月曜日, 6月 17, 2019

#30 mitchell dsge批判

#30 mitchell dsge批判



Buiter, W.(2009) "The Unfortunate Uselessness of Most State of the Art Academic Monetary Economics", Financial

Times,March. Available at: http://economistsview.typepad.com/economistsview/2009/03/the-unfortunate-use-lessness-of-most-state-of-the-art-academic-monetary-economics.html , accessed 25 September 2018


Mainstream macroeconomics in a state of ‘intellectual regress’ – Bill Mitchell – Modern Monetary Theory 2017/1/3

http://bilbo.economicoutlook.net/blog/?p=35118 ☆☆

Mainstream macroeconomic fads – just a waste of time




Their justification was that when interest rates reach the 'zero bound' (at zero or close to it), the space for f

ther monetary policy interventions becomes limited. In this situation, fiscal policy targeted at promoting higher

expectations of inflation may be effective in stimulating spending.

The idea is that in recession, policymakers must create the expectation that a fiscal expansion will spur infla-

tion that will increase future tax revenue to 'pay for' the current deficit. In that case, rational agents will not react

negatively to a fiscal deficit. Earlier versions of mainstream theory invoked the concept of Ricardian Equivalence

to eschew the use of fiscal deficits. Ricardian Equivalence states that when governments run fiscal deficits, the

spending stimulus forthcoming is thwarted by private households increasing their own saving (reducing spend-

ing) in order to build up a reserve to pay higher taxes that will be needed to retroactively pay for' the deficir

The NMC realises that in some circumstances (where fiscal deficits lead to higher inflationary expectations) this

offsetting private behaviour will not be forthcoming.

More importantly, according to NMC, the central bank's low interest rates in the absence of fiscal expansion

would actually tighten the govern ment's fiscal stance because it would pay less interest on its bonds. Thus, fiscal

policy must be intentionally relaxed to work with monetary policy when it has reached the lower bound at near-

zero interest rates. The claim is that after the GFC governments generally failed to do this, which is why monetary

policy did not work.

These considerations are believed to relieve govern ment, albeit temporarily, from the dreaded 'budget con-

straint' (addressed in Chapter 22), but only in the exceptional case where interest rates fall to zero. As the reader

will remember, the MMT position is that such thinking is flawed and results from extrapolating the budget con-

straint of a household to the currency-issuing government

30.3 Weaknesses of the NMC

The GFC and its aftermath cast unfavourable light on the NMC, and caused its proponents to attempt to address

some of its weaknesses. In particular, its treatment of money and financial institutions as well as its relegation of

fiscal policy to a subordinate role have been recognised as problematic. In addition, its methodology, which relies

on 'aggregating up' from individual behaviour, suffers from fallacies of composition. Finally, its policy recommen-

dations, both before and after the GFC, proved to be rather ineffective.

Proponents of New Keynesian economics and the NMC claim authority because their macroeconomic mod-

els are what they call micro founded. This just means that they assume people and firms behave as rational,

maximising agents with rational expectations and can solve very complex maximisation problems (with respect

to consumption and output decisions) about current and future actions. The problem is that the NMC's highly

stylised mathematical models, which are overly simplistic because they cannot be 'solved' otherwise, fail very

badly when they try to say anything sensible about movements in real world data. At that point, ad hoc changes

are made to the models (for example, putting lagged variables in to capture real world inertia), which are not

indicated by the micro-founded theaory. In other words, what eventually emerges as the practice interface of these

theories is not based on micro optimisation, and so the claim for authority is negated.

More generally, as argued throughout this textbook, any approach that attempts to explain macroeconomic

(aggregate) behaviour by starting out with individual behaviour is exposed to problems of fallacies of composi-

tion when it attempts to extrapolate findings to the economy as a whole. Even if individual behaviour can be

described as pursuing a rational calculation aimed at utility maximisation over one's lifetime subject to budget

constraints, the macroeconomic implications of such behaviour cannot be obtained by simply summing up over

a number of individuals. For example, as previous chapters have shown, while spending by individuals could be

constrained by income, at the aggregate level it is spending that determines income. Aggregate income is con-

strained by spending, which in turn is largely determined by expectations (as firms hire the amount of labour they

think they need to produce the amount of output they think they can sell at a profit). There are also comprex

problems of coordination at the aggregate level that are assumed away either by invocation of the 'invisible hand

metaphor or by modelling an economy that has only one 'representative' individual (a typical approach in general

equilibrium models) or identical individuals.









財政赤字の使用を避けるために。 Ricardian Equivalenceが政府の赤字を動かすとき、














30.3 NMCの弱点



























30 The New Monetary Consensus in Macroeconomics

NMC economists continue to repeat many of the logical errors of the old neoclassical theorists. For example,

proponents of the NMC explained the persistence of the post-GFC recession by arguing that the desire to save

outstripped the desire to invest. In their view, this would normally generate an equilibrating fall in the interest

rate, which would have reduced saving and increased investment spending. But due to the zero bound being

reached, monetary policy could not bring saving and investment into equilibrium.


Students will immediately identify that this argument is based on the flawed loanable

funds approach to interest rates that are supposed ly determined by the intersection of say-

ings and investment (see Chapter 13), As we demonstrated in Chapter 13, saving equals

investment lin the simple model without qovernment or a foreign sector) regardless of the

level of the interest rate. Most importantly, saving is a function of income and it is income

adjustments rather than interest rate adjustments that bring saving into line with planned

investment expenditure. In the expanded model, savings equals investment plus the gov-

ernment deficit plus the current account surplus.

Further, prior to the GFC, the mainstream macroeconomists ignored the financial sector because they believed

that it had no relevance to the real sector.. In this sense, the New Keynesian approach adopted the classical

dichotomy in which money is a veil and is only relevant for determining prices (see Chapter 12). Accordingly, an

understanding of the real economy could abstract from the financial sector, with the only concession being the

introduction of a central bank following a 'Taylor Rule.

After the GFC, the NMC economists realised that the lack of any attention to financial markets in their

core macroeconomic framework was a major error. A plethora of new academic papers emerged, attempting

to integrate banks and financial markets into the New Keynesian model. The revised New Keynesian approach

retained the DSGE framework and added elements of the financial sector. Once again this was a case of a practice

that heterodox economist David Gordon described in the 1970s as being an ad hoc response to anomaly: a

characteristic of the neoclassical approach when confronted with major empirical shortcomings.

A full exposition of the technicalities of the DSGE approach is beyond the scope of this textbook. The following

introductory statements made to the US House of Representatives Committee on Science and Technology

hearing on 20 July 2010 are useful:

The dominant macro model has for some time been the Dynamic Stochastic General Equilibrium model.

or DSGE, whose name points to some of its outstanding characteristics. "General" indicates that the madel

includes all markets in the economy. "Equilibrium" points to the assumptions that supply and demand

balance out rapidly and unfailingly, and that competition reigns in markets that are undisturbed by short

ages, surpluses, or involuntary unemployment. "Dynamic" means that the model looks at the economy over

time rather than at an isolated moment. "Stochastic" corresponds to a specific type of manageable random-

ness built into the model that allows for unexpected events, such as oil shocks or technological changes,

but assumes that the model's agents can assign a correct mathematical probability to such events, thereby

making them insurable. Events to which one cannot assign a probability, and that are thus truly uncertain,

are ruled out.

The agents populating DSGE models, functioning as individuals or firms, are endowed with kind of

clairvoyance. Immortal, they see to the end of time and are aware of anything that might possibly ever occur,

as well as the likelihood of its occurring their decisions are always instantaneous yet never in error, and no deci-

sion depends on a previous decision or influences a subsequent decision. Also assumed in the core DSGE model

is that all agents of the same type - that is, individuals or firms  - have identical needs and identical tastes 

which, as "optimisers," they pursue with unbounded self-interest and full knowledge of what their wants are. By

DSGE、その名前はその優れた特性のいくつかを指しています。 「一般」はそのmakelを示します
経済のすべての市場を含みます。 「均衡」は需要と供給という仮定を指している
年齢、余剰、または不本意な失業。 「動的」とは、モデルが経済全体を見ていることを意味します。
孤立した瞬間よりもむしろ時間。 「確率論的」は、特定の種類の扱いやすいランダム確率に対応します。



employing what is called the "representative agent" and assigning it these standardised features, the DSGE model

excludes from the model economy almost all consequential diversity and uncertainty - characteristics that

many ways make the actual economy what it is

The DSGE universe makes no distinction between system equilibrium, in which balancing agent-level

disequilibrium forces maintains the macroeconomy in equilibrium, and full agent equilibrium, in which every

individual in the economy is in equilibrium. In so doing, it assumes away phenomena that are commonplace

in the economy: involuntary unemployment and the failure of prices or wages to adjust instantaneously to

changes in the relation of supply and demand. These phenomena are seen as exceptional and call for special


As with all neoclassical general equilibrium models, there is also a problem with trying to introduce money, banks

and the financial system to this stylised framework. For example, the standard DSGE models are not useful for

analysing financial crises because debt default is ruled out under the representative agent assumption. This means

that there is no need for banks that specialise in assessing creditworth iness. If no one ever defaults then everyone

is equally creditworthy and the fundamental activity of banks, what is called 'underwriting' is superfluous. Savers

can just lend directly to borrowers or, alternatively, the debts issued by everyone are equally acceptable and

always exchange at par against all other debts.

While DSGE modellers want to include money as a medium of exchange to make their theory more

relevant to the real world, they have no justification for the existence of banks that would issue it. Given that

all debts are risk free, there would be no need for money since any debt could serve the same purpose, you

could always buy what you want by directly issuing your own debt. Indeed, debts that pay interest would

always trump non-interest paying money. It is ironic that this model is used by central bankers to formulate

monetary policy, yet it cannot convincingly justify either the use of money or the inclusion of financial

institutions. Attempts to work debt default into the DSGE framework post-GFC add significant complexity

and make it largely unworkable.

Economist Willem Buiter (2009), who now works in the financial markets, described New Keynesian and DSGE

modeling as "The unfortunate uselessness of most 'state of the art' academic monetary economics". He continued:

Most mainstream macroeconomic theoretical innovations since the 1970s (the New Classical rational

expectations revolution.. and the New Keynesian theorising.. have turned out to be self-referential, inward-

looking distractions at best. Research tended to be motivated by the internal logic, intellectual sunk capital

and esthetic puzzles of established research programmes rather than by a powerful desire to understand how

the economy works - let alone how the economy works during times of stress and financial instability. So the

economics profession was caught unprepared when the crisis struck ... the Dynamic Stochastic General

Equilibrium approach which for a while was the staple of central banks' internal modelling. .. excludes everything

relevant to the pursuit of financial stability. (Buiter, 2009)

A few years before the global financial collapse, central bankers were congratulating themselves on the success of the

NMC approach in not only keeping inflation down, but also stabilising growth and financial markets. In 2004, Benjamin

Bernanke, soon to become the Chairman of the US Federal Reserve Bank, declared the arrival of the Great Moderation-d

new era of stability in which successful policy management by central banks had reduced the risk of run-away inflatio

or recessions. Central bankers would be able to address macroeconomic problems.

This turned out to be an unfortunate prognosis, as the GFC began just three years later. Alan Greenspan (PBS

Newshour, 2008), who was chairman of the US Federal Reserve Bank until 2006, later told the US Congress t

the crisis showed that his entire world view, developed over half a century and based on a faith in the efficiency of

worked, nor had they actually produced a new era of stability. In fact, even as Bernan ke wrote his paper, the US

'free markets', had been entirely wrong (see Box 32.1). Central bankers had neither understood how the econony

was living through a period of unprecedented bubbles in real estate markets, commodities markets, and equity


現在は金融市場で働いているEconomist Willem Buiter(2009)は、New KeynesianとDSGEについて説明した。

経済はうまくいく - ストレスや金融不安の時代に経済がどのように機能するかは言うまでもありません。だから
中央銀行の内部モデリングの主流であった均衡アプローチ。 ..すべてを除外
財政の安定性の追求に関連しています。 (2009年バイター)

インフレを抑えるだけでなく、成長と金融市場を安定させるためのNMCのアプローチ。 2004年には、ベンジャミン
うまくいったわけでもなく、彼らは実際に新しい安定時代を生み出したのでもない。実際、Bernan keが彼の論文を書いたとしても、アメリカ
「自由市場」は全く間違っていた(Box 32.1参照)。中央銀行家たちはどちらもその経済性を理解していなかった

30 The New Monetary Consensus in Macroeconomics


the aftermath of the crisis, central bankers experimented with historically low interest targets, then turned

to unconventional policy such as quantitative easing (QE) and negative interest rates (see Chapter 23), and even

Jiccussed policies such as 'helicopter money drops' (in which the central bank would distribute 'free money' to

bouseholds). The central banks did everything they could think of doing (according to their theoretical positions)

to cause inflation (and reset expectations) because it remained stubbornly below their targets. While this cast

come doubt on the potency of monetary policy, it did not cause a significant change to the new synthesis of

macroeconomic theory. New Keynesian economists such as Paul Krugman simply tried to tweak the NMC by


arguing that in a 'liquidity trap', monetary policy loses some of its effectiveness (see Chapter 23). While central

hanks cried QE to lower longer-term interest rates and even negative interest rates by charging interest to banks

holding reserves, neither of these had significant effects.

