tag:blogger.com,1999:blog-5908830827135060852.post6106077979401827796..comments2018-10-14T08:05:06.607-04:00Comments on Bond Economics: The Curious Notation Of DSGE ModelsBrian Romanchuknoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5908830827135060852.post-44009324857654915172018-03-29T06:48:42.053-04:002018-03-29T06:48:42.053-04:00You’re free to do whatever model you want, but thi...You’re free to do whatever model you want, but this is the model they used in the text. There’s more than one mathematical model you can look at.<br /><br />Accounting profits are normally non-zero in this model; it’s just that all profits are immediately distributed as “rent” in the same period. And since the model is deterministic, the future is known with certainty, so the rent amount can be forecast perfectly. Since the model is internally consistent, albeit unrealistic.<br /><br />These models barely handle a business sector, adding in a financial sector is nearly impossible.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-68597998418112668962018-03-29T06:42:38.820-04:002018-03-29T06:42:38.820-04:00I’ll admit that it is somewhat silly, but there wa...I’ll admit that it is somewhat silly, but there was another possibility (that there were deep theorems that “everyone else” knows about, except me. I gave them the benefit of the doubt.<br /><br />And yes, I am probably beating a dead horse. However, the neoclassical replacements for DSGE representative agent macro are almost certainly be roughly the same thing, with just a few tweaks here and there. So we need to deal with the simpler cases first.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-37471534823037593142018-03-29T03:34:27.050-04:002018-03-29T03:34:27.050-04:00Brian Romanchuk
You announced a tripartite analys...Brian Romanchuk<br /><br />You announced a tripartite analysis of an elementary DSGE model and after part 2 you suddenly realize that the notation of DSGE models is “curious”. This tells everyone that you have not understood from the very beginning what you are talking about.<br /><br />At the end of your second post I summed up: “Lars Ljungqvist’s and Thomas Sargent’s DSGE is proto-scientific dreck. Nobody with more than two brain cells needs three lengthy posts to arrive at this conclusion.”<br /><br />Your analysis and critique of DSGE is a pointless exercise. Everybody knows by now that the microfoundations approach is dead. Standard economics is dead. DSGE is dead.<br /><br />Economics needs a Paradigm Shift because the main approaches ─ Walrasianism, Keynesianism, Marxianism, Austrianism ─ are axiomatically false and materially/ formally inconsistent.<br /><br />Endless recycling of long dead theories/models is not science.<br /><br />Economics is what Feynman called a cargo cult science, economists are failed/fake scientists, the Bank of Sweden Prize in Economic Sciences is a deception of the public. Economics is one of the worst cases of theory failure in the history of modern science ─ and you are part of it.<br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-79540225798559265792018-03-28T20:21:30.190-04:002018-03-28T20:21:30.190-04:00Brian,
I am still working on eq. 16.2.3. I am con...Brian,<br /><br />I am still working on eq. 16.2.3. I am convinced that either the book is wrong or your interpretation is incorrect. Here is my thinking of how it should be:<br /><br />The productive firm is represented by a stylized income statement with income = expenses. Income is represented by consumption translated to a form of price.<br /><br />Income in the real world is never equal to expenses except by accident. Hence, we need a balancing term which in this model is profit or loss. I will call it \(k_p(t).\)<br /><br />The capital conversion rate for labor is \(k_w(t) .\) The rest of the terms are labeled as you labeled them.<br /><br />We assume that all capital is borrowed and is borrowed at the same rate that labor is expended. Hence, the last capital is borrowed when the last hour is worked. This borrowed capital is rented at an interest rate of \(r(t) .\) Interest will be treated as an expense. Important--borrowed capital is all converted to labor cost in my formula.<br /><br />[This model is not the model of Nick where production produces both capital and salable product. Here capital substitutes for product and labor.]<br /><br />Here is the accounting: \[c(t) + g(t) = r(t) [k_b(t) = k_w(t)n(t)] + k_w(t)n(t) + k_p(t).\]<br /><br />Simplify to read \[c(t) + g(t) = k_w(t)n(t)[ r(t) + 1 ] + k_p(t). \]<br /><br />This equation should work for prices converted to goods and for prices in green dollars. Just be sure that every term is in the same unit.<br /><br />Changing the focus, I think we should define our sectors by decision-ownership categories. Each sector can make a buy-sell-continue decision. By that standard, we have here sectors of consumer, government, firm, capital lender, and worker. Each sector shares in the decisions and gives-gets part of the economic pie.<br /><br />The accounting in this equation has capital flowing between five sectors. We can think of a firm as being an amalgamator who brings this all together and keeps a profit (if any).<br /><br />Conclusion: I much appreciate this series of articles. They have prompted some deep thinking on my part. I hope you can agree with my processes, but I have learned whatever your reactions might be. Thanks.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.com