is exactly the same in the exchange market. It is far simpler to allow one price to change, namely, the price of foreign exchange, than to rely upon changes in the multitude of prices that together constitute the internal price structure.

On the self-destruction of the eurozone

27 August, 2012 at 13:44 | Posted in Economics | Comments Off on On the self-destruction of the eurozone

 

Skolan som god annorlundahet

27 August, 2012 at 13:07 | Posted in Education & School | Comments Off on Skolan som god annorlundahet

Yours truly har i dag en artikel om skolan i nättidningen Skola och samhälle:

Skolan ska vara en ö i en värld full av intensiva förändringar. För att kunna lära sig saker krävs koncentration och möjligheter till avskärmning. I vår hypermedialiserade värld är kanske just det sistnämnda speciellt viktigt. I det ständiga digitala brus som unga människor omger sig av dygnet runt, behövs öar av distans, lugn och möjligheter till reflektion, sållning av brus och bearbetning av information till kunskaper. Inte för att permanent dra sig undan livsvärldens bekymmer och besvär, utan för att – med den styrka, färdigheter och perspektiv som en kunskaps- och medborgarskapsgrundad skola kan ge – bättre kunna tackla de ständiga reala omvandlingar som kännetecknar våra liv.

Ska man lära något nytt i skolan måste den vara något annat än en förlängning av elevers vardag och liv. Ska skolan kunna katalysera och förändra måste den vara något annat och inte identiskt med sin omgivning.
I dagens samhälle måste skolan få fungera som något annorlunda, ett alternativ till de eroderande marknadskrafter som idag hotar samhällsbygget genom att reducera samhällsmedborgare till konsumenter. Kunskap är en nödvändig förutsättning för att kunna bjuda stånd mot denna utveckling. När inte familjen eller samhället står emot måste skolan kunna stå upp och ta tillvara det uppväxande släktets genuina emancipatoriska intressen.

Om skolan ska kunna utgöra ett förverkligande av varje elevs potential snarare än tidsbundna och kontingenta fakticitet måste den kunna bygga broar till elevens livsvärld, samtidigt som den behåller distansen och avståndet mellan skola och samhälle.

Eugene Fama and the Economics of Denial

27 August, 2012 at 11:26 | Posted in Economics | 3 Comments

George Soros has put generous funding behind the Institute for New Economic Thinking (INET). The Bank of England has also tried to stimulate fresh ideas. The proceedings of a conference that it organized earlier this year have now been edited under the provocative title What’s the Use of Economics?

Some of the recommendations that emerged from that conference are straightforward and concrete. For example, there should be more teaching of economic history …

Many conference participants agreed that the study of economics should be set in a broader political context, with greater emphasis on the role of institutions. Students should also be taught some humility. The models to which they are still exposed have some explanatory value, but within constrained parameters. And painful experience tells us that economic agents may not behave as the models suppose they will.

But it is not clear that a majority of the profession yet accepts even these modest proposals. The so-called “Chicago School” has mounted a robust defense of its rational expectations-based approach, rejecting the notion that a rethink is required. The Nobel laureate economist Robert Lucas has argued that the crisis was not predicted because economic theory predicts that such events cannot be predicted. So all is well …

We should not focus attention exclusively on economists, however.
Arguably the elements of the conventional intellectual toolkit found most wanting are the capital asset pricing model and its close cousin, the efficient-market hypothesis. Yet their protagonists see no problems to address.

On the contrary, the University of Chicago’s Eugene Fama has described the notion that finance theory was at fault as “a fantasy,” and argues that “financial markets and financial institutions were casualties rather than causes of the recession.” And the efficient-market hypothesis that he championed cannot be blamed, because “most investing is done by active managers who don’t believe that markets are efficient.”

This amounts to what we might call an “irrelevance” defense: Finance theorists cannot be held responsible, since no one in the real world pays attention to them!

Howard Davies

Inequality and moral behaviour

24 August, 2012 at 14:23 | Posted in Economics | 1 Comment

 

Botten Björklund!

24 August, 2012 at 11:17 | Posted in Education & School | 5 Comments

I går tillsatte Jan Björklund en utredning om effekterna av den svenska skolans kommunalisering. Den ska ledas av Leif Lewin och ligga klar i början på år 2014.