For this reason, as noted above, some NMC economists have begun to move away from the common orthodoxy

that fiscal policy is impotent, arguing that at least in some circumstances the 'Ricardian Equivalence' assumption

does not hold. In a 'non-Ricardian' situation, an increase of govern ment spending or a reduction of taxes might

not be offset by more private sector saving to pay the anticipated higher taxes in the future. In that case, deficit

spending can raise demand and thus nominal and even real GDP. While some of the terminology differs from

that of MMT, including metaphors such as 'printing money' and 'helicopter drops, at least some advocates of the

NMC have come to understand what MMT has long argued.

For example, this is how Woodford (2000: 32, emphasis retained from original) puts it:

A subtler question is whether it makes sense to suppose that actual market institutions do not actual-

ly impose a constraint.. upon governments (whether logically necessary or not), given that we believe that

they impose such borrowing limits upon households and firms. The best answer to this question, I believe,

is to note that a government that issues debt denominated in its own currency is in a different situation

than from that of private borrowers, in that its debt is a promise only to deliver more of its own liabilities

(A Treasury bond is simply a promise to pay dollars at vario us future dates, but these dollars are simply

additional government liabilities, that happen to be non-interest-earning) There is thus no possible doubt about

the government's technical ability to deliver what it has promised.

Ben Bernanke (2002, emphasis added) reached the same conclusion:

Under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with

other agencies) should always be able to generate increased nominal spending and inflation, even when

the short-term nominal interest rate is at zero... The U.S. government has a technology, called a printing

press (or, today, its electronic equivalent) that allows it to produce as many U.S. dollars as it wishes at

essentially no cost.

However, the NMC remains a mainstream approach. It still sees taxes and borrowing as the means of financing

government spending with money printing as an option to be reserved for extraordinary circumstances, such as

a downturn as deep as that of the GFC. Its approach to macroeconomics still relies on aggregating up from indi-

vidual behaviour, meaning it is subject to various fallacy of composition errors.

it views market forces as equilibrating, even if rigidities, imperfect information, and imperfect competition

prevent continuous market clearing, It has trouble introducing money and financial institutions, let alone financial

crises, into the analysis in a plausible manner

Individuals are still presumed to hold rational expectations in

certain. There is no true uncertainty although probabilistic risk exists (see Section 29.5). In all these respects, the

world it models bears little resemblance to the world in which we live.

The effectiveness of NMC policy relies critically on expectations management. Both monetary policy and

fiscal policy will work only if the central bank can generate a consensus of expectations. For example, lowering

inflation requires market participants to expect that inflation will be lower. This lowers actual inflation as firms

world that is presumed to be actuarially

マクロ経済理論Paul Krugmanのような新しいケインズ経済学者は、単にNMCを調整しようとしました。
保持しません。 「非Ricardian」の状況では、政府支出の増加または減税は
Ben Bernanke(2002年、強調)は、同じ結論に達しました。



and workers agree to stop raising wages and prices. When the problem is deflation, it is even more imperative

that policy generate expectations of rising prices. Once monetary policy reaches the zero lower bound, it is

difficult to do anything but to work through expectations management. And as discussed even stimulative

fiscal policy will be impotent unless it can produce expectations of inflation due to the notion of Ricardian



Since the early 1980s the central banks have adopted several key principles that were believed to improve expec-

tations management: transparency, telegraphing policy, gradualism, and activism. Transparency means that the

central bank will work closely with financial markets, informing them about its policy formation process, provid-

Ing clear statements about its goals. It telegraphs rate changes far in advance to avoid any surprises (note how dif

ferent this is from both Monetarism and New Classical views of central bank operations). Gradualism means that

the central bank moves rates by small amounts over relatively long periods of time to achieve the total change of

rates desired. This also allows markets to adjust gradually to the new interest rate regime. Finally, activism means

that the central banks act quickly at the first signs that inflation will move away from target. Ideally, the central

bank fights either highe

However, in practice, following these principles can prove to be problematic. For example, evidence from the

US shows that as the economy recovered from the GFC, the US Federal Reserve Bank began to warn markets

that the era of very low interest rates would be coming to an end. This was consistent with the desi re for

transparency, policy telegraphing, and activism. However, for years after the US Federal Reserve Bank first issued

this warning, inflation rates remained below its preferred range. Markets came to expect rate hikes that never


We know from the US Federal Reserve Bank's transcripts that the main reason it raised rates was because the

market expected it to do so, and it did not want to disappoint the market. In other words, expectations management

had gone awry as the US Federal Reserve Bank had built expectations that then forced it to undertake policy that

totherwise might not have undertaken.

Ultimately, market expectations must be linked to reality. After the GFC, the central banks believed that the

path to recovery was to generate expectations of inflation. However, as discussed above, even the combination

of zero interest rate policy and many trillions of dollars, pounds, euros, and yen spent purchasing through QE

policy, the central banks could not induce expectations of positive inflation. This demonstrates that expectations

or deflation before

ally appears

management can be a thin reed on which to hang national economic policy


Bernanke, B. (2002) "Deflation: Making Sure 'It' Doesn't Happen Here", Remarks before the National Economists Club,

Washington, DC, November 21.

Bernanke, B.S. (2004) "The Great Moderation", Remarks made at the meeting of the E

Washington, DC. February 20.

Buiter, W.(2009) "The Unfortunate Uselessness of Most State of the Art Academic Monetary Economics", Financial

Times,March. Available at: http://economistsview.typepad.com/economistsview/2009/03/the-unfortunate-use-lessness-of-most-state-of-the-art-academic-monetary-economics.html , accessed 25 September 2018


PBS Newshour (2008) "Greenspan Admits 'Flaw' to Congress, Predicts More Economic Problems", 23 October. Available

at: http://www.pbs.org/newshour/bb/business-july-dec08-crisishearing 10-23/, accessed 27 June 2017

rn Economic Association

最終的には、市場の期待は現実と結びついていなければなりません。 GFCの後、中央銀行は、
Bernanke、B。(2002)「デフレ:それがここでは起こらないことを確認する」、National Economists Clubの前で、
バーナンキ、B.S。 (2004)「大緩和」、E会議での発言
ワシントンDC。 2月20日
タイムズ、3月。 http://economistsview.typepad.com/economistsview/2009/03/the-unfortunate-use-から入手できます。
PBS Newshour(2008) "Greenspanは議会の「欠陥」を認め、より多くの経済問題を予測する」、10月23日。利用可能
http://www.pbs.org/newshour/bb/business-july-dec08-crisishearing 10-23 /で、2017年6月27日にアクセス

30 The New Monetary Consensus in Macroeconomics


U.S. House of Representatives (2010) "Building a Science of Fconomics for the Real World", Committee on Science and

Technology Subcommittee on Investigations and Oversight, 20 July 2010. Available at: https://www.gp0.gov/fdsys/

pkg/CHRG-111hhrg57604/pdf/CHRG-111hhrg57604. pdf, accessed 24 September 2018.

Woodford, M.(2000) "Fiscal Requirements for Price Stability", Princeton University Working Paper, October. Available

at: http://www.columbia.edu/~mw2230/imcb.pdf. accessed 24 September 2018. Published as Woodford, M. (2001)

'Fiscal Requirements For Price Stability' Journal of Money, Credit and Banking, 33(3), 669-728.

Visit the companion website at www.macmillanihe.com/mitchell-macro for additional resources

including author videos, an instructor's manual, worked examples, tutorial questions, additional

references, the data sets used in constructing various graphs in the text, and more.

pkg / CHRG-111hhrg57604 / pdf / CHRG-111hhrg57604。 pdf、2018年9月24日にアクセス。
Woodford、M。(2000)「価格安定のための財政要件」、プリンストン大学ワーキングペーパー、10月。 利用可能
で:http://www.columbia.edu/~mw2230/imcb.pdf。 2018年9月24日にアクセス。Woodford、M.(2001)として公開。

"The Unfortunate Uselessness of Most 'State of the Art' Academic Monetary Economics"



ウィレム・バイター著 『最先端の』学術的通貨経済学の不幸な無用さ、イングランド銀行の金融政策委員会私は、その後継者のように、含まれる 『創設者』外部メンバーになることを特権とされました...学術経済学者やその他の専門的な経済学者を真剣に扱っている。これは、中央銀行が、秩序ある金融市場のもとでのインフレ目標の中央銀行から、広範な市場の非流動性および資金調達の非流動性のもとでの金融の安定性を重視した中央銀行へと移行しなければならないときに深刻な障害となった。 ;確かに、それは集約的な経済行動と経済政策に関連する理解の数十年の真剣な調査によって後退したかもしれない。それは個人的にも社会的にも高価な時間と他の資源の浪費でした。



最も影響力のある新古典派とニューケインジアンの理論家は皆、経済学者が「完全な市場パラダイム」と呼ぶもので働いた。想定されるすべての自然状態(想定されるあらゆる偶発事象および結果)にまたがる条件付請求権取引の市場が存在し、仮に間欠的な予算制約が常に満たされる世界では、債務不履行、破産および破産は不可能です。 ...

ニュークラシックとニューケインジアンの完全市場マクロ経済理論はどちらも、破産と非流動性に関する質問に答えることができなかっただけではなかった。彼らはそのような質問をすることを許しませんでした。 ...

アークは本質的にそして絶望的に不完全なものである。それと共に生きて、そしてその事実から始めなさい。 ...たぶん今度はどこかに着くでしょう。


新古典派とニューケインジアンの両方の貨幣理論へのアプローチ(および一般的には集約的マクロ経済学へのアプローチ)では、最強版の効率的市場仮説(EMH)が維持された。これは、資産価格がすべての関連する基本情報を集約して完全に反映し、したがって資源配分のための適切なシグナルを提供するという仮説です。 2007年以前の70年代、80年代、90年代、および90年代の間でさえも、多くの主要資産市場での明らかなEMHの失敗は、現代の英米博士によって認知能力が歪められていなかったほとんどすべての人々にとって明白でした。教育。;;しかし、James Tobin、Robert Shiller、George Akerlof、Hyman Minsky、Joseph Stiglitz、そして行動主義的アプローチによる資金調達など、至る所で有力な理由の支持者がいましたが、ほとんどの職業はEMHフック、ラインおよびシンカーを飲み続けました。しかし、ヘテロドックスアプローチの影響は...厳密には限られていました。

金融市場、そして資産市場では、一般的に、実際のおよび金融の、今日の資産価格は、市場参加者が資産価格の将来のありそうな振る舞いについて取る見方によって異なります。 ...宇宙の明確な有限の終了日はありませんので...、合理的な資産価格設定を持つほとんどの経済モデルは、今日の価格が無限の将来における資産価格の今日の予測にある程度依存することを意味します。 ...;しかし、分散型市場経済では、すべてが大丈夫であることを確認するために終端境界条件を課す数学的プログラマーはいません。 ...

例えば、合理的な投機的なバブルを排除するために正しい終端境界条件が課されることを保証する、時間の終わりに親切な競売人は、全知があり、全能で、そして慈悲深い中心的立案者に他なりません。現代のマクロ経済学がそのような悪い形をしているのも不思議ではありません。 ...;競争力のある、あるいはそうでない、分散型市場経済の均衡を、数理計画法の演習の結果と混同することは、もはや許容できないはずです。





非流動市場における資産価格と、時価会計、証拠金要件、追加担保の要求などを通じてこれらの資産価格にさらされる金融機関の資金調達の非流動性との間の非線形のフィードバック・ループに驚いた人々。失われたものに感謝します...;しきい値効果、非線形アクセラレータ - これらはすべてウィンドウの外にあります。合理的に合理的な市場参加者の相互作用から生じる内因性の不確実性を心配する私たちは、すべての不確実性が外因性で相加的であるというメインラインモデルの主張に私たちの頭をかき傷付けることができます。

技術的には、非線形確率動的モデルは決定論的(非確率的)定常状態で線形化された(しばしば対数線形化された)。決定論的定常状態の周辺では自明に小さくなるであろうランダム性の形式を考慮するだけで、分析はさらに制限された。我々が扱うことができる加法的なランダム衝撃を持つ線形モデル - ほとんど!

