CEA MMT Panel Post-Mortem

I participated in a “Yay/boo for MMT!” debate Zoom panel for the annual Canadian Economist Association conference. I do not think I said anything outrageously stupid or got anyone raging mad at me, so I beat my expectations going into it.

(I do not know if these panels will be publicly available after the end of the conference.)

Reading The Classics: Mathematics Vs. Economics

There’s been a fun (but silly) long-running debate on Twitter whether economists need to read canonical texts: Smith, Marx, Ricardo, Keynes, etc. What caught my eye is that a mainstream economist compared economics to mathematics — why don’t we learn calculus by studying the history of calculus? Why this is interesting is that is showed a lack of understanding of the situation in both mathematics and economics.

Please note that this article is a discussion of the philosophy of teaching at the university level, so do not expect any conclusions that will help make analysing bond markets easier. That said, there is an outline of a critique of the core methodological principles of neoclassical macro.

The Curious Household Accounting Of DSGE Models

This article is the second part (of a planned trilogy) of articles on the accounting issues within Dynamic Stochastic General Equilibrium (DSGE) models. I have deliberately chosen one of the simplest DSGE models I could find, a deterministic (non-random) Ramsey model from the text Recursive Macroeconomic Theory by Lars Ljungqvist and Thomas J. Sargent. I have the third edition; the text is referred to as [LS2012] herein. My previous article, "The Curious Profit Accounting of DSGE Models," described the relationships for the business sector. This model has three sectors, and yes, the third article will likely be titled "The Curious Government Accounting of DSGE Models." That is, I see issues with all three sectors; the macroeconomic accounting identities tell us if we have a problem with one sector, this will rebound to the other sectors.

The Curious Profit Accounting Of DSGE Models

One of the more puzzling aspects of neo-classical economic theory is the assertion that profits are zero in equilibrium under the conditions that are assumed for many models. One should re-interpret this statement as "excess profits" are zero, but there are still some awkward aspects to the treatment of profits in standard macro models. This article works through the theory of profits for an example dynamic stochastic general equilibrium (DSGE) model, and discusses the difficulties with the mathematical formulation.

The example is taken from Chapter 16 ("Optimal Taxation With Commitment") in the textbook Recursive Macroeconomic Theory, by Lars Ljungqvist and Thomas J. Sargent (I have the third edition). For brevity, the text will be abbreviated as [LS2012] herein. If the reader is mathematically trained and wishes to delve into DSGE models, this textbook is the best place to start. The mathematics is closer to the original optimal control theory that DSGE macro is based upon, whereas other treatments follow the mathematical standards of academic economics, the difficulties with which are discussed later in this article.

Presentation At MMT Conference

I will be doing a presentation at the First International Conference of Modern Monetary Theory in Kansas City in September 2017 (conference dates are September 21-24, website: http://www.mmtconference.org/). I will be presenting an introduction to my Python stock-flow consistent models package -- sfc_models. This article is a rough draft of what I think the slides will look like.

Draft Article: Solution Properties of Stock-Flow Consistent DSGE Models

Solution Properties of Stock-Flow Consistent Models by Brian Romanchuk

This paper is the mathematical proof of the statements I made in this earlier article. I am putting this out now as a means of getting comments. The paper is written in the same mathematical style I used to write in before I bailed from academia, and it is not light reading with punchy quotes.