Kommunaliseringens negativa effekter på svensk skola är redan väl kända, men en ytterligare genomlysning kan väl aldrig vara fel. Men vad som  är – inte minst ur vetenskaplig synpunkt – fullständigt huvudlöst är att man inte samtidigt utreder effekterna av friskolereformen och det fria skolvalet.

Är det något som är uppenbart i frågan om de kumulativa kausala faktorer som kan tänkas ligga bakom den svenska skolans utförsbacke och den ökade segregationen så är det vikten av dessa tre samverkande faktorer. Att då lyfta ut en av dem och “konstanthålla” för de övriga är – något vi brukar tala om för våra studenter redan på första metodkursen – ur vetenskaplig synpunkt rent stolleri.

Alla med ens de mest rudimentära kunskaper om svensk politik idag begriper så klart att valet av utredningsdirektiv är rent partitaktiskt dikterat. Men någon gräns måste det väl ändå finnas för hur lågt även politiker kan sänka sig?

Modern macroeconomics – science without aspirations?

23 August, 2012 at 14:57 | Posted in Economics | 1 Comment

The problem is that the new theories, the theories embedded in general equilibrium dynamics of the sort that we know how to use pretty well now—there’s a residue of things they don’t let us think about.
They don’t let us think about the U.S. experience in the 1930s or about financial crises and their real consequences inAsia and LatinAmerica. They don’t let us think, I don’t think, very well about Japan in the 1990s. We mayn be disillusioned with the Keynesian apparatus for thinking about these things, but it doesn’t mean that this replacement apparatus can do it either. It can’t. In terms of the theory that researchers are developing as a cumulative body of knowledge—no one has figured out how to take that theory to successful answers to the real effects of monetary instability. Some people just deny that there are real effects of monetary instability, but I think that is just a mistake. I don’t think that argument can be sustained.

Robert Lucas

Isn’t that like having seismological and meteorological sciences that can’t help us explaining or predicting earthquakes or hurricanes? Maybe we should have just a little higher aspiration level as scientists? After all, if uncertainty is all around in the economy and – as Lucas has said – “in cases of uncertainty, economics reasoning will be of no value,” then why should be bother with economics at all? I’m just wondering …  

Keynes on conventions and managing uncertainty

23 August, 2012 at 12:50 | Posted in Economics | Comments Off on Keynes on conventions and managing uncertainty

In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention. The essence of this convention – though it does not, of course, work out quite so simply – lies in assuming that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change. This does not mean that we really believe that the existing state of affairs will continue indefinitely. We know from extensive experience that this is most unlikely. The actual results of an investment over a long term of years very seldom agree with the initial expectation. Nor can we rationalise our behaviour by arguing that to a man in a state of ignorance errors in either direction are equally probable, so that there remains a mean actuarial expectation based on equi-probabilities. For it can easily be shown that the assumption of arithmetically equal probabilities based on a state of ignorance leads to absurdities. We are assuming, in effect, that the existing market valuation, however arrived at, is uniquely correct in relation to our existing knowledge of the facts which will influence the yield of the investment, and that it will only change in proportion to changes in this knowledge; though, philosophically speaking, it cannot be uniquely correct, since our existing knowledge does not provide a sufficient basis for a calculated mathematical expectation. In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield.

Nevertheless the above conventional method of calculation will be compatible with a considerable measure of continuity and stability in our affairs, so long as we can rely on the maintenance of the convention.

We should not conclude from this that everything depends on waves of irrational psychology. On the contrary, the state of long-term expectation is often steady, and, even when it is not, the other factors exert their compensating effects. We are merely reminding ourselves that human decisions affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist; and that it is our innate urge to activity which makes the wheels go round, our rational selves choosing between the alternatives as best we are able, calculating where we can, but often falling back for our motive on whim or sentiment or chance.

General Theory

Paul Krugman – a pathetic old fool?

