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 | | Macroeconomics and the Real World: Volume 2: Keynesian Economics, Unemployment, and Policy by Roger E. Backhouse (Editor), Andrea Salanti (Editor) ISBN-10: 9780198297963 ISBN-10: 0-19-829796-3 ISBN-13: 9780198297963 ISBN-13: 978-0-19-829796-3 Hardcover 2001-02-01 Oxford University Press, USA Find Lowest Price |
Editorials | ||
Product Description In these two volumes, a group of distinguished economists debate the way in which evidence, in particular econometric evidence, can and should be used to relate macroeconomic theories to the real world. Topics covered include the business cycle, monetary policy, economic growth, the impact of new econometric techniques, the IS-LM model, the labor market, new Keynesian macroeconomics, and the use of macroeconomics in official documents. | ||
Reviews | ||
Ignores the non normal ,non linear ,Indeterminate,chaotic nature of the real world Backhouse,the editor of this book,presents a series of articles and discussions purporting to be concerned about using econometric techniques and analysis to study what is happening in the real world.Benoit Mandelbrot,who has spent over 50 years studying the actual behavior of real world price statistics,has demonstrated beyond any doubt that the macroeconomic and microeconomic price data is discontinuous,not continuous;demonstrates short and long run dependence(path dependence),not independence;is non linear,not linear;is non normal,not normal,so that the normal probability distribution can't be used as an accurate and reliable approximation of the data;finally,echoing Schumpeter,patterns appear,disappear,and then reappear with a regular irregularity,which means it is impossible to identify the ergodicity in the system.In fact,it is impossible to accurately separate and isolate the deterministic from the random influences over time.Neither Backhouse or any of the other econometricians in this book appear to be aware that they are about 30-40 years behind Mandelbrot.Econometricians appear to still be working under the assumption that they can assume linearity , stationarity and a normal distribution.They also appear not to be able to integrate the derivatives that appear in chapters 10,19,20, and 21 of Keynes's 1936 General Theory in order to obtain the original functions that make up the mathematical model constructed by Keynes in that book from which he derived his results:"His (Eichenbaum's)objection to Keynes is not that he is wrong but that it is impossible,even decades later,to work out what he meant".(Backhouse and Salanti,p.6).It is quite easy to work out what Keynes meant if one simplifies the elasticity results in chapters 10,20, and 21 of the GT.Any mathematically literate economist who can integrate and simplify elasticities can obtain the following result:w/p=mpl/(mpc+mpi),where mpl is the macroscopic marginal product of labor derived from an aggregated neoclassical production function(GT;pp.283,285),w is the money wage,p is the expected price level,w/p is the expected real wage,mpc is the marginal propensity to spend on consumption goods,and mpi is the marginal propensity to spend on investment goods.Unless mpc+mpi =1,involuntary unemployment will exist.Labor,in the aggregate,will be unable to cut its money wage in order to reduce this type of unemployment.A set of multiple,stable unemployment equilibria will exist.Keynes spells it out twice on pp.261-262 of the GT for those readers who do not have the technical capabilities to follow his analysis in chapters 20 and 21-unless the mpc=1(mpc+mpi=1),involuntary unemployment will occur.The major reason why mpc+mpi<1 is due to decision making under conditions of uncertainty,by which Keynes means the existence of Ellsbergian Ambiguity.The mild risk of the normal distribution used by M Friedman,R Lucas,etc., to model the business cycle is a very special case. | ||