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Thursday, July 18, 2013

Responses: Evoution Theory in Economics and the Paradox of Flexibility

I was in a bit of a sour mood when I wrote this, so it's probably fair to allow a response from Barkley Rosser:

Will Economics Be Revolutionized By Being Evolutionized?: Mark Thoma at Economist's View has linked to a post by Jag Bhalla at Scientific American, who in turn links to the Evolution Institute where one finds a link to a special issue of the Journal of Economic Behavior and Organization (JEBO) that I have coedited with David Sloan Wilson and John M. Gowdy. The special issue makes a play for increasing the use of evolutionary theory in economics. Bhalla argues that this involves arguing that economics should not necessarily involve assuming people rationally maximize utility or that equilibrium analysis should be the focus of analysis. Mark is unhappy about this characterization and disses the argument pretty hard.  Of course, he is welcome to his view.

Furthermore, he invokes Paul Krugman, quoting in full a speech that PK gave in 1996 to the European Society for Evolutionary Political Economy...[continue reading]...

And while I'm at it, David Beckworth:

A Paradox of Flexibility or Central Bank Incompetence?: Paul Krugman and Mark Thoma are again making the case against increased wage flexibility in a depressed economy. They contend that rather than helping labor markets clear, increased wage flexibility in a slump will create wage cuts that only serve to lower incomes. In turn, spending will weaken and further stoke the existing deflationary pressures. Policy makers, therefore, should avoid the siren call of reforms that enhance wage flexibility. This so-called "paradox of flexibility" dates back to John Maynard Keynes, was endorsed by James Tobin, and continues to be advocated by prominent New Keynesians like Gautti Eggertson. Despite this long pedigree, there is a big problem with this view: it assumes that central banks are incompetent. ...[continue reading]...

    Posted by on Thursday, July 18, 2013 at 05:04 AM in Economics | Permalink  Comments (13)


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