23 August, 2012 at 10:55 | Posted in Economics | Comments Off on Paul Krugman – a pathetic old fool?

 

Svenskt Näringsliv och euron

22 August, 2012 at 15:41 | Posted in Economics, Politics & Society | Comments Off on Svenskt Näringsliv och euron

Apropå Calmfors och eurodebatten påminner bloggkollegan barnilsson om Svenskt Näringslivs vassa euroanalys:

Förutom alla andra återvändsgränder, i dubbel bemärkelse, hittade jag den här roliga propagandaskriften. Den ligger sedan 2003 fortfarande kvar på Svenskt Näringslivs sida, till allmänt nöje. Det var de intellektuella giganterna Johnny Munkhammar och Fredrik Segerfeldt som hade samlat sig till en marsch in i framtiden, genom att försöka desavouera utredningen. Skriften slutar så här:

Den offentliga utredning som leddes av professor Lars Calmfors är en produkt som var ett tungt och relevant inlägg för sin tid. Den utgick i grunden från att Sverige under vissa förutsättningar borde gå med i EMU:s tredje steg och införa euron. Dessa förutsättningar är nu uppfyllda och Sverige är enligt utredningens sätt att resonera fullt redo att gå med.

Därtill kommer att nyare forskning har förändrat förutsättningarna för analysen. Centrala, för att inte säga avgörande, belägg i de ekonomiska aspekterna har tillkommit. Framför allt gäller det såväl teori som empiri avseende handel samt värdet av en integrerad kapitalmarknad. På de punkter där utredningen var bristfällig eller idag är överspelad kan den inte längre användas i debatten.

Argumenten för att vänta och se är borta. Argumenten för att gå med har stärkts. Inget nytt argument har tillkommit emot. Summan blir att de ekonomiska skälen för ja är starkare.”

Särskilt att “inget nytt argument tillkommit emot” är väldigt starkt. Undrar varför vi inte är med egentligen. Visst är det synd om oss. Men målet ligger väl fast hos Svenskt Täringsliv, synd bara att det knappast är läge för en propagandamaskin förrän tidigast 2022. Typ. Liksom.

 

Haavelmo on economic “laws”

22 August, 2012 at 15:01 | Posted in Statistics & Econometrics | Comments Off on Haavelmo on economic “laws”

With the completion – in 1958 –  of the twenty-fifth volume of Econometrica, Trygve Haavelmo took the opportunity of making an assessment of the role of econometrics in the advancement of economics. Although mainly positive of the “repair work” and “clearing-up work” done, Haavelmo also found some grounds for despair:

We have found certain general principles which would seem to make good sense. Essentially, these principles are based on the reasonable idea that, if an economic model is in fact “correct” or “true,” we can say something a priori about the way in which the data emerging from it must behave. We can say something, a priori, about whether it is theoretically possible to estimate the parameters involved. And we can decide, a priori, what the proper estimation procedure should be … But the concrete results of these efforts have often been a seemingly lower degree of accuracy of the would-be economic laws (i.e., larger residuals), or coefficients that seem a priori less reasonable than those obtained by using cruder or clearly inconsistent methods.

There is the possibility that the more stringent methods we have been striving to develop have actually opened our eyes to recognize a plain fact: viz., that the “laws” of economics are not very accurate in the sense of a close fit, and that we have been living in a dream-world of large but somewhat superficial or spurious correlations.

Calmfors – både rätt och fel om en misslyckad ekonomiprofession

22 August, 2012 at 11:17 | Posted in Economics | 2 Comments

Lars Calmfors hade i går en artikel i DN där han gör några viktiga iakttagelser om finanskrisen och ekonomiprofessionens misslyckande i samband med denna:

Finanskrisen var ett misslyckande för ekonomprofessionen. Vi borde ha varnat mer för de finansiella riskerna. Det fanns visserligen en medvetenhet om att de globala obalanserna, med stor amerikansk utlandsupplåning, kunde leda till en hårdlandning. Men den kom att ta sig andra vägar än som förutsetts och blev mycket värre. Finansmarknadernas risktagande var vida större än vad de flesta ekonomer hade kunnat föreställa sig. Kunskapen om olika finansiella instrument och hur de flätade samman aktörer var alldeles för liten.

Ett systemfel inom ekonomisk forskning var bristande integration mellan makroteori (som analyserar hur den ekonomiska aktivitetsnivån bestäms) och finansiell ekonomi. Makroforskningen lade inte tillräcklig vikt vid det finansiella systemets betydelse för konjunktursvängningarna. Forskningen i finansiell ekonomi var mer inriktad på enskilda finansiella instrument än på finansmarknadernas betydelse för den makroekonomiska utvecklingen.

