John Cochrane has a new post on his site that is quite dismissive of the ideas of Richard Thaler.
http://www.pragcap.com/economics-and-the-vacuum-problem#ixzz3bedYZsos
http://www.pragcap.com/economics-and-the-vacuum-problem#ixzz3bedYZsos
Economics performed in a vacuum doesn't translate well to the real world
- Thread starter Banjo
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I read the article. Good points are made, but they have been made many times before, i.e., many economic models don't approximate reality, instead they represent an alternative reality.
I also read the article entitled "Reserves do not Allow Banks to Make More Loans", at the same site. That article is partially correct in recognizing that the amount of loans a bank can make is usually limited by demand rather than the amount of the bank's reserves, but it misses the mark on other points. For example, paying interest on reserves won't necessarily prevent banks from loaning (banks have always earned interest on excess reserves via the fed funds rate). It is the spread between the fed funds rate (or alternatively the rate paid by the fed on excess reserves) and the rate on lending that will determine bank incentives, and that continues to favor lending.
Analysis is good. I am referring to both the sides. Other than this "vacuum problem", in general, I feel that unnecessary statistical approaches and some maths do no "larger good" for economics.
It is likely to distort catallactic order in a market and simply ends up making things dismal for the parties.
Read my article on the said assertions, here: http://yuvarevolution.org/irrelevance-statistics-maths-economics/
It is likely to distort catallactic order in a market and simply ends up making things dismal for the parties.
Read my article on the said assertions, here: http://yuvarevolution.org/irrelevance-statistics-maths-economics/
I haven't read your article. Perhaps I will. But what you're eluding to seems to me to be in line with the thinking of those who call themselves "behavioral economists". They have realized that people are not entirely rational, where rational behavior is defined by an equation. So far, we are not very good at developing equations that reliably predict real behavior, but nevertheless we are good at predicting, without equations, the behavior of our fellow primates. This must surely upset some of the classical economists who went into economics because of their love of mathematics. Wouldn't it be nice if economists could contribute as much to economics as they have to mathematics?
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