Arnold Kling  

Resources for Home-Schooled Economists

Krugman Misstates Arrow... Why Traditionalists Should Pre...

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CATEGORIES: Economic Education

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paul writes:

Thanks for the link to arjounals. I started reading “The state of Macro” by Olivier Blanchard. In his conclusion he notes,

“A macroeconomic article today often follows strict, haiku-like rules. It starts from a general equilibrium structure, in which individuals maximize the expected present value of utility, firms maximize their value, and markets clear. Then, it introduces a twist, be it an imperfection or the closing of a particular set of markets, and works out the general equilibrium implications. It then performs a numerical simulation based on calibration, showing that the model performs well. It ends with a welfare assessment.”

I think this nicely highlights the central problem with economics as currently practiced. The assumption of a welfare assessment is a necessary one to be rewarded by the institutions that really care about economics namely the state and the institutions that support the state, special interest groups, lobbyists, universities etc. I think that in a truly free market, the study of economics would look more like philosophy. Financial engineering would fill the gap for math weenies… ; )

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