これでも十分ではありませんでした…。モデルを線形化し、追加のランダムな外乱で衝撃を与えると、残念な副産物は、結果として得られる線形化モデルが非常に強く安定化するように、または容赦なく爆発的に振舞うことです。 ...動的確率的一般均衡(DSGE)の大衆は、過去に限って経済が爆発することはなかったことを見いだし、このことから...爆発的な解決の軌跡を除外することは理にかなっていると結論しました。彼らが残されたのは、外因性のものを追っていることでした。ランダムな外乱は、かなり賢く決定論的定常状態に戻るでしょう。 L字型のくぼみはありません。累積的な因果関係と限界のあるプロセスはありませんが、持続的な減少または拡大。ちょうどいいV字型の景気後退。





2007年のイングランド銀行は、知的戸棚にロバート・ルーカス、マイケル・ウッドフォード、ロバート・メートンが多すぎるという信用収縮の発生に直面しました。抜本的なが混沌とした再教育が行われ続けています。 ...








新しいケインズ派は答えようとしてきた:我々は、合理的なエージェントと完全な市場で均衡モデルを使用して、モデルに摩擦を加えることができるか?賃金と物価の調整の鈍化 - これは "カルボ価格"と呼ばれています - 過去40年または50年の主要なマクロ経済変数の実際の動きを概算できるようにするためです。


戦い - そして学術界での主な問題 - は、平常時のマクロ経済変数、需要サイドのショック(金融政策、財政政策、投資、純輸出)、あるいは供給サイドのショック(生産性、労働供給)を駆り立てるものです。そしてそれは時々かなり残忍な戦いでした - あなたはそのうちのいくつかが現在の政策議論の間に出てくるのを見ました。職業内のその議論は研究課題を決定づけました。



Buiterが言うことが本当であるかどうか尋ねられたとき、Brad DeLongは言います:

Brad DeLong:はい、そうです。それがすべてです。

実は、それだけではありません。市場が社会的計画、奨励、調整のメカニズムとして非常にうまく機能しているように見えても、それでもやはりそうであるように見えるという問題を解決しようとしていた私たちが「景気循環」のラベルの下に置くことで比較的ひどくしなさい。私は、少なくとも、常に、「シラー」、「アケロフ」、および「スティグリッツ」を「ニューケインジアン」の仲間と見なしていました。ラリーサマーズが1983年の終わりごろに私たちの大学院生たちの多くにそれを入れたように、1966年のミルトンフリードマンの予測はインフレで崩壊するであろうとシカゴの学校に巨大なものを与えた後押ししますが、今や彼らは行き過ぎていて脆弱だったのです。そして知識に追加し、世界のために尽力し、そして生産的で目立つ学術的なキャリアを持ちたいのであれば、私たちの集合的な知的課題:ジョン・メイナード・ケインズが彼の雇用、利子およびお金の一般理論で到達した結論を取り、シカゴ学派が生み出した期待形成および資産価格設定に対する真の洞察をどの程度生き残ったかを説明する。実際、Buiterのコラム私が一般理論第12章の解説として読んだのは、「長期期待の状態」です。まとめると、私たちは説得力のある知的訴訟を起こしたと思います - しかし、私たちはシカゴによって完全に無視され、却下されました。


更新:Justin Wolfersによるこのトピックの詳細。

The unfortunate uselessness of most ’state of the art’ academic monetary economics, by Willem Buiter: The Monetary Policy Committee of the Bank of England I was privileged to be a ‘founder’ external member ... contained, like its successor..., quite a strong representation of academic economists and other professional economists with serious technical training and backgrounds. This turned out to be a severe handicap when the central bank had to switch gears and change from being an inflation-targeting central bank under conditions of orderly financial markets to a financial stability-oriented central bank under conditions of widespread market illiquidity and funding illiquidity.; Indeed, it may have set back by decades serious investigations of aggregate economic behaviour and economic policy-relevant understanding .; It was a privately and socially costly waste of time and other resources.

Most mainstream macroeconomic theoretical innovations since the 1970s (the New Classical rational expectations revolution associated with such names as Robert E. Lucas Jr., Edward Prescott, Thomas Sargent, Robert Barro etc, and the New Keynesian theorizing of Michael Woodford and many others) have turned out to be self-referential, inward-looking distractions at best.; Research tended to be motivated by the internal logic, intellectual sunk capital and esthetic puzzles of established research programmes; rather than by a powerful desire to understand how the economy works - let alone how the economy works during times of stress and financial instability.; So the economics profession was caught unprepared when the crisis struck.

Complete markets

The most influential New Classical and New Keynesian theorists all worked in what economists call a ‘complete markets paradigm’. In a world where there are markets for contingent claims trading that span all possible states of nature (all possible contingencies and outcomes), and in which intertemporal budget constraints are always satisfied by assumption, default, bankruptcy and insolvency are impossible. ...

Both the New Classical and New Keynesian complete markets macroeconomic theories not only did not allow questions about insolvency and illiquidity to be answered.; They did not allow such questions to be asked. ...

[M]arkets are inherently and hopelessly incomplete.; Live with it and start from that fact. ... Perhaps we shall get somewhere this time.

The Auctioneer at the end of time

In both the New Classical and New Keynesian approaches to monetary theory (and to aggregative macroeconomics in general), the strongest version of the efficient markets hypothesis (EMH) was maintained.; This is the hypothesis that asset prices aggregate and fully reflect all relevant fundamental information, and thus provide the proper signals for resource allocation.; Even during the seventies, eighties, nineties and noughties before 2007, the manifest failure of the EMH in many key asset markets was obvious to virtually all those whose cognitive abilities had not been warped by a modern Anglo-American Ph.D. education.;; But most of the profession continued to swallow the EMH hook, line and sinker, although there were influential advocates of reason throughout, including James Tobin, Robert Shiller, George Akerlof, Hyman Minsky, Joseph Stiglitz and behaviourist approaches to finance.; The influence of the heterodox approaches ... was, however, strictly limited. 

In financial markets, and in asset markets, real and financial, in general, today’s asset price depends on the view market participants take of the likely future behaviour of asset prices.; ... Since there is no obvious finite terminal date for the universe..., most economic models with rational asset pricing imply that today’s price depend in part on today’s anticipation of the asset price in the infinitely remote future. ...; But in a decentralised market economy there is no mathematical programmer imposing the terminal boundary conditions to make sure everything will be all right. ...

The friendly auctioneer at the end of time, who ensures that the right terminal boundary conditions are imposed to preclude, for instance, rational speculative bubbles, is none other than the omniscient, omnipotent and benevolent central planner.; No wonder modern macroeconomics is in such bad shape. ...; Confusing the equilibrium of a decentralised market economy, competitive or otherwise, with the outcome of a mathematical programming exercise should no longer be acceptable.

So, no Oikomenia, there is no pot of gold at the end of the rainbow, and no Auctioneer at the end of time.

Linearize and trivialize

If one were to hold one’s nose and agree to play with the New Classical or New Keynesian complete markets toolkit, it would soon become clear that any potentially policy-relevant model would be highly non-linear, and that the interaction of these non-linearities and uncertainty makes for deep conceptual and technical problems. Macroeconomists are brave, but not that brave.; So they took these non-linear stochastic dynamic general equilibrium models into the basement and beat them with a rubber hose until they behaved.; This was achieved by completely stripping the model of its non-linearities and by ... mappings into well-behaved additive stochastic disturbances.

Those of us who have marvelled at the non-linear feedback loops between asset prices in illiquid markets and the funding illiquidity of financial institutions exposed to these asset prices through mark-to-market accounting, margin requirements, calls for additional collateral etc.; will appreciate what is lost...; Threshold effects, non-linear accelerators - they are all out of the window.; Those of us who worry about endogenous uncertainty arising from the interactions of boundedly rational market participants cannot but scratch our heads at the insistence of the mainline models that all uncertainty is exogenous and additive.

Technically, the non-linear stochastic dynamic models were linearised (often log-linearised) at a deterministic (non-stochastic) steady state.; The analysis was further restricted by only considering forms of randomness that would become trivially small in the neigbourhood of the deterministic steady state.; Linear models with additive random shocks we can handle - almost !

Even this was not quite enough...; When you linearize a model, and shock it with additive random disturbances, an unfortunate by-product is that the resulting linearised model behaves either in a very strongly stabilising fashion or in a relentlessly explosive manner.; ... The dynamic stochastic general equilibrium (DSGE) crowd saw that the economy had not exploded without bound in the past, and concluded from this that it made sense to rule out ... the explosive solution trajectories.; What they were left with was something that, following an exogenous; random disturbance, would return to the deterministic steady state pretty smartly.; No L-shaped recessions.; No processes of cumulative causation and bounded but persistent decline or expansion.; Just nice V-shaped recessions.

There actually are approaches to economics that treat non-linearities seriously.; Much of this work is numerical - analytical results of a policy-relevant nature are few and far between - but at least it attempts to address the problems as they are, rather than as we would like them lest we be asked to venture outside the range of issued we can address with the existing toolkit.

The practice of removing all non-linearities and most of the interesting aspects of uncertainty from the models ... was a major step backwards.; I trust it has been relegated to the dustbin of history by now in those central banks that matter.


Charles Goodhart, who was fortunate enough not to encounter complete markets macroeconomics and monetary economics during his impressionable, formative years, but only after he had acquired some intellectual immunity, once said of the Dynamic Stochastic General Equilibrium approach which for a while was the staple of central banks’ internal modelling: “It excludes everything I am interested in”. He was right.; It excludes everything relevant to the pursuit of financial stability.

The Bank of England in 2007 faced the onset of the credit crunch with too much Robert Lucas, Michael Woodford and Robert Merton in its intellectual cupboard.; A drastic but chaotic re-education took place and is continuing. ...

[Buiter has much more in the original article in support of his arguments.]

I think this is right, but I'd put it differently. Models are built to answer questions, and the models economists have been using do, in fact, help us find answers to some important questions. But the models were not very good (at all) at answering the questions that are important right now. They have been largely stripped of their usefulness for actual policy in a world where markets simply break down. 

The reason is that in order to get to mathematical forms that can be solved, the models had to be simplified. And when they are simplified, something must be sacrificed. So what do you sacrifice? Hopefully, it is the ability to answer questions that are the least important, so the modeling choices that are made reveal what the modelers though was most and least important. 

The models we built were very useful for asking whether the federal funds rate should go up or down a quarter point when the economy was hovering in the neighborhood of full employment ,or when we found ourselves in mild, "normal" recessions. The models could tell us what type of monetary policy rule is best for stabilizing the economy. But the models had almost nothing to say about a world where markets melt down, where prices depart from fundamentals, or when markets are incomplete. When this crisis hit, I looked into our tool bag of models and policy recommendations and came up empty for the most part. It was disappointing. There was really no choice but to go back to older Keynesian style models for insight. 

The reason the Keynesian model is finding new life is that it specifically built to answer the questions that are important at the moment. The theorists who built modern macro models, those largely in control of where the profession has spent its effort in recent decades,; did not even envision that this could happen, let alone build it into their models. Markets work, they don't break down, so why waste time thinking about those possibilities.

So it's not the math, the modeling choices that were made and the inevitable sacrifices to reality that entails reflected the importance those making the choices gave to various questions. We weren't forced to this end by the mathematics, we asked the wrong questions and built the wrong models.

New Keynesians have been trying to answer: Can we, using equilibrium models with rational agents and complete markets, add frictions to the model - e.g. sluggish wage and price adjustment - you'll see this called "Calvo pricing" - in a way that allows us to approximate the actual movements in key macroeconomic variables of the last 40 or 50 years.

Real Business Cycle theorists also use equilibrium models with rational agents and complete markets, and they look at whether supply-side shocks such as shocks to productivity or labor supply can, by themselves, explain movements in the economy. They largely reject demand-side explanations for movements in macro variables. 

The fight - and main question in academics - has been about what drives macroeconomic variables in normal times, demand-side shocks (monetary policy, fiscal policy, investment, net exports) or supply-side shocks (productivity, labor supply). And it's been a fairly brutal fight at times - you've seen some of that come out during the current policy debate. That debate within the profession has dictated the research agenda.