En orsak till felbedömningarna var alltför stor tilltro till teoretiskt eleganta analysmodeller. Alltför liten vikt lades vid empiriska generaliseringar av tidigare ekonomisk-historiska erfarenheter av finansiella kriser som stod i strid med antaganden om rationellt beteende. Större kunskaper i doktrinhistoria hade förmodligen också hjälpt ekonomkåren till mer skepsis gentemot för tillfället dominerande synsätt.

Tyvärr följer Calmfors upp denna riktiga diagnos med ett halsbrytande omdöme om professionens insatser på eorokrisens område:

När det gäller eurokrisen förtjänar emellertid nationalekonomerna enligt min mening ett gott betyg. De obalanser som kan uppkomma därför att en gemensam penningpolitik inte passar ett enskilt land med avvikande konjunkturutveckling var väl analyserade. Det fanns även många varningar för att överhettningarna och fastighetsprisbubblorna i Irland och Spanien måste leda till krascher.

Här “glömmer” ju Calmfors bort att både han själv (efter många våndor) och lejonparten av ledande svenska nationalekonomer traskade patrull och tyckte att Sverige skulle gå med i eurosamarbetet. Det hade nog varit klädsammare om Calmfors et consortes hade framfört ett stort tack till Nils Lundgren, Sören Wibe, yours truly och andra inom professionen som var klarsynta nog att se vart detta misslyckade megaprestigeprojekt skulle leda.

Förtjänar “gott betyg”? Ska man då också räkna in alla europellejönsande ekonomkollegor? Ska man då också räkna in t ex Harry Flam – som tycker att man ska lägga munkavle på broderlandets utrikesminister när denne han fräckheten att säga det vi alla vet – att euron är på väg att kapsejsa och att varje ansvarstagande regering måste förbereda för denna eventualitet? Ska man då också räkna in Carl Bastiat Hamilton – som ju sämre det går för euron skriker desto gällare om nödvändigheten av att Sverige ska ansluta sig? Jag bara undrar.

Mechanisms vs deductive-axiomatic models

22 August, 2012 at 09:35 | Posted in Theory of Science & Methodology | 1 Comment

Stumbling and mumbling – Chris Dillow – has a nice piece on why people interested in real economies ought to focus on mechanisms rather than models of the deductive-axiomatic ilk:

[L]ots of brilliant economists don’t think merely in terms of mechanisms but rather build impressive models. And like photographers, they tend to fall in love with their models which distracts them both from others’ models and from mechanisms.

A good example of this lies in the idea of expansionary fiscal contraction. The virtue of this idea is that it draws our attention to mechanisms (a falling exchange rate, better corporate animal spirits, whatever) whereby fiscal contraction might boost the economy. The drawback is that these mechanisms are just unlikely to operate here and now. Yes, there’s a model that tells us that expansionary fiscal contraction can work. And there are models that say it can’t. But arguing about competing models misses the practical point.

Now, there is an obvious reply to all this. Models have the virtue of ensuring internal consistency, and thus avoiding potentially misleading partial analysis. However, I’m not sure whether this is an argument against mechanisms so much as against poor thinking about them.

Sveriges egen Margaret Thatcher i välförtjänt utförsbacke

20 August, 2012 at 14:05 | Posted in Politics & Society | Comments Off on Sveriges egen Margaret Thatcher i välförtjänt utförsbacke

Enligt en Novus-undersökning beställd av Dagens Industri rasar nu förtroendet för centerledaren Annie Lööf.

Nästan 50 procent säger sig ha lågt förtroende för Annie Lööf. Och endast 12 procent av de tillfrågade i undersökningen har stort förtroende för henne. För ett halvår sedan hade var femte tillfrågad stort förtroende för centerledaren.

Dyra krognotor och konferenser börjar nu komma ikapp vår egen Margaret Thatcher. Undrar om det inte också börjar dra ihop sig till ett uppvaknande ur den nyliberala mardröm denna politiska broiler och klyschmakare lyckats dra ner det en gång så stolta centerpartiet i …

Nicholas Kaldor on the United States of Europe

20 August, 2012 at 11:30 | Posted in Economics, Politics & Society | 1 Comment

Foreseeing the future is difficult. But sometimes it seems as though someone gets it terribly right: 


Some day the nations of Europe may be ready to merge their national identities and create a new European Union – the United States of Europe. If and when they do, a European Government will take over all the functions which the Federal government now provides in the U.S., or in Canada or Australia. This will involve the creation of a “full economic and monetary union”. But it is a dangerous error to believe that monetary and economic union can precede a political union or that it will act (in the words of the Werner report) “as a leaven for the evolvement of a political union which in the long run it will in any case be unable to do without”. For if the creation of a monetary union and Community control over national budgets generates pressures which lead to a breakdown of the whole system it will prevent the development of a political union, not promote it.

