I see no reason to be optimistic about the state of academic economics. If you want to learn about economic theory, it would be best to do so from outside most economics faculties. The resources available for non-academics to study post-Keynesian economics is more limited than for mainstream economics; one of my objectives is to help meet that need.
A Culture Of Open-Minded EnquiryProfessor Noah Smith provides an unusual example of the issues facing post-Keynesian economics within academia. Please note that Smith is an academic, in addition to being a writer.
Every so often, self-described "heterodox" econ people will show up in my Twitter feed or (less often) my blog comments, declaring that new methodologies are poised to topple mainstream economics. My typical response is to ask what these new methodologies are. But incredibly, I can almost never get an answer.In other words, an academic is unwilling to do a literature survey using textbooks (such as Post-Keynesian Economics: A New Foundation, by Marc Lavoie) -- which is the first place to begin a literature survey in an unfamiliar field.
When I ask what the new methodologies are, people very rarely try to give concise explanations. Instead, they almost always direct me to one of the following:
1. A book
2. A paywalled journal article
3. A video link
Books, of course, must be bought, so the book and gated article links are basically a request that I fork over cash before I even learn the very basics of what the new methodologies are. Video links, of course, are almost always useless.
On those rare occasions when a heterodox person does link me to a PDF purporting to explain the new methodologies, the content of the document is usually just more criticism of mainstream methodologies.
It is unclear whether Professor Smith is entirely serious in his blog articles. That said, what he wrote provides one explanation of why post-Keynesian critiques are broadly ignored by the bulk of mainstream economists.
Where Are The Reductionist Models?
Professor Smith asks:
Mainstream econ does this like crazy. Want to know how the Solow Model works? Here are some slides! Want to know how the AD-AS model works? Here are some slides! If they're not good slides, find another set of slides - there are many. If slides aren't your thing, try some lecture notes, or a textbook chapter, or a paper! All of these exist in bountiful abundance, for a price of $0. Mainstream macroeconomics has many serious problems, but it has done an admirable job of explaining its ideas publicly and clearly, for free, to anyone who wants to learn.
In other words, where are the slide presentations of post-Keynesian reductionist models?
- Post-Keynesian academics constantly complain that they are marginalised and that they have largely been blocked from many academic institutions. Is it surprising that it is hard to find post-Keynesian lecture notes?
- As he notes, post-Keynesians tend to go on at length about the weaknesses of reductionist mainstream models. Perhaps asking for reductionist post-Keynesian models is not the correct question?
What About Non-Academics?
I left academia for a variety of reasons, one of which is that I doubted its ability to advance. If you want to learn about economics, the best place to do it is not inside most economics faculties. Get an intellectual training elsewhere, and then apply what you learned to the study of economic theory. You may find that mainstream economic theory is a vibrant field full of promise; I cannot pre-judge your conclusions.@RomanchukBrian @UnlearningEcon nah he right. Where is the power point? I asked the same thing when I got started and still doesn't exist— Mike Sankowski (@traderscrucible) February 28, 2016
(Please note that I am writing about economic theory; economic history seems to be a reasonable field, with a solid distinct academic tradition. The problem I see with economic history is that history advances one year at a time, and there are more papers published in that one year than there is actual history.)
In response to the tweet of Mike Sankowski above, I would agree that the free resources available for post-Keynesian economics are still limited. Modern Monetary Theory has a lot of literature on the internet, but the most popular articles are not model-driven. However, there are some "wonkish" prices around.
- Bill Mitchell's Billy Blog does have a lot of wonkish work, but it is detailed and not easy to reduce to his analysis to a sound bite on a slide.
- Although he has been publishing at a slow pace recently, Nick Edmonds also publishes articles about Stock-Flow Consistent models.
- Ramanan publishes a lot of deep articles in the "Narrow-Tent Post-Keynesian" tradition, (including a response to Smith's article). Please note that some "narrow-tent Post-Keynesians" have a stricter sense of what constitutes Post-Keynesian economics, and MMT might not quality as "Post-Keynesian." (Update: Ramanan notes that he views MMT as being within the PKE camp, but he disagrees with parts of it.) This analytical split makes it very hard to generalise about "Post-Keynesian" economics. (I would probably fit within a "broad tent" definition, but not the "narrow tent.")