What happens in non-normal times, i.e. when markets break down, or when markets are not complete, agents are not rational, etc., was far down the agenda of important questions, partly because those in control of the journals, those who largely dictated the direction of research, did not think those questions were very important (some don't even believe that policy can help the economy, so why put effort into studying it?). 

I think that the current crisis has dealt a bigger blow to macroeconomic theory and modeling than many of us realize. 

When asked if what Buiter says is true, Brad DeLong says:

Brad DeLong: Yes, it is true. That is all. 

Well, actually, that is not all. Buiter is a little bit too mean to us "new Keynesians", who were trying to solve the problem of why it is that markets seem to work very well as social planning, incentivizing, and coordination mechanisms across a range of activities and yet appear to do relatively badly in the things we put under the label of "business cycle." I, at least, always regarded Shiller, Akerlof, and Stiglitz as being fellow "New Keynesians." As Larry Summers put it to a bunch of us graduate students l around the end of 1983, Milton Friedman's prediction in 1966 that the post-WWII economic policy order would break down in inflation had come true and that that had given the Chicago School an enormous boost, but that now they had gone too far and were vulnerable, and that our collective intellectual task if we wanted to add to knowledge, do good for the world, and have productive and prominent academic careers was to "math up the General Theory": to take the conclusions reached by John Maynard Keynes in his General Theory of Employment, Interest and Money, and explain how or demonstrate to what degree they survived the genuine insights into expectations formation and asset pricing that the Chicago School had produced. In fact, Buiter's column I read as a commentary on General Theory chapter 12: "The State of Long-Term Expectation." Collectively, I think we made a compelling intellectual case--but we were completely ignored and dismissed by Chicago. 

But, yes, on the big things Buiter is right. 

UpdateMore on this topic from Justin Wolfers.


Mainstream macroeconomics in a state of ‘intellectual regress’ – Bill Mitchell – Modern Monetary Theory




bill 2017年1月3日火曜日
経済政策決定の中心にある、特に中央銀行の予測は、いわゆる動的確率的一般均衡(DSGE)モデルであり、これは世界的に注目を浴びており、経済学の学生が晒されているナンセンスの最も進化した形である。彼らの学部研究で。 Paul Romerが自身のブログ(2016年9月14日) -  The Trouble With Macroeconomics  - にかなりの注目を集め、パーソナライズされていることを考えると、最近記事を発表しました。私の職業の主流を攻撃します。 Paul Romerは、主流のマクロ経済学は、DSGEフレームワークが権威のキメラを提示するニューケインジアンモデルの最新の流行で最高潮に達する「30年」の間「知的退行」の状態にあると説明している。主流のマクロ経済学に対する彼の攻撃は、マクロ経済学における支配的なアプローチが本質的に詐欺行為であるという他の証拠を検討し、それと結びつける価値がある。

Romerは、「大手マクロ経済学者」(彼は彼の名前を挙げていませんが、UPenn出身のJesúsFernández-Villaverdeです)の言葉で、「お金の重要性を完全には納得できなかった」と述べています。 (金融政策が実質的な影響を及ぼし得ないことを意味する - 実質GDPの変動を引き起こすなど)。



余談として、Fernández-Villaverdeの引用は2009年からのこのひどい論文から来ました -  DSGEモデルの計量経済学 - ここで著者は「1970年代初頭から1990年代の終わりまでの間の」マクロ経済の発展は「1世代でライト兄弟からエアバス380に飛び乗る」。

少なくともエアバス380(とライト兄弟)は実際に飛んで、実際に動作するように設計されていました!しかし、それからフェルナンデス - ビリャヴェルデは、主流の経済学者の典型であり、自己宣伝や傲慢さに欠かせない。







彼はそれから彼がRBC「menagerie」の次の部分であると正しく考えているDSGEモデルの詳細な批評を提供します - 「このRBC豚の上で値段の付く口紅」。


私は、このブログ(2009) - 主流のマクロ経済流行 - の中で、ニューケインジアン/ DSGEのアプローチについて、ある程度の時間をかけて書いた。






言い換えれば、先進的なマクロ経済学の理論の大部分と同様に、それは複雑であるように見え、そしてその認識はイデオロギー的アジェンダに役立つ - 精査を避けるが権威あるように見える。



これらのブログ -  GIGOとOECD  -  GIGO Part 2で、Garbage In Garbage Outが、何にもならないことに惑わされるようになるプロセスまたはメカニズムであることを議論しました。



DSGE / NKモデルは、独自の言葉で言うと「マイクロファウンデッド」であるため、美徳(「科学的厳密さ」)を主張します。一体これはどういう意味ですか?



ミクロ理論が個人の選択に特定の心理学を課したように(例えば仕事または消費の決定に関して) - それは個人(消費者、企業)が「合理的期待」に基づく計算の最適化を使ったと考えた(本質的にランダムエラーによる完全な先見性)彼らが死ぬまで行動について今決断を下すために、マクロ経済理論はこのアプローチを受け入れるべきです。

私はこのブログで行動に関するこれらの仮定のいくつかを考えました - 合理的な期待の神話。

1970年代後半に発展したRational Expectations(RATEX)の文献は、総需要を刺激しようとする政府の政策の試みは実質的には効果がないがインフレが非常に大きいと主張している。


言い換えれば、彼らは金銭的刺激で実質生産を増やすことはできないが、常にインフレを引き起こす。この点に関するより多くの議論については私のブログ - 中央銀行の独立性 - もう一つの悪い議題 - を読んでください。







有名な(DSGE以前の)マクロ経済学者のRobert Solowは、2010年7月20日に米国の科学、宇宙と技術に関する議会委員会の調査と監視に関する聴聞会 - 経済学 - に出席しました。証拠はこちらから入手できます。













この式はDSGE / NKモデルの中心にあります。



今日の消費からの限界効用AQUAL A(1 + R)*将来の消費からの限界効用。

限界効用は、最後の消費単位から得られる満足度に関係します。 *は乗算記号です。今日保存すれば、将来的に(1 + R)単位を消費することができます。ここで、Rは複利です。







3.消費者は、自分の人生の終わりに何をしているのかを、首尾一貫した方法で本当に考えていません。多くの人々は、その低収入または他の状況の結果として、毎日生きることを余儀なくされています。 DSGEモデルの中心となる永久生涯収入という概念はありません。













テストの質問を見ることができます - こちら。私は合格ですが、経済学の博士号を取得しています。



我々は合理的な選択をするという考えを歪める供給側の広告によって操作されます - 我々はどんちゃん騒ぎし、衝動買いなどをします。

このブログで(2014年6月18日) - なぜDSGEが危機の間にクラッシュするのか - いわゆるGeneral-to-Specific時系列計量経済学モデリングの創設者(David HendryとGrayham Mizon)は、推測できない未来に目を向けると書いた。今何をするかを決めるとき。




しかし、世界は完全に静止しているわけではありません。予期せぬ出来事が起こります…特に、「外因的な予測不可能性」 - 予期せぬ時における経済変数の分布の予測不能なシフト - が一般的です。私たちが説明するように、外的な予測不可能性は世界中の政府によって使用される標準的なマクロ経済予測モデル - 「動的確率的一般均衡」モデル - あるいはDSGEモデル - に劇的な影響を及ぼします…

…分布がシフトすると、DSGEモデルの数学的基礎は成り立たなくなります…一般的な均衡理論は、ceteris paribusの仮定 - 特に平衡が予期せずにシフトしないという仮定に大きく依存します。

したがって、ある時点で、予期せぬ不正な赤信号ランナーが私の青信号の均衡を問題にするでしょう - 私は事故を避けるために何度警告なしに振ったのか!

Hendry and Mizonのポイントは、Nicholas Fawcett氏、Riccardo Masolo氏、Lena Koerber氏、およびMatt Waldron氏が発表したイングランド銀行(Staff Working Paper No. 538)の分析(2015年7月31日)でよく示されています。推定DSGEモデル金融危機におけるモデル外情報の役割





Robert Solow氏(上記)はまた、DSGEの友愛関係は「マクロ経済政策には何もするべきではないという結論を本質的に考えられない仮定に組み込んでいるので、反不況政策について何の意味もない」と述べた。

Willem Buiterのような主流企業でさえ、DSGEモデリングを「最先端の学術的通貨経済学の残念な無用」と説明しています。彼はそれを指摘した:


経済がどのように機能するのかを理解したいという強い願望ではなく、知的な資金と確立された研究プログラムの審美的なパズル - ストレスや金融不安の時代に経済がどのように機能するかは言うまでもない。そのため、中央銀行の内部モデリングの主流であった動的確率的一般均衡アプローチでは、金融の安定性の追求に関連するものはすべて除外されていました。》



New Keynesianアプローチ(DSGEモデリングを組み込んでいる)の利点とされているのは、実際の景気循環理論の要素(異時点間最適化、合理的期待、および市場クリアリング)を確率論的動的マクロ経済モデルに統合することです。問題は、抽象理論が経験的世界と関係がないことです。







Robert Solowが述べたように(上で引用したように)、DSGEの友愛は「マクロ経済政策には何もするべきではないという結論を本質的に考えられない仮定に組み込んでいるので」。








Paul Romerは、素粒子物理学の統一理論(まだ劇的に失敗した)とポストポストマクロ経済学を提供すると主張している「弦理論」の間に類似点を描いています。









私の現在の本 -  Eurozone Dystopiaの読者:

GroupthinkとDenial of Grand Scale  - グループ内の暴徒の支配が合理的な慣行と事実への注意を奪うGroupthinkの状態を決定づけるものとしてこれらの7つの機能を識別します。

Them v Usモードは傲慢さと否定によって動かされます(Fernández-Villaverdeは物質を何も誇大宣伝する能力を代表しています)。






問題は、これらの理論は、Paul Romerが議論した理由や他の批評家たちが提示した理由から、私たちが住んでいる世界についてのいかなる価値の洞察も提供できないということです。



(c)著作権2017 William Mitchell。全著作権所有。

Mainstream macroeconomics in a state of ‘intellectual regress’

At the heart of economic policy making, particularly central bank forecasting are so-called Dynamic Stochastic General Equilibrium (DSGE) models of the economy, which are a blight on the world and are the most evolved form of the nonsense that economics students are exposed to in their undergraduate studies. Paul Romer recently published an article on his blog (September 14, 2016) – The Trouble With Macroeconomics – which received a fair amount of attention in the media, given that it represented a rather scathing, and at times, personalised (he ‘names names’) attack on the mainstream of my profession. Paul Romer describes mainstream macroeconomics as being in a state of “intellectual regress” for “three decades” culminating in the latest fad of New Keynesian models where the DSGE framework present a chimera of authority. His attack on mainstream macroeconomics is worth considering and linking with other evidence that the dominant approach in macroeconomics is essentially a fraud.

Romer begins by quoting “a leading macroeconomist” (he doesn’t name him but it is Jesús Fernández-Villaverde from UPenn, who I would hardly label “leading”) as saying that he was “less than totally convinced of the importance of money outside the case of large inflations” (meaning that monetary policy cannot have real effects – cause fluctuations in real GDP etc).

This monetary neutrality is a core presumption of the mainstream approach.

Romer then uses the Volcker hike in real interest rates in the US in the late 1970s, which preceded two sharp recessions in a row and drove unemployment up and real GDP growth down, as a vehicle for highlighting the absurdity of this mainstream approach to macroeconomics.

The Fernández-Villaverde quote, as an aside, came from this awful paper from 2009 – The Econometrics of DSGE Models – where the author claims the developments in macroeconomics “between the early 1970s and the late 1990s” represented a “quantum leap” equivalent to “jumping from the Wright brothers to an Airbus 380 in one generation”.

Well at least the Airbus 380 (and the Wright brothers) actually flew and were designed to work in reality! But then Fernández-Villaverde is typical of the mainstream economists, not short on self-promotion and hubris. 

Romer proceeds to viscerate the elements in what Fernández-Villaverde thinks represents the ‘quantum leap’.

He starts with “real business cycle (RBC)” theory, which claims “that fluctuations in macroeconomic aggregates are caused by imaginary shocks, instead of actions that people take”.

In RBC a collapse in nominal spending has no impact. Only real shocks (these “imaginary” shocks) which are driven by random technology changes and productivity shifts apparently drive market responses and economic cycles.