Nicholas Kaldor 1971 (!)

For whom the bell tolls – the eurozone prepares for break-up

17 August, 2012 at 09:53 | Posted in Economics, Politics & Society | Comments Off on For whom the bell tolls – the eurozone prepares for break-up

Finland’s foreign minister Erkki Tuomioja warned yesterday that the country is preparing for the break-up of the eurozone:

The Nordic state is battening down the hatches for a full-blown currency crisis as tensions in the eurozone mount and has said it will not tolerate further bail-out creep or fiscal union by stealth.

“We have to face openly the possibility of a euro-break up,” said Erkki Tuomioja, the country’s veteran foreign minister …

“Our officials, like everybody else and like every general staff, have some sort of operational plan for any eventuality.”

Mr Tuomioja’s intervention is the bluntest warning to date by a senior eurozone minister …

“But let me add that the break-up of the euro does not mean the end of the European Union. It could make the EU function better,” he said, describing the dash for monetary union in the 1990s as a vaulting political leap in defiance of economic gravity. Finland has emerged as the toughest member of the eurozone’s creditor bloc as it tries to hold together a motley coalition. It has insisted on collateral from both Greece and Spain in exchange for rescue loans …

Like other member states, Finland has a veto that could be used to block any new bail-out measures. However, unlike some states, its parliament would have to approve each future measure of the eurozone rescue, including a full bail-out of Spain.

The issue of euro break-up may come to a head in October as EU-IMF Troika inspectors report back on Greek bail-out compliance. Pleas from Athens for two extra years to stretch out its austerity regime have run into fierce resistance from creditor powers …

Critics say the Greek deal set a fatal precedent, triggering further capital flight from Spain and Italy. Mrs Kumpula-Natri – chairman of the Finnish parliament’s Grand Committee on Europe- said Finland can be pushed only so far. “There is a feeling on the street that there has to be a limit. I can’t say whether it is 10% of GDP, or what. It’s not written. But it is obvious that a small country can’t help big countries eternally.”

The Telegraph

Bright Star

16 August, 2012 at 22:16 | Posted in Varia | Comments Off on Bright Star

This one is, as always, for you, Jeanette Meyer.
 

Annie Lööf snart ensam på Stureplan

16 August, 2012 at 11:42 | Posted in Politics & Society | 2 Comments

Stort grattis Annie! Snart har du lyckats med det som din föregångare Maud Olofsson så storartat påbörjade – att göra det en gång så stolta centerpartiet till ett marginaliserat nyliberalt Stureplansjippo.

Eva Franchell har idag en suverän artikel i Aftonbladet om vår nyliberala Ayn Rand dyrkande näringsminister och centerledare:

Annie Lööf valdes till partiledare för ett år sedan. Under hennes ledarskap har partiet fortsatt att balansera på gränsen till riksdagen. När drevet drog igång var partiet redan i kris. För Annie Lööf är det mer än den personliga karriären som står på spel.

Centern är det gamla landsbygds­partiet som i takt med urbaniseringen försökt hitta nya väljare. Nyorienteringen började när Maud Olofsson tog över 2001. Det var då hon kastade ut de sista resterna av vadmal för nu skulle bönderna bli business. Kärnkraftsmotstånd, hållbar utveckling och andra gamla Centerfrågor raskades raskt undan.

När Annie Lööf tog över fullföljde hon marschen högerut. Eftersom Moderaterna drog sig mot mitten kunde Centern inta platsen högerut och den gamla folk­rörelsen återuppstod som ett Tea Party på Stureplan.

I sommar har Per Ankersjö i Centerpartiets idéprogramgrupp angripit Moderaterna från höger. Ankersjö vill ­bekämpa statlig klåfingrighet. Han är för egoism och privat konsumtion utan några begränsningar. Det är inte konstigt att Centern ligger kvar på runt fyra procent.

Vilka väljare litar på en partiledning som förespråkar egoism?

Annie Lööf har beskrivit hur hon vill tillbaka till 70-talet då partiet var starkt i både större städer och på landet.

