Brad DeLong and the true nature of neoclassical economics


Another clear piece from Lars, drawing on previously published work

Originally posted on LARS P. SYLL:

I think that modern neoclassical economics is in fine shape as long as it is understood as the ideological and substantive legitimating doctrine of the political theory of possessive individualism. As long as we have relatively-self-interested liberal individuals who have relatively-strong beliefs that things are theirs, the competitive market in equilibrium is an absolutely wonderful mechanism for achieving truly extraordinary degree of societal coordination and productivity. We need to understand that. We need to value that. And that is what neoclassical economics does, and does well.

Of course, there are all the caveats to Arrow-Debreu-Mackenzie:

adb_poster_red_kickitover1   The market must be in equilibrium.
2   The market must be competitive.
3   The goods traded must be excludable.
4   The goods traded must be non-rival.
5   The quality of goods traded and of effort delivered must be known, or at least bonded, for adverse selection and moral hazard…

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Economist: World Leaders Will Exploit Charlie Hebdo to Eliminate Encryption

Originally posted on The Kiellopathra Report:

‘Economist Martin Armstrong warns that the twin attacks in France will be used by world leaders to push for restrictions on Internet privacy and the total elimination of encrypted communications.

Armstrong, who correctly predicted the 1987 Black Monday crash as well as the 1998 Russian financial collapse, writes that, “They are using this latest event precisely as they used 911 to strip us of all rights.”

“David Cameron, PM of Britain, wants to block WhatsApp and Snapchat if he wins the next election, as part of his plans for new surveillance. Britain will lead the charge to outlaw encryption altogether when Britain has been walking hand-in-hand with the NSA. They are using this latest event precisely as they used 911 to strip us of all rights,” adds Armstrong.’

More from Source…

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Variance: regression, clustering, residual and variance – Liyun Chen ’11


GSE are a great school, and their thoughts are worth spending time on..

Originally posted on The Barcelona GSE Voice:

Liyun ChenLiyun Chen ’11 (Economics) is Senior Analyst for Data Science at eBay in Shanghai, China. The following post originally appeared on her economics blog in English and in Chinese. Follow her on Twitter @cloudlychen

Variance is an interesting word. When we use it in statistics, it is defined as the “deviation from the center”, which corresponds to the formula  sum (x- bar{x})^2 / (n-1), or in the matrix form Var(X) = E(X^2)- E(X)^2=X'X/N-(X'1/N)^2(1 is a column vector with N*1 ones). From its definition it is the second (order) central moment, i.e. sum of the squared distance to the central. It measures how much the distribution deviates from its center — the larger the sparser; the smaller the denser. This is how it works in the 1-dimension world. Many of you should be familiar with these.

Variance has a close relative called standard deviation, which is essentially the square root of variance, denoted by sigma// . There is…

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Men (No Longer) At Work

Originally posted on The Dish:

by Dish Staff

Screen Shot 2014-12-16 at 5.33.21 PM

Binyamin Appelbaum looks into the causes of the decline in America’s male work force:

Working, in America, is in decline. The share of prime-age men — those 25 to 54 years old — who are not working has more than tripled since the late 1960s, to 16 percent. … Many men, in particular, have decided that low-wage work will not improve their lives, in part because deep changes in American society have made it easier for them to live without working. These changes include the availability of federal disability benefits; the decline of marriage, which means fewer men provide for children; and the rise of the Internet, which has reduced the isolation of unemployment. …

The resulting absence of millions of potential workers has serious consequences not just for the men and their families but for the nation as a whole. A smaller work force is likely to…

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Oil: When News Flow Drowns out the Fundamentals

Originally posted on Wall Street and Beyond:

When asked by a journalist what he most feared, British Prime Minister Harold MacMillan answered “Events, dear boy, Events!

The same fear is palpable in the oil markets right now. Following weak manufacturing data out of China and Europe and a disappointing OPEC meeting, crude oil prices are down by over 25% in the past 3 months.

As is often the case in event-driven markets, stock movements have been quite violent.   Oil majors have taken a beating, while oil services companies, with higher perceived leverage to the oil price, have been hit even harder. News flow has taken over from objective analysis, creating huge volatility across the sector. The current situation reminds me of a Benjamin Graham quote:

“the prices of common stocks are not carefully thought out computations but the resultants of a welter of human reactions. The stock market is a voting machine rather than a…

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Black Friday Sale- prices in Europe close to freezing, by Andrew Wishart

Originally posted on ...And Markets for all:

Today marks ‘Black Friday’ with low prices exciting consumers across the globe as America’s retail tradition spreads. However, low prices are causing a real headache for policymakers and economists across Europe. This morning’s inflation figures for November confirm Europe is on the brink of deflation, a scenario in which the price level falls. This may sound like a good thing, but it is usually regarded as very damaging, and I will come back to why later.

First a look at the figures. Overall euro area inflation (the change in prices compared to the same month a year ago) fell to 0.3 per cent in November, down from 0.4 per cent last month, matching the five year low seen in September and in line with market expectations. The below charts are really useful in seeing what is driving these price changes and also allow us to unpick which items drove the…

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Book Review: Poor Economics – A Radical Rethinking of the Way to Fight Global Poverty

Originally posted on Do No Harm:

I recently finished reading Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty  by Abhijit Banerjee and Esther Duflo. The co-authors who are rockstars in the field of experimental development economics have pioneered the randomized control trials (RCTs) movement, which offers a rigorous evaluation of development interventions. The book draws on the evidence generated from RCTs but complements it with anecdotes, which offer a nuanced rethinking of how we understand poverty and subsequently design anti-poverty policy.

In a nutshell, the book illuminates the multi-faceted economic lives of the poor. What sets it apart from numerous other books on similar topics is the anthropological approach taken by the economists. The book shines in the authors’ visible efforts to engage closely with the poor and understand how they make decisions and adopt certain coping strategies as narrated through stories in the text. They highlight the inherent contradictions in the…

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