A recession, is characterised as an ‘optimal’ response to a negative productivity shock – where workers knowing that they are less productive now than in the future, will offer less work (hence choose leisure over labour) and become unemployed, in the knowledge that they can make up the income later when they will be more productive.

While Fernández-Villaverde thinks the RBC approach was a “particular keystone” in the “quantum leap”, any reasonable interpretation of the proposition that recessions are optimal outcomes of individual’s choosing to be unemployed would label RBC absurd.

Romer is highly critical of this approach which he calls “post-real”.

He then provides a detailed critique of DSGE models which he rightfully considers to be the next part of the RBC “menagerie” – the “sticky-price lipstick on this RBC pig”.

I won’t go into all the nuts and bolts (being beyond the interest and probably scope of my readership).

I wrote, at some length about the New Keynesian/DSGE approach in this blog (2009) – Mainstream macroeconomic fads – just a waste of time.

The New Keynesian approach has provided the basis for a new consensus emerging among orthodox macroeconomists. It attempted to merge the so-called Keynesian elements of money, imperfect competition and rigid prices with the so-called Real Business Cycle theory elements of rational expectations, market clearing and optimisation across time, all within a stochastic dynamic model.

That mind sound daunting to readers who haven’t suffered years of the propaganda that goes for economics ‘education’ these days but let me assure you all the fancy terminology (like ‘rational expectations, stochastic dynamics, intertemporal optimisation’ and the rest of it) cannot hide the fact that these theories and attempts at application to real world data are a total waste of time.

Yes, they given economists a job. A job is a good thing. But these brains would be far better applied to helping improve the lot of real people in need rather than filling up academic journals with tripe

New Keynesian theory is actually very easy to understand despite the deliberate complexity of the mathematical techniques that are typically employed by its practitioners.

In other words, like most of the advanced macroeconomics theory it looks to be complex and that perception serves the ideological agenda – to avoid scrutiny but appear authoritative.

Graduate students who undertake advanced macroeconomics become imbued with their own self-importance as they churn out what they think is deep theory that only the cognoscenti can embrace – the rest – stupid (doing Arts or Law or something). If only they knew they were reciting garbage and had, in fact, very little to say (in a meaningful sense) about the topics they claim intellectual superiority.

The professors who taught them are worse, if that is possible.

In these blogs – GIGO and OECD – GIGO Part 2, I discussed how Garbage In Garbage Out is that process or mechanism that leads us to be beguiled by what amounts to nothing.

The framework is so deeply flawed and bears no relation at the macroeconomic level to the operational realities of modern monetary economies.

In our 2008 book Full Employment Abandoned: Shifting Sands and Policy Failures, we have a section on the so-called new Keynesian (NK) models and we argue that they are the latest denial of involuntary unemployment, in a long list of efforts that the mainstream has offered over the years.

DSGE/NK models claim virtue (‘scientific rigour’) because they are, in their own terms, ‘microfounded’. What the hell does that mean?

Not much when it comes down to it.

Essentially, as a critique of Keynesian-style macroeconomics which was built by analysing movements in aggregates (output, employment etc), the microeconomists believed that their approach to economics was valid and that macroeconomics was just an aggregate version of what the micro theory believed explained individual choice.

So just as micro theory imposed a particular psychology in individual choice (for example, about decisions to work or consume) – which considered individuals (consumers, firms) used optimising calculations based on ‘rational expectations’ (essentially – perfect foresight with random errors) to make decisions now about behaviour until they died, macroeconomic theory should embrace this approach.

I considered some of these assumptions about behaviour in this blog – The myth of rational expectations.

The Rational Expectations (RATEX) literature which evolved in the late 1970s claimed that government policy attempts to stimulate aggregate demand would be ineffective in real terms but highly inflationary.

People (you and me) anticipate everything the central bank or the fiscal authority is going to do and render it neutral in real terms (that is, policy changes do not have any real effects). But expansionary attempts will lead to accelerating inflation because agents predict this as an outcome of the policy and build it into their own contracts.

In other words, they cannot increase real output with monetary stimulus but always cause inflation. Please read my blog – Central bank independence – another faux agenda – for more discussion on this point.

The RATEX theory argued that it was only reasonable to assume that people act rationally and use all the information available to them.

What information do they possess? Well RATEX theory claims that individuals (you and me) essentially know the true economic model that is driving economic outcomes and make accurate predictions of these outcomes with white noise (random) errors only. The expected value of the errors is zero so on average the prediction is accurate.

Everyone is assumed to act in this way and have this capacity. So ‘pre-announced’ policy expansions or contractions will have no effect on the real economy.

For example, if the government announces it will be expanding its fiscal deficit and adding new high powered money, we will also assume immediately that it will be inflationary and will not alter our real demands or supply (so real outcomes remain fixed). Our response will be to simply increase the value of all nominal contracts and thus generate the inflation we predict via our expectations.

The problem is that all this theory has to be put together in a way that can be mathematically solvable (“tractable”). That places particular restrictions on how rich the analysis can be.

It is impossible to achieve a solution based on the alleged ‘micro foundations’ (meaning individual level) so the first dodge we encounter is the introduction of the ‘representative agent’ – a single consumer and single firm that represents the maximising behaviour of all the heterogenous ‘agents’ in the economy.

Famous (pre-DSGE) macroeconomist Robert Solow gave to the US Congress Committee on Science, Space and Technology – in its sub-committee hearings on Investigations and Oversight Hearing – Science of Economics on Jul 20, 2010. The evidence is available HERE.

Here is an excerpt relevant to the topic:

Under pressure from skeptics and from the need to deal with actual data, DSGE modellers have worked hard to allow for various market frictions and imperfections like rigid prices and wages, asymmetries of information, time lags, and so on. This is all to the good. But the basic story always treats the whole economy as if it were like a person, trying consciously and rationally to do the best it can on behalf of the representative agent, given its circumstances. This can not be an adequate description of a national economy, which is pretty conspicuously not pursuing a consistent goal. A thoughtful person, faced with the thought that economic policy was being pursued on this basis, might reasonably wonder what planet he or she is on.

So the micro foundations manifest, in the models, as homogenous (aggregated) maximising entities, with the assumption that everybody behaves in the same way when confronted with market information.

This ‘one’ (mythical) consumer is rational and has perfect foresight so that it (as a representation of all of us) seeks to maximise ‘life-time’ income.

Consumption spending in the real world accounts for about 60 per cent of total spending. So the way in which these DSGE models represent consumption will have important implications for their capacity to mimic real world dynamics.

This mythical consumer is assumed to know the opportunities available for income now and for every period into the future and solves what is called an ‘intertemporal maximisation’ problem – which just means they maximise in every period from now until infinity.

So the consumer maximises the present discounted value of consumption over their lifetime given the present value of the resources (wealth) that the person knows he/she will generate.

If you don’t know what that means then you are either not a real person (given that the mainstream consider this is the way we behave) or you are just proving what I am about to say next and should feel good about that.

A basic Post Keynesian presumption, which Modern Monetary Theory (MMT) proponents share, and which is central to Keynes’ own analysis in the 1936 General Theory, is that the future is unknowable and so, at best, we make guesses about it, based on habit, custom, gut-feeling etc.

So this would appear to make any approach that depends on being able to optimise at each point in time problematic to say the least.

Enter some more abstract mathematics in the form of the famous Euler equation for consumption, which provides a way in which the mythical consumer links decisions now with decisions to consume later and achieve maximum utility in each period.

This equation is at the centrepiece of DSGE/NK models.

It simply says that the representative consumer has to be indifferent (does care) between consuming one more unit today or saving that extra unit of consumption and consuming the compounded value of it in the future (in all periods this must hold).

It is written as:

Marginal Utility from consumption today MUST EQUAL A(1 + R)*Marginal Utility from consumption in the future.

Marginal utility relates to the satisfaction derived from the last unit of consumption. * is a multiply sign. If we save today we can consume (1 + R) units in the future, where R is the compound interest rate.

The weighting parameter A just refers to the valuation that the consumer places on the future relative to today.

The consumer always satisfies the Euler equation for consumption, which means all of us do it individually, if this approach is to reflect the micro foundations of consumption.

Some mathematical gymnastics based upon these assumptions then generates the maximising consumption solution in every period where the represenative consumer spends up to the limits of his/her income (both earned and non-labour). 

Reflect on your own life first. You will identify many flaws in this conception of your consumption decision making.

1. No consumer is alike in terms of random shocks and uncertainty of income. Some consumers spend every cent of any extra income they receive while others (high-income earners) spend very little of any extra income. Trying to aggregate these differences into a representative agent is impossible.

2. No consumer is alike with respect to access to credit.

3. No consumer really considers what they will be doing at the end of their life in any coherent way. Many, as a result of their low incomes or other circumstances, are forced to live day by day. There is no conception of permanent lifetime income, which are central to DSGE models.

4. Even the concept of the represent agent is incompatible with what we observe in macroeconomic data.

For example, a central notion within the DSGE models is that of Ricardian Equivalence.

This notion claims that individuals (consumers and firms) anticipate policy changes now in terms of their implications for their future incomes and adjust their current behaviour accordingly, which has the effect of rendering the policy change ineffective.

Specifically, say a government aanounces it will cut its net spending deficit (austerity), the representative agent is claimed to believe that the government will decreasing taxes in the future which increases the present value of permanent income and as a result, the agent will spend more.

As a result, it is alleged that austerity is not a growth killer because total spending just shifts from public to private.

The reality is quite different and opposite to what the Euler equation predicts. Consumers actually cut back spending in periods of austerity because unemployment increases. Firms cut back on investment spending because sales flag.

5. The research evidence (from behavioural economics) refutes the rationality and forward-looking assumptions built in to DSGE models.

We are not good at solving complex intertemporal financial maximisation mathematical models.

S&P conduced a Global Financial Literacy Survey in 2015 (published November 20, 2015) and found that “57% Of Adults In U.S. Are Financially Literate” (Source).

The survey found that “just one-third of the world’s population is financially literate.”

The questions probed knowledge of interest compounding, risk diversification, and inflation.

You can see the test questions – HERE. I pass but have a PhD in economics.

The knowledge required to pass this literacy test is far less than would be required to compute the intertemporal maximisation solution constrained by the Euler equation, even if there was perfect knowledge of the future.

We tend to satisfice (near enough is good enough) rather than maximise.

We are manipulated by supply-side advertising which distorts any notion that we make rational choices – we binge, impulse buy etc.

In this blog (June 18, 2014) – Why DSGEs crash during crises – the founders of so-called General-to-Specific time series econometric modelling (David Hendry and Grayham Mizon) wrote that we do look into the unknowable future to make guessess when deciding what to do now.

We typically assume that there will be “no unanticipated future changes in the environment pertinent to the decision”. So we assume the future is stationary.

For example, when I ride my motorcycle down the road I assume (based on habit, custom, past experience) that people will stop at the red light, which allows me to accelerate (into the future) through the next green light.

But Hendry and Mizon correctly note that:

The world, however, is far from completely stationary. Unanticipated events occur … In particular, ‘extrinsic unpredictability’ – unpredicted shifts of the distributions of economic variables at unanticipated times – is common. As we shall illustrate, extrinsic unpredictability has dramatic consequences for the standard macroeconomic forecasting models used by governments around the world – models known as ‘dynamic stochastic general equilibrium’ models – or DSGE models …

… the mathematical basis of a DSGE model fails when distributions shift … General equilibrium theories rely heavily on ceteris paribus assumptions – especially the assumption that equilibria do not shift unexpectedly.

So at some point, an unexpected rogue red-light runner will bring my green light equilibrium into question – how many times have I swerved without warning to avoid accident!

Hendry and Mizon’s point is illustrated well by the Bank of England (Staff Working Paper No. 538) analysis presented by Nicholas Fawcett, Riccardo Masolo, Lena Koerber, and Matt Waldron (July 31, 2015) – Evaluating UK point and density forecasts from an estimated DSGE model: the role of off-model information over the financial crisis .

They show that “all of the forecasts fared badly during the crisis”. These forecasts were derived from the Bank’s COMPASS model (Central Organising Model for Projection Analysis and Scenario Simulation), which is a “standard New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model”.

They wrote that:

None of the models we evaluated coped well during the financial crisis. This underscores the role that large structural breaks can have in contributing to forecast failure, even if they turn out to be temporary …

Criticism of the so-called ‘micro-founded’ DSGE approach is not new.

Robert Solow (cited above) also said that the DSGE fraternity “has nothing useful to say about anti-recession policy because it has built into its essentially implausible assumptions the “conclusion” that there is nothing for macroeconomic policy to do”.