- The Levy Institute has a wealth of articles in the MMT and the post-Keynesian tradition. One of the skills of academia is to find pre-prints of journal articles; the Levy Institute is such a source.
I would note my previous article on the analysis of breakeven inflation. I gave an introduction to some of the issues involved in extracting inflation expectations from market pricing. Since I use rate expectations, some might incorrectly assume that I was explaining the "mainstream" view on the subject. In fact, the mainstream has adopted affine term structure models as "best practice." In my concluding remarks, one could read between the lines to see why my suggested methodology is superior to that approach. Rather than dwell on the negative -- why affine term structure models are useless -- I instead advanced portions of an alternative (superior) methodology. If the only time you pay attention to post-Keynesian economists is when they are critiquing mainstream methods, you are not going to see much in the way of constructive content.
My objective to have a series of reports which are advancing a constructive line of analysis. Unfortunate events had stopped that production to a crawl since the publication of my first report, but I hope to release the second relatively "soon."
- My resource page on Stock-Flow Consistent Models and Post-Keynesian economics. (This page needs a face lift.)
- My book review of Marc Lavoie's text.
I agree about the narrow-tent part: I identify as a Kaldorian. I don't think I'd classify MMT as not PKE.
A lot of things MMTers say are PKE things. Just that I think they are quite wrong when it comes to open economy macro and that their catch phrases like "taxes don't fund anything" are meaningless.
OK, it's always unsafe to guess about these things; I realise that I should have written "some people think that".Delete
I got the broad/narrow tent description from Lavoie; it would have been nice if the generic broad tent term was not how one group described itself. For example, I believe that Minsky specifically wrote one time that he was not a "Post-Keynesian", but most people would describe him as a broad tent "post-Keynesian".
Your blog reminds me of Nicholas Kaldor's comment in his 1970s papers, that economics went backwards after Adam Smith. Smith set out a superlative rich research agenda - and economics ended up in the cul-de-sac of Walrasian esotericaReplyDelete
a community college lecturer
Even though you said you didn't want to do it I would love a post on affine term structure models lol.ReplyDelete
In particular The wu-xia shadow rate seems to be just curve fitting?
And I can't figure out what is going on in this model of inflation breakevens at all
I took a look some time ago, and gave up.ReplyDelete
In order to look at them, you need good zero curve data. I think there's some data sets lying around in academia, but I had not got them onto my database. You then need to build the model; I probably would have to use Matlab to do it, since I am not as familiar with R, and I currently do not have a Matlab license.
One you leap those hurdles, you then need to find an example affine term structure model to build. Each one I have seen is different.
What I did instead was to look at the model outputs. If you look at the inflation breakeven model in the Fed paper, you see that the breakeven just looks like moving average of inflation (or something else). It's not entirely obvious why, but the construction forces the "inflation expectations" component to be a low frequency series.
The implication is that all the high frequency dynamics of the breakeven end up having to be matched by rapidly moving term premia.
This makes absolutely no financial sense. But it is convenient for the Fed - it looks like they stabilised inflation expectations. Hooray! It's just the risk premia - which nobody understands - is careening around like a drunken sailor. (My apologies to any sailors reading this.)
Without spending time replicating the methodology, the only sensible thing to do is to look at the specification to see why the inflation expectation is picking up only the low frequency information. My feeling is that the actual inflation carry is a smooth daily series, and so that is what the "inflation compensation" ends up looking like.
I took a look at that paper, and ended up scratching my head. I made parenthetical remarks aimed at it, without dragging in the full explanation.
Here is the link to a splash page for a paper by Hyman Minsky:ReplyDelete
The Essential Characteristics of Post-Keynesian Economics
I am in the process of reading the paper so cannot comment further.
I think this paper by Robert E. Lucas (treating the history of thought on the neutrality of money and future expectations) provides a good background for reading the Minsky paper on the essentials of Post-Keynesian economics:Delete
Footnote 13 in the Minsky paper is interesting because he asserts that Keynes mistakenly accepted the JR Hicks interpretation of his theory!
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