Då var det Thorbjörn Fälldin som regerade och Per Ankersjö borde kanske läsa om den gamle mästarens installationstal:

”Det är fel att tala om att man skulle kunna minska den offentliga sektorns uppgifter. Vi måste öka dem, om vi skall klara jämlikhet, trygghet, utbildning, miljö­vård, regionalpolitik och näringspolitik.”

Centerpartiet var inte bara ett parti för bönder. Det var ett socialliberalt och progressivt miljöparti, det borgerliga vänsterpartiet.

Krisen var ett faktum redan innan drevet mot Annie Lööf drog igång. Nu står hon nästan ensam på Stureplan och där kan det blåsa riktigt kallt.

Snart finns dessa Lööf, Federley, Ankersjö et consortes inte kvar i Sveriges riksdag. Kanske det börjar bli dags för en ny Thorbjörn Fälldin att träda fram nu när det verkar som om de här pellejönsarna snart lekt färdigt?

The euro threatens democracy in Europe

15 August, 2012 at 16:34 | Posted in Economics, Politics & Society | Comments Off on The euro threatens democracy in Europe

The 17-nation eurozone has contracted for eleven straight months. And now it’s not only getting worse in the periphery countries, but also in France and Germany. Unemployment is on the rise everywhere within the eurozone.

These are very alarming facts and should be taken seriously.

Richard Koo now warns us that the problems – created to a large extent by the euro – may not only endanger our economies, but also our democracy itself:

The question is how long democracy can survive with governments and EU institutions forcing the patient to undergo treatment for the wrong disease. Eurozone social security programs have made great strides since the prewar era, and as a result a recession will not lead to an immediate collapse of democratic government.

However, the term “democratic deficit” is appearing more frequently in Western newspapers, as more governments are implementing policies without going through proper democratic channels. The complete inability of leaders in the countries already experiencing double dips to present a plan for addressing the situation also casts a shadow over the outlook for democracy.

In Germany’s Weimar Republic, the unemployment rate was at 28% when the government pushed through austerity measures in the midst of a balance sheet recession, causing democratic structures to collapse.

In that sense I am deeply concerned about eurozone unemployment, which now stands at 24.8% in Spain (June, Eurostat) and 23.1% in Greece (May, National Statistical Service of Greece). Even more worrying, policymakers have been unable to present the public with a single persuasive scenario showing a way out of the current predicament.

The Weimar Republic collapsed in 1933 after Chancellor Heinrich Brüning’s insistence on fiscal consolidation triggered an economic implosion. It is extremely unfortunate that the countries of Europe are repeating his mistake some eighty years later.

The one difference is that this time it is the lack of understanding of balance sheet recessions at the ECB, the EU, and the German government that is pushing the eurozone (ex Germany) in the wrong direction.

How much whipping can democracy take? How many more are going to get seriously hurt and ruined before we end this madness and put the euro where it belongs – in the dustbin of history!

Financial markets as Keynesian beauty contests

14 August, 2012 at 14:24 | Posted in Economics | Comments Off on Financial markets as Keynesian beauty contests

 

Seminariet som var ett glamourparty

14 August, 2012 at 13:11 | Posted in Politics & Society | Comments Off on Seminariet som var ett glamourparty

 Annie Lööf och hennes departement hade en julfest för över 600 000 kronor.

Temat för kvällen var glitter och glamour och notan skickades till skattebetalarna.Julfesten har bokförts som seminarium.

Den första augusti begärde Aftonbladet ut en förteckning över all internrepresentation på Lööfs departement. Några dagar senare kom en lista – men där fanns ingenting om julfesten med.

– Nej, det är sånt som inte har varit bokfört som representation säger Jenny Forkman, som har vikarierat som expeditionschef.

Annie Lööfs pressekreterare Kenneth Hultgren har granskat alla handlingar som har lämnats ut till Aftonbladet. Vi kunde i förra veckan avslöja hur ärenden fördröjs och hur Lööfs stab har städat upp bland sina spritnotor och felfaktureringar innan handlingar har lämnats ut.

När det gäller julfesten den 8 december förra året så har inga handlingar som helst lämnats ut förrän departementet nu på måndagen la ut uppgifter på sin hemsida.