Even mainstreamers like Willem Buiter described DSGE modelling as “The unfortunate uselessness of most ‘state of the art’ academic monetary economics”. He noted that:

Most mainstream macroeconomic theoretical innovations since the 1970s (the New Classical rational expectations revolution … and the New Keynesian theorizing … have turned out to be self-referential, inward-looking distractions at best. Research tended to be motivated by the internal logic, intellectual sunk capital and esthetic puzzles of established research programmes rather than by a powerful desire to understand how the economy works – let alone how the economy works during times of stress and financial instability. So the economics profession was caught unprepared when the crisis struck … the Dynamic Stochastic General Equilibrium approach which for a while was the staple of central banks’ internal modelling … excludes everything relevant to the pursuit of financial stability.

The other problem is that these DSGE models are essentially fraudulent. 

In my 2008 book cited above we considered the standard DSGE approach in detail.

The alleged advantage of the New Keynesian approach (which incorporates DSGE modelling) is the integration of real business cycle theory elements (intertemporal optimisation, rational expectations, and market clearing) into a stochastic dynamic macroeconomic model. The problem is that the abstract theory does not relate to the empirical world.

To then get some traction (as Solow noted) with data, the ‘theoretical rigour’ is supplanted by a series of ad hoc additions which effectively undermine the claim to theoretical rigour.

You cannot have it both ways. These economists first try to garner credibility by appealing to the theoretical rigour of their models.

But then, confronted with the fact that these models have nothing to say about the real world, the same economists compromise that rigour to introduce structures (and variables) that can relate to the real world data.

But they never let on that the authority of this compromise is lost although the authority was only ever in the terms that this lot think.

No reasonable assessment would associate intellectual authority (knowledge generation) with the theoretical rigour that we see in these models.

This is the fundamental weakness of the New Keynesian approach. The mathematical solution of the dynamic stochastic models as required by the rational expectations approach forces a highly simplified specification in terms of the underlying behavioural assumptions deployed.

As Robert Solow noted (cited above), the DSGE fraternity “has nothing useful to say about anti-recession policy because it has built into its essentially implausible assumptions the “conclusion” that there is nothing for macroeconomic policy to do”.

Further, the empirical credibility of the abstract DSGE models is highly questionable. There is a substantial literature pointing out that the models do not stack up against the data.

Clearly, the claimed theoretical robustness of the DSGE models has to give way to empirical fixes, which leave the econometric equations indistinguishable from other competing theoretical approaches where inertia is considered important. And then the initial authority of the rigour is gone anyway.

This general ad hoc approach to empirical anomaly cripples the DSGE models and strains their credibility. When confronted with increasing empirical failures, proponents of DSGE models have implemented these ad hoc amendments to the specifications to make them more realistic.

I could provide countless examples which include studies of habit formation in consumption behaviour; contrived variations to investment behaviour such as time-to-build , capital adjustment costs or credit rationing.

But the worst examples are those that attempt to explain unemployment. Various authors introduce labour market dynamics and pay specific attention to the wage setting process.

One should not be seduced by DSGE models that include real world concessions such as labour market frictions and wage rigidities in their analysis. Their focus is predominantly on the determinants of inflation with unemployment hardly being discussed.

Of-course, the point that the DSGE authors appear unable to grasp is that these ad hoc additions, which aim to fill the gaping empirical cracks in their models, also compromise the underlying rigour provided by the assumptions of intertemporal optimisation and rational expectations.

Paul Romer draws a parallel between ‘string theory’, which claimed to provide a unified theory of particle physics (yet failed dramatically) and post-real macroeconomics.

He cites a particle physicist who listed “seven distinctive characteristics of string theorists”:

1. Tremendous self-confidence

2. An unusually monolithic community

3. A sense of identification with the group akin to identification with a religious faith or political platform

4. A strong sense of the boundary between the group and other experts

5. A disregard for and disinterest in ideas, opinions, and work of experts who are not part of the group

6. A tendency to interpret evidence optimistically, to believe exaggerated or incomplete statements of results, and to disregard the possibility that the theory might be wrong

7. A lack of appreciation for the extent to which a research program ought to involve risk

Readers of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – will identify those 7 features as being definitive of a state of Groupthink where the mob rule in a group usurps reasonable practice and attention to facts.

The Them v Us mode is driven by arrogance and denial (Fernández-Villaverde epitomises the capacity to hype up nothing of substance).

Romer believes that the:

… the parallel is that developments in both string theory and post-real macroeconomics illustrate a general failure mode of a scientific field that relies on mathematical theory … In physics as in macroeconomics, the disregard for facts has to be understood as a choice.

A choice to avoid the facts, which are contradictory to one’s pet theory, is equivalent to fraud!


There are New Keynesians who still strut around the literature and the Internet claiming to still be relevant. Some are even advising political parties (for example, the British Labour Party).

The problem is that these theories cannot provide insights of any value about the world we live in for the reasons that Paul Romer discusses and other critics have offered.

The DSGE brigade are really captured in their own Groupthink and appear incapable of seeing beyond the fraud.

That is enough for today!

(c) Copyright 2017 William Mitchell. All Rights Reserved.


Mainstream macroeconomic fads – just a waste of time


主流のマクロ経済流行 - 時間の浪費

主流の経済学専門家は保守派からの注目に値する介入のいくつかとそれほど保守的でない少数の経済学者を除いて危機の間あまり話していません。一般的に、彼らは何を言うことができますか?まったくありません。彼らが推論するために使用する枠組みは深く欠陥があり、そしてマクロ経済レベルでは現代の通貨経済の運用上の現実とは関係がありません。借金返済(プログレッシブ)でさえも、賢明な政策オプションをとらえる能力には限界があるという、株式流動の一貫性を打ち消すような様式化されたモデルを使用しています。このブログでは、主流の経済学者の間で現在流行しており、最近のPaul Krugmanの攻撃でその支持者の一人によって強く擁護されているニューケインジアン理論について説明します。ブログはちょっととんでもない。


Paul KrugmanのNew York Timesの記事「経済学者はどうやってそれを間違ったのか」への返信を読んだとき、私は今週ニューケインジアン経済学を思い出した。 Krugmanへの攻撃は、著名なシカゴ大学ニューケインジアンのJohn Cochraneによるものでした。 Krugmanの記事は9月2日に発表されたが、返信は2009年9月12日付けのものだった。






あなたがそれについて考えるならば、現代の金融理論は本質的に主流のマクロ経済学に関してコクランがKrugmanを言っているように構成するのと同じ発言をしています。について書かれた、大学で教えられた、と考えられているマクロ経済学のほとんどは、平凡な通貨システムには適用できません。それは価値と価格の古典理論、19世紀後半の限界理論と貨幣理論、そしてより最近のアドオン(Cochraneはそれらを「摩擦」と呼ぶ - 古典の自由市場モデルへの)の調停である。ゴールドスタンダードの推論(またはそれに続く変換性)は、フレームワークに深く組み込まれています。

政府予算の制約が、既知の収入や借入能力によって決まる支出制約に直面している教科書のミクロ経済的消費者に似た政府に対する事前の財政的制約として働くと仮定しています。それはそれからこの誤った構成にシステムの個人の行動についての一連の仮定(読まれた:主張 - 通常経験的に反論されることができる)を課し、一般に、市場の調整を遅らせる摩擦によってさえ自由市場のような結果が政府の歪曲が課されていない限り、優勢である。





カロリンスカノーベル生理学医学賞、ノーベル文学賞アカデミー、ノーベル平和賞のためにノルウェー議会で選出される5人の委員会。 1968年、Sveriges RiksbankはAlfred Nobelを記念してSveriges Riksbank経済学賞を創設しました。スウェーデン王立科学アカデミーは1969年から経済学賞受賞者を選ぶ任務を与えられました。





この記事の大部分は、増え続ける敵のリストに対する、個人的な攻撃であり、Olivier BlanchardやGreg Mankiwなどの「新しいKeyenesians」が含まれています。プロの文章を書くのではなく、彼はメディアのインタビューからの文脈外の中古の引用で落とし穴を演じています。彼は、人々の口頭で彼らの書面による意見に反する言葉を大胆に入れながら、ものを詰め込みます。これでも十分ではありません。彼は自分の「敵」を愚かに見せようとするために漫画を追加し、それらを虚偽の恥ずかしい状況にしています。彼は文字通り私たちを支払いのためのアイデアを採用し、「フーバー機関のサバティカル」と太った「ウォール街給料」のために売り払ったと非難します。それは少し妄想的に思えます。

さて、コクランとは一線を画すことなく、「原文のプロの執筆」を検討して、ニューケインジアンモデルを検討する価値がない理由を説明します。以下のいくつかは私のブログの先の尖端にあります。そのうちのいくつかは、序文で述べたJoan Muyskenとの私の最近の本から取られています。







デヴィッド・ゴードンの1972年の著書 『貧困と失業の理論』を読むことができます。正統派、過激派、および二重労働市場の展望(Lexington Books)は興味深い - 彼は、理論構造を棄却にさらすという異常に直面したときに、正統派がいかに自らを再発明し続けているかを追跡している。それは私の学生時代とポストグレード時代の私のお気に入りの本の1つです。今週のGood Guysオファーは学生用電子機器です。








Marc Lavoieの2006年の記事(「金融政策に関する新しいコンセンサスのポストケインジアン改正」、Metroeconomica、57(2)、165-192)は例外です。





NKのアプローチは、正統的なマクロ経済学者の間で浮上している新しいコンセンサスの基礎を提供しました。このアプローチの典型的な表現は、Oxford University Press発行のCarlinとSoskiceの2006年の著書Macroeconomics:不完全性、制度、政策にあります。









私のいわゆる経済学「教育」では、私はこのような無数の記事を読んだことがあります - 人類に利益をもたらすものは何も言わない。私はチェスをするのが好きです。私はいつもそれに付随するすべての数学を含む経済学における私のいわゆる教育は、退屈なバージョンではあるがチェスをすると考えていました。








このアプローチと矛盾しないように、債券は1期間のみ発行され、このアプローチにおける資金の役割は取引を円滑にすることだけです。言い換えれば、NKのアプローチは、私たちをケインズ以前の、数量理論の時代へと導きます。そこでは、お金は支払い手段と会計単位としてのみ使用されます。これに関する古典的な貢献は、Buiter(2006年「金融政策の目的としての物価安定のとらえどころのない福祉経済学。なぜ新しいケインジアン中央銀行家はコアインフレを検証すべきか」、ECBワーキングペーパーシリーズ、609番ではない)およびWoodford(2006年) 、「金融政策の実施にお金はありますか?」、カナダ経済学部ワーキングペーパーNo 1104、クイーンズ大学、カナダ)。


端的に言うと、NK IS関係は、ゼロインフレーション定常状態周辺の時間間最適消費に対するオイラー条件の近似から導き出されます。通常は自然水準からの乖離の観点から提示され、安定化金利、つまりウィクセルの自然金利を、総需要を自然産出レベルy *に等しくするレートr *として暗黙的に定義します。


問題は、このモデルに恒久的な需要シフトがあるとr *が変化するという事実であり、これは結果として一時的な需要ショックが恒久的な需要ショックとは異なる影響を与えることを意味します。したがって、金融政策に影響を与えます(Marc Lavoie、2006年もこの点を指摘しています)。

第二に、ニューケインジアンフィリップス曲線が重要です。 NKフィリップス曲線は期待期待値フィリップス曲線によく似ています。後者はフリードマンとフェルプスから受け継がれた自然レート理論に基づいています。ですから、インフレと失業の間に長期的なトレードオフはありません(そして短期的にはおそらくトレードオフはほとんどありません)。そして失業が高すぎると考えるならば、財政政策を使ってトレードオフを強制しようとする政府の試みはありません。インフレを引き起こすだけです。





しかし、Calvoの価格設定では、遅れたインフレが元のFriedmanの概念の基本であった現在のインフレに影響を与えることは許されていません。 Carlin and Soskice(2006:608)は以下のことを適切に観察している。


この異常の結果として、アドホースリーは争いの中に入ります。 NKは、マクロ経済学の応用世界では通常、産出とインフレの間に遅れた依存関係が考慮されることを認識していた。主な正当化は経験的です。

しかし、最初の原則からこれをモデルに組み込もうとするのは事実上不可能です。 NKのエコノミストは、この課題を解決したことはありません。その代わりに、とにかく遅れたインフレを導入するだけです。ほとんどの主流の理論体系と同様に、彼らはいわゆるミクロ経済的厳格さに基づいて美徳を主張しているが、その「厳格さ」が現実と遠隔的に矛盾するものを提供することに失敗したときに指摘される異常に応える。


