Raja

Raja

1: That FT article is terrifying. This is one of the reasons I've backed out of econ and am sticking to math. Mathematicians don't know much either, but at least we don't try to run the economy on theories that we have reason to fear are bunk.

2: Thomas Sargent is my macro professor, and he teaches the class as though Keynes never existed. It's all Friedman models and rational expectations. At first I thought it was weird, but maybe it's wise.

Still, if we ought to take behavior into account, does it make sense to assume people plan their entire life's spending decisions based on their expected incomes? Sure, we do some consumption smoothing, but who do you know who consumes exactly the same amount every year of his life? The Ricardian Equivalence Theorem and the “propensity to consume” seem like two opposite extremes, with actual consumer behavior probably somewhere in the middle. But that's a sleepy student's thought, so I know not to give too much weight to it.

3. It irks me when people mistake economic theories for ideologies. I meet a guy at a barbecue, a few years out of college, says he's a “Keynesian.” What he means is, he's a progressive. Nothing wrong with that, of course. But Keynes, like all economists, made falsifiable predictions — positive, not normative statements! That is not the same thing as an overall desire that the US should become a social democracy. I think people, especially those who work in policy, get confused into thinking that economics is all about picking your favorite team. Folks who've never seen an integral saying we need to “prime the pump”! Jeez, guys, it's supposed to be science.

http://blogs.ft.com/maverecon/2009/03/the-unfor…