Aftonbladet

On Top 30 Heterodox Economics Blogs

12 August, 2012 at 22:00 | Posted in Varia | 1 Comment

Earlier this week, Lord Keynes presented a list of top 30 heterodox Keynesian/MMT economics blogs and web resources. Based on “how popular various sites seem to be” and “their importance”, yours truly is happy to acknowledge his blog being one of the chosen few. Great!

Annie Lööf och den iskalla egoismens unkna stank

12 August, 2012 at 18:40 | Posted in Politics & Society | 9 Comments

Vår egen Margaret Thatcher – näringsministern och centerledaren Annie Lööf  – avsatte häromdagen generaldirektören för  Tillväxtverket efter att det i medierna avslöjats att man ägnat sig åt något för vidlyftig representation.

De senaste dagarna har det nu framkommit att Annie Lööf själv ägnat sig åt samma vidlyftiga representationsformer på näringsdepartementet.

Är detta ägnat att överraska? Knappast om man betänker centerledarens nyliberala ideologiska ideal.

I takt med att moderaterna under Fredrik Reinfeldt har rört sig mot den politiska mitten har centerpartiet under Annie Lööfs ledarskap fullföljt det som Maud Olofsson påbörjade och har rört sig lika tydligt åt höger. I dag är det centerpartiet som är högerpartiet. Och ett nyliberalt sådant.

Centerpartiets partiledare och näringsminister har en meritlista som säkert skulle imponera på en Reagan eller Thatcher. Här ett axplock av vad Lööf argumenterat och motionerat för på senare år:

  • Inför plattskatt (lägre skatt för höginkomsttagare)
  • Avskaffa lagen om anställningsskydd
  • Inskränk strejkrätten
  • Inför marknadshyror
  • Sälj ut SvT och SR
  • Sverige bör gå med i NATO
  • Bygg ut kärnkraften

Inte bara diktaturkramaren Margaret Thatcher står på Annie Lööfs idollista. Den iskalla egoismen översteprästinna – Ayn Rand – är en annan.

Att välkända nyliberaler som Alan Greenspan och Johan Norberg vurmar för Ayn Rands övermänniskoideal är kanske inte så förvånande. Men att Annie Lööf också gör det förvånar nog en del.

I Lööfs ögon är Rand “en av 1900-talets största tänkare”. I andras en av 1900-talets mest vämjeliga personer.

Centerpartiet har numera en nyliberal Stureplansmegafon till partiledare. En partiledare som har idoler med bland de mest unkna egoistiska människo- och samhällsideal man kan tänka sig.

För politiker med sådana ideal spelar respekten för hur man spenderar skattebetalarnas pengar antagligen en helt försumbar roll. Sådana bagateller bryr sig vår tids självutnämnda övermänniskor inte om. Men låt oss hoppas att väljarna gör det om två år!

Amartya Sen on Neoliberalism

12 August, 2012 at 15:56 | Posted in Economics, Politics & Society | 1 Comment

Amartya Sen is one of the most influential economists and philosophers today. Sen has for decades directed severe criticism against Neoliberalism.

Neoliberals often contrast the importance of equality with that of liberty. But to Sen it can never be a question of liberty or equality. To pose the question in terms of this contrast is a “category mistake”.

With his capability approach, Sen explicitly acknowledges human diversity in a way that is impossible within the Neoliberal approach. This is an issue to which Neoliberals have paid almost no attention, and for which Sen also rightly criticizes them. 

In this essay I further analyze what kind philosophical-ideological-political-economic doctrine Neoliberalism is, and how to position Sen’s incisive critique of it.

Markets and morality

12 August, 2012 at 13:13 | Posted in Politics & Society | Comments Off on Markets and morality

Michael Walzer has for as long as I can remember been one of my favourite political philosophers. Especially his seminal Spheres of Justice. A Defence of Pluralism and Equality has had an immense influence on my own research on distributional justice and political ethics.