とにかく、それはあなたがインフレを安定させるならばあなたが自動的に産出ギャップを安定させるという(アドホック)モデルから得られます。 NKアプローチの支持者たちは、この結果が福祉の観点からも効率的であると主張することによって、この構築された論理から徳を主張しています。

しかしBlanchard、O. and J. Gali(2005)( '実質賃金の硬直性と新しいケインジアンモデル'、NBER Working Paper Series、no 11806)はこれがNKモデルにおける「神の偶然の一致」であると主張したが不完全さの欠如の結果。 Blanchard and Gali(2005:3)は次のように述べています。


だからあなたはすぐに推論のパターンを手に入れる。問題に直面すると、NKエコノミストは真の賃金の硬直性の形でBlanchard and Gali(2005)によって提案された別の特別な解決策を持ち出し、それは同時に同時に神の一致を排除する。













米国経済におけるインフレーションダイナミクスに関する文献調査で、Rudd and Whelan(4ページ)は次のように述べています。

…データは実際にはこれらのモデルによって暗示されている種類の合理的な将来展望行動のための重要な役割の非常にわずかな証拠を提供します。 (Rudd、J. and K. Whelan(2005)「インフレーションダイナミクスのモデリング:最近の研究の批評的レビュー」、FEDSワーキングペーパー、2005年 -  66年)


…得られた結果は、合理的期待仮説が課されず、インフレ期待が直接測定されれば、NKPCがユーロ圏のインフレダイナミクスを捉えることができることを示唆しています。 (Paloviita、M.(2006)「ユーロ圏のインフレダイナミクスと期待の役割」、Empirical Economics、31、847-860)




しかし、最悪の例は失業を説明しようとするものです。さまざまな著者が労働市場の動態を紹介し、賃金設定プロセスに特別な注意を払っています。分析に労働市場の摩擦や賃金の硬直性などの実社会の譲歩を含むNKモデルに誘惑されるべきではありません。彼らの焦点は主に失業率が議論されていない状態でのインフレの決定要因にある(例えば、Blanchard and Gali、2005)。





マクロ経済学者は、キッドランドとプレスコットの1982年の論文の永遠の正当性を賞賛するのに30年を費やしていません。私たちが30年間行ってきたことのほとんどは、欠陥、摩擦、そして新しい行動、特にリスクに対する新しい態度のモデルを導入し、結果として得られたモデルをデータと定量的に比較することです。 Krugmanが言及していない金融危機と銀行取引に関する長い文献は、まさにこの入札を行っています。



The mainstream economics profession is not saying much during the crisis apart from some of the notable interventions from conservatives and a few not-so conservative economists. In general, what can they say? Not much at all. The frameworks they use to reason with are deeply flawed and bear no relation at the macroeconomic level to the operational realities of modern monetary economies. Even the debt-deleveraging (progressives) use such stylised models which negate stock-flow consistency that their ability to capture sensible policy options are limited. This blog discusses New Keynesian theory which is a current fad among mainstream economists and which has been defended strongly by one of its adherents in a recent attack on Paul Krugman. The blog is a bit pointy.

In our recent book Full employment abandoned, we have a section on the so-called new Keynesian (NK) models and we argue that they are the latest denial of involuntary unemployment, in a long list of efforts that the mainstream has offered over the years. Each effort fails but they never give up.

I was reminded of New Keynesian economics this week when I read the vituperative reply to Paul Krugman’s New York Times article How Did Economists Get It So Wrong? The attack on Krugman came from prominent Chicago University New Keynesian John Cochrane. Krugman’s article came out on September 2 while the reply was dated September 12, 2009.

I may write a specific blog about this dispute but many readers have asked me to comment on where New Keynesian models might fit into modern monetary theory of macroeconomics. So I thought I might briefly provide some ideas on that theme in this blog.

The short answer to the question is: Nowhere. New Keynesian models are irrelevant to anything useful.

But I am sure you will want some substance to back up that conclusion. So here it is.

Cochrane opens with this salvo. He says of Krugman’s piece that:

Most of all, it’s sad. Imagine this weren’t economics for a moment. Imagine this were a respected scientist turned popular writer, who says, most basically, that everything everyone has done in his field since the mid 1960s is a complete waste of time. Everything that fills its academic journals, is taught in its PhD programs, presented at its conferences, summarized in its graduate textbooks, and rewarded with the accolades a profession can bestow, including multiple Nobel prizes, is totally wrong. Instead, he calls for a return to the eternal verities of a rather convoluted book written in the 1930s, as taught to our author in his undergraduate introductory courses. If a scientist, he might be a global-warming skeptic, an AIDS-HIV disbeliever, a stalwart that maybe continents don’t move after all, or that smoking isn’t that bad for you really.

If you think about it modern monetary theory is essentially making the same statements about mainstream macroeconomics as Cochrane constructs Krugman as saying. Most of the macroeconomics written about, taught in universities, thought about is inapplicable to a fiat monetary system. It is a concoction of classical theory of value and prices, late C19th marginal theory and monetary theory, and more recent add-ons (Cochrane calls them “frictions” – to the free market models of the classics). Gold Standard reasoning (or the convertibility that followed) is deeply embedded in the framework.

It assumes a government budget constraint works as an ex ante financial constraint on governments analogous the textbook microeconomic consumer who faces a spending constraint dictated by known revenue and/or capacity to borrow. It then imposes on this fallacious construction a range of assumptions (read: assertions – assumptions can usually be empirically refuted) about the behaviour of individuals in the system and generally concludes, that even with frictions slowing up market adjustments, free market-like outcomes will prevail unless government distortions are imposed.

That body of analysis and teaching is a disgrace and I would hardly judge the veracity of an idea by the fact that the proponent holds a Nobel Prize in Economics. The awarding institution is hardly an unbiased arbiter of truth and reason.

As an aside, if you go to the Nobel Prize home page you will see the following headings – Nobel Prize in Physics, Nobel Prize in Chemistry, Nobel Prize in Medicine, Nobel Prize in Literature, Nobel Peace Prize, Prize in Economics.

Did you spot the missing attribution in the case of Economics? To understand why you have to go back to the original arrangements that were made in the will of Alfred Nobel. Here is what the organisation tells us:

In his last will and testament, Alfred Nobel specifically designated the institutions responsible for the prizes he wished to be established: The Royal Swedish Academy of Sciences for the Nobel Prize in Physics and Chemistry, Karolinska Institute for the Nobel Prize in Physiology or Medicine, the Swedish Academy for the Nobel Prize in Literature, and a Committee of five persons to be elected by the Norwegian Parliament (Storting) for the Nobel Peace Prize. In 1968, the Sveriges Riksbank established the Sveriges Riksbank Prize in Economics in Memory of Alfred Nobel. The Royal Swedish Academy of Sciences was given the task to select the Economics Prize Laureates starting in 1969.

So the economics award was not even part of the original deal but came from the Swedish central bank who must have been upset that my profession was considered less worthy. The fact is that the economics profession is not worthy of this sort of accolade given the state of its theorising and worth to humanity. Mainstream economists hinder human potential and human progress although they allow some individuals to become extremely wealthy at the expense of millions of others.

Anyway, Cochrane’s last sentence above is classic mis-association. The mainstream has never come to terms with Keynes’ General Theory (that is the “rather convoluted book” he is referring to above). While I do not think much of the General Theory, it does successfully expose the irreconcilable flaws in the existing macroeconomic theory of the day (1930s). I should add that the elements of this discredited theory now form the mainstream core of economic reasoning again.

But then to associate that with global-warming denial, AIDs-denial, etc is poor logic and is suggestive of worse to come. And it surely comes.

Cochrane then continues:

Most of the article is just a calumnious personal attack on an ever-growing enemies list, which now includes “new Keyenesians” such as Olivier Blanchard and Greg Mankiw. Rather than source professional writing, he plays gotcha with out-of-context second-hand quotes from media interviews. He makes stuff up, boldly putting words in people’s mouths that run contrary to their written opinions. Even this isn’t enough: he adds cartoons to try to make his “enemies” look silly, and puts them in false and embarrassing situations. He accuses us literally of adopting ideas for pay, selling out for “sabbaticals at the Hoover institution” and fat “Wall street paychecks.” It sounds a bit paranoid.

Okay, without going word-for-word against Cochrane I thought I would show you, by examining the “source professional writing”, why New Keynesian models are not worth considering. Some of what follows is at the pointy end of my blogs. Some of it is taken from my recent book with Joan Muysken noted in the introduction.

I have already written several blogs showing the association between the 1994 OECD policy agenda and the abstract and flawed NAIRU models developed by various economists in the later 1980s and beyond. You will find a host of links HERE

The OECD Jobs Study articulated a microeconomic reform agenda aimed at the supply-side of the labour market based on the false presumption that unemployment was a attribute of individual failure (poor attitutes or skills and policy distortions) rather than a systemic failure (not enough jobs due to deficient aggregate demand).

The accompanying macroeconomic policies that emerged in the 1990s (after the monumental failure of the Milton Friedman-inspired Monetarist “monetary targetting” experiment in the 1980s), were in the form of inflation targeting which have seen monetary authorities narrowly focusing on inflation and largely ignoring the consequences of this obsession for the real economy.

In taking such a narrow view of macroeconomic policy governments have eschewed the use of fiscal policy as the best weapon for reducing unemployment. They have increasingly advocated the virtues of budget surpluses, even if in some cases, cyclical events have proven their views to be wrong.

The NAIRU paradigm that was laid out in the late 1980s has dominated this area of economic literature and provided the authority to policy makers to pursue the supply side activism. However, the mounting empirical anomalies and theoretical critiques seriously dented its image of respectability within the mainstream profession, particularly in the USA.

However, the orthodox economics paradigm has shown considerable flexibility when confronted with empirical anomaly, somewhat like the Lernean Hydra.

You might find David Gordon’s 1972 book Theories of poverty and underemployment; orthodox, radical, and dual labor market perspectives (Lexington Books) interesting – he traces how orthodoxy keeps reinventing itself when confronted with an anomaly that exposes the theoretical structure to rejection. It is one of my favourite books from my student and postgrad days. Good Guys offers are student electronics this week.

In this context, while the NAIRU paradigm has struggled to survive the policy failures that it had motivated (persistent unemployment and rising poverty), a new theoretical edifice, the NK approach, has emerged.

The NK approach has provided solace to an orthodoxy that continues to deny the existence of involuntary unemployment and instead wishes to reassert the flawed prognostications embedded in Quantity Theory and Says Law.

The NK approach is the most recent orthodox effort to attempt reconciliation between macroeconomic theory and what is alleged to be microeconomic rigour (markets clear to give optimal outcomes based on decentralised decisions by rational and maximising individuals).

I note that in general, the literature that has aimed to develop “microeconomic underpinnings” of extant macroeconomic theory, typically aims to hijack any non-orthodox macroeconomic ideas back into the orthodox market-clearing, long-run neutral framework. The money neutrality framework asserts that in the long-run fiscal policy has no real benefits but causes inflation. It is a highly flawed framework.

The NK theory is a quintessential expression of this tradition. Importantly, from a policy perspective, the NK approach is also the most recent theoretical structure to be co-opted by orthodox policy makers to justify inflation targeting.

Despite the fact the NK approach is fast becoming an industry in academic and policy making circles it has received very little critical scrutiny in the literature.

Fellow Post Keynesian and modern money sympathiser, Marc Lavoie’s 2006 article (‘A post-Keynesian amendment to the new consensus on monetary policy’, Metroeconomica, 57(2), 165-192) is an exception.

Anyway, in the spirit of Heracles and Iolaus, it is necessary to expose some of the glaring anomalies that you will find in the NK models.

There are three major conclusions to be drawn from this literature:

  • The so-called microfoundations of New Keynesian models are not as robust as the various authors would like to claim;
  • The so-called Keynesian content of the models should be taken with a grain of salt;
  • The rationale these models provide to justify their claim that tight inflation control leads to minimal labour market disruption is highly contestable. The only reasonable conclusion is that the approach has no credibility in dealing with the issue of unemployment and cannot reasonably be used to justify aggregate policy settings.

But to understand these conclusions you need to examine the approach in more detail.

