Archive for May 29th, 2012

From BigMac Price Index to Mcwages…

May 29, 2012

Orley Ashenfelter of Princeton University in a fab paper looks at this issue of real wages. Even more interesting is his usage of wages paid at McDonalds in different countries to arrive at a kind of McWage index:

(more…)

Economics Is Not Math…

May 29, 2012

Michael Edesess (a Mathematician) writes in this post.

He says econs pose as wannabe mathematicians. However, much of math is pretty well defined. In eco, math is used to define eco terms:

“Economics pretends to be mathematics, but it is not mathematics,” he says. “There is a major difference. No mathematician uses a term in a formula, or a statement of a theorem, unless that term has first been defined with excruciating precision.”

And while economists may think they’ve defined terms like “aggregate demand” or “economic growth,” Edesess suggests they talk to a mathematician. “Economists may think they’ve defined them, but they should try reading some real mathematics to see what a precise definition truly is,” he says.  “The economists, I think, leave the work of definition to be inferred from the way the terms are used in the formulas. This, to me, is weird.”

 The post is based on a longish article he wrote earlier.

Using a recent blogosphere debate between Steve Keen and Paul Krugman as a jumping off point, Edesess offers a mathematician’s insight into some of the key problems with economic theory and economic debate. The lack of precise definitions produces some distinct symptoms, as the Krugman-Keen argument shows: “The amazing thing is that, in this debate, one side or the other will present what appears to be a very simple proof that they are right – and yet the other side is not persuaded in the least.”

He traces this problem back to what he suggests is the cause: “The source of all the confusion, in my view, is the idea that if you can’t measure something and model it mathematically, it has no meaning. There is too much mathematics used and expected in economics, and too much of it is of poor quality and distorts the ideas it is meant to undergird.

If econs need to be relevant they should focus on core economics related issues. They should avoid all the math hubris they have created:

If economists want to remain relevant they have to return mathematics and the precision it offers to its proper place in the discipline. Math should be a tool that economists use, not an end goal in and of itself.  And economists must focus on addressing humanity and morals and ethical dilemmas, which lie at the heart of it all.

Well who cares..Most of this would fall on deaf ears…

Robert Johnson of INET also suggested a similar revamp of economics. Econ bashing remains one of the hot topics of the season..

MIT economists/central bankers Family Tree

May 29, 2012

I just pointed to a Bloomberg article which showed how most central banks of the world have been students of MIT.

Businessweek has a graphic which has put all this via a family tree . Paul Samuelson, Franco Modigliani, Rudi Dornbusch, Stan Fisher and  are the main guys around which the tree of current central bankers is built (Stan Fisher himself is the chief of Bank of Israel).

Trivia: Check the pics of the young guns at the end. Answers on the left lower corner…Bernanke looked quite a cowboy in 1975…and Summers is just plain unrecognizable…


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