The modelers’ response

12 August, 2012 at 12:20 | Posted in Statistics & Econometrics, Theory of Science & Methodology | Comments Off on The modelers’ response

At least since the time of Keynes’ famous critique of Tinbergen’s econometric methods, those of us in the social science community who have been unpolite enough to dare questioning the preferred methods and models applied in quantitive research in general and econometrics more specifically, are as a rule met with disapproval. Although people seem to get very agitated and upset by the critique – just read the commentaries on this blog if you don’t believe me – defenders of “received theory” always say that the critique is “nothing new”, that they have always been “well aware” of the problems, and so on, and so on.So, for the benefit of all you mindless practitioners of econometrics and statistics – who don’t want to be disturbed in your doings – eminent mathematical statistician David Freedman has put together a very practical list of vacuous responses to criticism that you can freely use to save your peace of mind:   

We know all that. Nothing is perfect … The assumptions are reasonable. The assumptions don’t matter. The assumptios are conservative. You can’t prove the assumptions are wrong. The biases will cancel. We can model the biases. We’re only doing what evereybody else does. Now we use more sophisticated techniques. If we don’t do it, someone else will. What would you do? The decision-maker has to be better off with us than without us … The models aren’t totally useless. You have to do the best you can with the data. You have to make assumptions in order to make progress. You have to give the models the benefit of the doubt. Where’s the harm?

Paul Samuelson and the ergodic hypothesis

7 August, 2012 at 18:40 | Posted in Economics, Statistics & Econometrics, Theory of Science & Methodology | 2 Comments

Paul Samuelson claimed that the “ergodic hypothesis” is essential for advancing economics from the realm of history to the realm of science.

But is it really tenable to assume that ergodicity is essential to economics?

The answer can only be – as I have argued

here

here

here

here

and

here  – NO WAY!   
 

Samuelson said that we should accept the ergodic hypothesis because if a system is not ergodic you cannot treat it scientifically. First of all, that’s incorrect, although I think I understand how he ended up with this impression: ergodicity means that a system is very insensitive to initial conditions or perturbations and details of the dynamics, and that makes it easy to make universal statements about such systems …

Another problem with Samuelson’s statement is the logic: we should accept this hypothesis because then we can make universal statements. But before we make any hypothesis—even one that makes our lives easier—we should check whether we know it to be wrong. In this case, there’s nothing to hypothesize. Financial and economic systems are non-ergodic. And if that means we can’t say anything meaningful, then perhaps we shouldn’t try to make meaningful claims. Well, perhaps we can speak for entertainment, but we cannot claim that it’s meaningful.

In what sense would saying something that’s patently false be “meaningful,” or “scientific” rather than “historical”? You can see where I’m going with this. Important models that economists use are not ergodic, so what’s this debate about?…

In finance or economics the situation is different. Take the most basic model of a stock market, Louis Bachelier’s random walk. Is that model ergodic? No. A little later, in the 1950s, maybe starting with M. F. M. Osborne, the popular model in finance became geometric Brownian motion—basically a random walk in log-space …

Since geometric Brownian motion is a mathematical model, you can answer the question of whether that’s ergodic by scribbling a few lines of equations. Of course it is not. It’s a model of growth, after all, so it can’t be ergodic, but you can actually make this completely formal and do the math, and not even the expectation value of the growth rate is equal to the time average of the growth rate. At the end of the day, what’s more important in finance than growth rates?

So Samuelson’s comment makes little sense. A hypothesis is about something we don’t know, but in the case of finance models this is something we do know. There’s no reason to hypothesize—the system is not ergodic. It’s like hypothesizing that 3 times 4 is 0 because it makes the mathematics simpler. But I can calculate that the product is 12. Of course, a formalism that’s based on the 3-times-4 hypothesis will run into trouble sooner or later. In economics, that happens with the ergodic hypothesis when we think about risk, or financial stability. Or inequality, as we’re just working out at the moment.

The reason this is so important is quite simple, and stems from a basic question: what does risk mean if the notion of time is not irreversible? The only reason risk exists is that we cannot go back and make decisions over again. Economics got very confused about the point of dealing with risk, and had to resort to introducing psychology and human behavior and all sorts of things. I don’t mean to say that we don’t need behavioral economics. What I mean is that there are lots of questions in economics that we can only answer behaviorally at the moment, but at the same time we have a perfectly formal natural physical analytic answer that’s very intuitive and sensible and that comes straight out of recognizing the non-ergodicity of the situation.

To be blunter, I’m pointing out that economics is internally inconsistent. I accept all the models that economists have developed. I could critique them, but I’m not worried about that. I didn’t make them up, the economists did. But when the economists treat the models as if they were ergodic, that’s when someone has to say “stop, that’s enough.”

Ole Peters

Next Page »

Create a free website or blog at WordPress.com.
Entries and comments feeds.