New Keynesian models

The NK approach has provided the basis for a new consensus emerging among orthodox macroeconomists. A typical representation of this approach is found in Carlin and Soskice’s 2006 book Macroeconomics: imperfections, institutions and policies, published by Oxford University Press, where you read in their preface that:

Consensus in macroeconomics has often been elusive but the common ground is much wider now than has been the case in previous decades … There is broad agreement that a fully satisfactory macroeconomic model should be based on optimizing behaviour by micro agents, that individual behaviour should satisfy rational expectations and that the model should allow for wage and price rigidities … The three equations … [summarising the model] … are derived from explicit optimizing behaviour on the part of the monetary authority, price setters, and households in imperfect product and labour markets and in the presence of some nominal rigidities.

NK theory thus attempts to merge the so-called Keynesian elements of money, imperfect competition and rigid prices with the real business cycle theory elements of rational expectations, market clearing and optimisation across time, all within a stochastic dynamic model.

Simpflifying NK theory is easy despite its deliberate complexity. I am reminded of a beautiful section in a book by American economist (and Marxist) Paul Sweezy who wrote in 1972 in the Monthly Review Press an article entitled Towards a Critique of Economics.

He argued that orthodoxy (mainstream) economics in recent times had:

… remained within the same fundamental limits” of the C19th century free market economist. He said they had “therefore tended … to yield diminishing returns. It has concerned itself with smaller and decreasingly significant questions … To compensate for this trivialisation of content, it has paid increasing attention to elaborating and refining its techniques. The consequence is that today we often find a truly stupefying gap between the questions posed and the techniques employed to answer them.

He then cites a wonderful example of mainstream written reasoning which the modern NK economists would be proud off. It is taken from Debreu’s 1966 mimeo on Preference Functions. Here is is for some light relief:

Given as set of economic agents and a set of coalitions, a non-empty family of subsets of the first set closed under the formation of countable unions and complements, an allocation is a countable additive function from the set of coalitions to the closed positive orthant of the commodity space. To describe preferences in this context, one can either introduce a positive, finite real measure defined on the set of coalitions and specify, for each agent, a relation of preference-or-indifference on the closed positive orthant of the commodity space, or specify, for each coalition, a relation of the preference-or-indifference on the set of allocations. This article studies the extent to which these two approachas are equivalent.

In my so-called economics “education” I have read countless articles like this one – saying nothing about anything that will be of any benefit to humanity. I like playing chess. I always thought of my so-called education in economics with all the mathematics that came with it to be playing chess although a boring version.

Anyway, NK has all this sort of complexity and obtuseness and more.

But we can simplify it to three basic equations that purport to capture the essential nature of the economic system.

First, the New Keynesian IS equation. This is the relationship that brings investment (I) and saving (S) together to ensure there is full capacity utilisation in the long-run (so Says Law holds).

What is not always recognised is that in most NK models, the micro foundations of the IS curve allow neither savings nor investment to play any role. This is usually motivated by the fact that in real business cycle models the capital stock is typically ignored because any flux in investment and resulting changes to the stock of productive capital to externally imposed “productivity shocks” (which are the way RBC theories claim business cycles occur) actually has little bearing on the dynamics of their models.

As a consequence of this glaring omission, the so-called intertemporal IS relation (the across time conjunction between investment and saving) is derived using intertemporal utility maximising behaviour by consumers, who face a trade-off between consumption and leisure.

The nominal rate of interest then equates the nominal intertemporal marginal rates of substitution in consumption, such that consumption can be smoothed out over an individuals’ life time.

It is assumed that individuals can always borrow and lend at the prevailing interest rate to implement their life-time consumption plan. Thus, while savings and investment may take place at the individual level, they are assumed to cancel out at the aggregate level because all income is assumed to be consumed. So there are no capital market constraints on anyone.

To be consistent with this approach, bonds are issued for one-period only and the role of money in this approach is only to facilitate transactions. In other words, the NK approach takes us back to the pre-Keynes, Quantity Theory era where money is used only as a means of payment and a unit of account. Classic contributions in this regard come from Buiter (2006 ‘The elusive welfare economics of price stability as a monetary policy objective. Why new Keynesian central bankers should validate core inflation’, ECB Working Paper Series, no 609) and Woodford (2006 ‘How important is money in the conduct of monetary policy?’, Department of Economics Working Papers No 1104, Queens University, Canada).

The reality is that none of the NK models handle money in a way that remotely corresponds to the dynamics and operational realities of a modern monetary economy based around a fiat currency.

Getting pointy, the NK IS relation is derived from an approximation of the Euler condition for intertemporal optimal consumption around a zero-inflation steady state. It is usually presented in terms of deviations from natural levels and implicitly defines the stabilising interest rate – that is, the Wicksellian natural rate of interest – as the rate r* that equates aggregate demand to the natural level of output y*.

So the Austrian influence creeps in here.

Problematic is the fact that when there is a permanent demand shift in this model r* changes which means that as a consequence a temporary demand shock, has a different impact compared to a permanent demand shock, since the latter leads to a change in r* and hence has an impact on monetary policy (Marc Lavoie, 2006 makes this point too).

Second, the New Keynesian Phillips curve is important. The NK Phillips curve bears a close resemblance to the Expectations Augmented Phillips curve, the latter being based on natural rate theory inherited from Friedman and Phelps. So there is no long-run trade-off between inflation and unemployment (and maybe very little trade-off in the short-run) and any attempts by the government to use fiscal policy to enforce a trade off if they consider unemployment is too high will only cause inflation.

However, as a result of the NK Phillips curve being derived from so-called optimising behaviour, its coefficients have a specific interpretation. Firms are assumed to employ so-called Calvo price-setting, which has become the standard NK approach.

Accordingly, under monopolistic competition only a fraction of firms set their prices in the current period. The remainder of firms keep their price at the level of the previous period. Optimal consumer and producer behaviour implies that the (log of) the deviation of marginal costs plus mark-up on prices from its normal level is proportionally related to the (log of) deviation of output from its natural level.

All this means is that there are adjustment lags imposed on the normal natural rate story and which allow short-run trade-offs between inflation and unemployment to occur.

But Calvo price-setting does not allow lagged inflation to influence current inflation which was basic in the original Friedman conception. Carlin and Soskice (2006: 608) aptly observed the:

NKPC brings back rational expectations into the inflationary process, but it throws out the baby (the empirical fact of inflation inertia) with the bath water of non-rationality.

As a result of this anomaly, ad hocery enters the fray. NKs quickly recognised that in the applied world of macroeconomics there is usually a lagged dependence between output and inflation taken into account. The primary justification is empirical.

But trying to build this in to their model from the first principles that they start with is virtually impossible. No NK economist has picked up this challenge, and instead they just introduce lagged inflation anyway. So like most of the mainstream body of theory they claim virtue based on so-called microeconomic rigour but respond to anomalies that are pointed out when that “rigour” fails to deliver anything remotely consistent with reality, with ad hoc (non rigourous) tack ons.

So at the end of the process there is no rigour at all – using rigour in the way they use it which is, as an aside, not how I would define tight analysis.

Anyway, it follows from the (ad hoc) model that if you stabilise inflation then you automatically stabilise the output gap. The proponents of the NK approach claim virtue from this constructed logic by asserting that this outcome is also efficient from a welfare perspective because their model is underpinned with optimising microfoundations.

But while Blanchard, O. and J. Gali (2005) (‘Real wage rigidities and the new Keynesian model’, NBER Working Paper Series, no 11806) claimed that this was a “divine coincidence” in the NK model it only occurs as a result of the absence of imperfections. Blanchard and Gali (2005: 3) then stated that the:

… optimal design of macroeconomic policy depends very much on the interaction between real perfections and shocks … [and] … Understanding these interactions should be high on macroeconomists’ research agendas.

So you quickly get the pattern of reasoning. When confronted with a problem the NK economists bring out another ad hoc solution as was proposed by Blanchard and Gali (2005) in the form of real wage rigidities, which clearly also eliminates the divine coincidence at the same time.

Third, the New Keynesian monetary rule completes their system.

Without attempting to understand how central banks actually operate, New Keynesians derive their monetary rule (which is just an interest rate setting reaction function) by assuming that the central bank minimises a loss function in which both deviations of inflation from its target value and deviations of output from its natural level play a role, subject to the Phillips curve discussed above.

They also assume that the central bank can control aggregate demand using the interest rate, through the IS relationship. So they have a sort of Taylor rule such as the real interest rate set equals the natural interest rate plus some function of the inflation gap plus some function of the output gap (output out of sync with the potential).

So the models are always represented in real terms, whereas the central bank can only set the nominal interest rate. To get around that problem they presume that the central bank can observe both the natural output level and the natural rate of interest correctly.

It follows analytically that in the NK models, the central bank will only achieve its target inflation rate when it correctly estimates both the natural output and the natural rate of interest levels correctly – a tall order one would suspect.

The deficiencies of the New Keynesian approach

The alleged advantage of the NK approach is the integration of real business cycle theory elements (intertemporal optimisation, rational expectations, and market clearing) into a stochastic dynamic macroeconomic model.

But it is obvious that notwithstanding the air of rigour, the NK results are still always conjunctions of abstract starting assumptions and ad hoc additions to make any traction with reality.

This indicates an important weakness of the NK approach. The mathematical solution of the dynamic stochastic models as required by the rational expectations approach forces a highly simplified specification in terms of the underlying behavioural assumptions as we have already indicated in our description of the standard model.

But the ability of these models to say anything about the actual operations of central banks is severely compromised by the highly simplistic behavioural assumptions employed, notwithstanding Friedman’s long-standing appeal to empiricism.

The empirical credibility of the abstract NK models is questionable. This holds, in particular, for the NK Phillips curve and its potential to represent real world inflation dynamics.

In their survey of the literature on inflation dynamics in the US economy, Rudd and Whelan (page 4) observed:

… the data actually provide very little evidence of an important role for rational forward-looking behavior of the sort implied by these models. (Rudd, J. and K. Whelan (2005) ‘Modelling inflation dynamics: a critical review of recent research’, FEDS working papers¸ no 2005-66)

Further, after finding similar results for the Euro area, Paloviita (page 858) concluded that the

… results obtained suggest that NKPC can capture inflation dynamics in the euro area if the rational expectations hypothesis is not imposed and inflation expectations are measured directly – we find evidence that lagged inflation seems to be needed to properly explain the persistence of European inflation. (Paloviita, M. (2006) ‘Inflation dynamics in the euro area and the role of expectations’, Empirical Economics, 31, 847-860)

There are many similar studies that have exposed these sort of weaknesses in NK models.

Clearly, the claimed theoretical robustness of the NK models has to give way to empirical fixes, which leave the econometric equations indistinguishable from other competing theoretical approaches where inertia is considered important. And then the initial authority of the rigour is gone anyway.

This general ad hoc approach to empirical anomaly cripples the NK models and strains their credibility. When confronted with increasing empirical failures, proponents of NK models have implemented these ad hoc amendments to the specifications to make them more realistic. I could provide countless examples which include studies of habit formation in consumption behaviour; contrived variations to investment behaviour such as time-to-build , capital adjustment costs or credit rationing.

But the worst examples are those that attempt to explain unemployment. Various authors introduce labour market dynamics and pay specific attention to the wage setting process. One should not be seduced by NK models that include real world concessions such as labour market frictions and wage rigidities in their analysis. Their focus is predominantly on the determinants of inflation with unemployment hardly being discussed (for example, Blanchard and Gali, 2005).

Of-course, the point that the NK authors appear unable to grasp is that these ad hoc additions, which aim to fill the gaping empirical cracks in their models, also compromise the underlying rigour provided by the assumptions of intertemporal optimisation and rational expectations.

The NK approach is another program of theoretical work designed to justify orthodox approaches to macroeconomic policy, in this case the virtues of inflation targeting. In the orthodox tradition, it also denies the existence of involuntary unemployment. However, it categorically fails to integrate its theoretical structure with empirical veracity.


So after appreciating that, you will be better placed to read and dismiss Cochrane’s response to Krugman. His characterisation of what economists have been doing for the last 30 years is as follows:

Macroeconomists have not spent 30 years admiring the eternal verities of Kydland and Prescott’s 1982 paper. Pretty much all we have been doing for 30 years is introducing flaws, frictions and new behaviors, especially new models of attitudes to risk, and comparing the resulting models, quantitatively, to data. The long literature on financial crises and banking which Krugman does not mention has been doing exactly this bidding for the same time.

The literature that has been produced bears no relation to the modern monetary economies that most of us live in and also categorically failed to see the crisis coming.

A friend calls this literature La-La land. Not a bad description.