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Wednesday, August 07, 2013

(1) Numerical Methods, (2) Pigou, Samuelson, Solow, & Friedman vs Keynes and Krugman

Robert Waldmann:

...Another thing, what about numerical methods?  Macro was totally taken over by computer simulations. This liberated it (so that anything could happen) but also ruined the fun. When computers were new and scary, simulation based macro was scary and high status. When everyone can do it, setting up a model and simulating just doesn't demonstrate brains as effectively as finding one of the two or three special cases with closed form solutions and then presenting them. Also simulating unrealistic models is really pointless. People end up staring at the computer output and trying to think up stories which explain what went on in the computer. If one is reduced to that, one might as well look at real data. Models which can't be solved don't clarify thought. Since they also don't fit the data, they are really truly madly useless.

And one more:

Pigou, Samuelson, Solow, & Friedman vs Keynes and Krugman: Thoma Bait
I might as well be honest. I am posting this here rather than at rjwaldmann.blogspot.com , because I think it is the sort of thing to which Mark Thoma links and my standing among the bears is based entirely on the fact that Thoma occasionally links to me.
I think that Pigou, Samuelson, Solow and Friedman all assumed that the marginal propensity to consume out of wealth must, on average, be higher for nominal creditors than for nominal debtors. I think this is a gross error which shows how the representative consumer (invented by Samuelson) had done devastating damage already by 1960.
The topic is the Pigou effect versus the liquidity trap. ...

Guess I should send you there to read it.

    Posted by on Wednesday, August 7, 2013 at 06:49 AM in Economics, Macroeconomics, Methodology | Permalink  Comments (40)


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