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Truth and knowledge | LARS P. SYLL
The relation of knowledge to power is one not only of servility but of truth. Much knowledge, if out of proportion to the disposition of forces, is invalid, however formally correct it may be.If an émigré doctor says: 'For me ... is a patological case', his pronouncement may ultimately be confirmed by clinical findings, but…
Models and evidence in economics | LARS P. SYLL
Analogue-economy models may picture Galilean thought experiments or they may describe credible worlds. In either case we have a problem in taking lessons from the model to the world. The problem is the venerable one of unrealistic assumptions, exacerbated in economics by the fact that the paucity of economic principles with serious empirical content makes…
Keynes and Knight on uncertainty | LARS P. SYLL
First, Knight and Keynes derive from their different philosophical worldviews distinct definitions of uncertainty. Keynes’s is a wholly epistemic uncertainty concept (see Packard and Clark, 2020), the ignorance of an actor regarding the objective and knowable (a priori) probabilities of future outcomes. Such probabilities are discoverable by learning the underlying ‘probability-relations’ between causes and effects.…
Solving a simple DP problem (student stuff) | LARS P. SYLL
. In case you want to solve the problem yourself, here's a Python script yours truly made (assuming the utility function is of the natural log kind and with some explicit numerical parameterization): import numpy as np import matplotlib.pyplot as plt # Parameters beta = 0.9 # Discount factor r = 0.1 # Depreciation rate…
Best advice to an aspiring economist — don’t be an economist! | LARS P. SYLL
A science that fails to reflect on its own history and neglects critical methodological and theoretical questions about its practice is a science in crisis. As early as 1991, a commission led by Anne Krueger—featuring esteemed economists such as Kenneth Arrow, Edward Leamer, and Joseph Stiglitz—highlighted a fundamental weakness in graduate economics education. Drawing from…
Models of uncertainty | LARS P. SYLL
Post Keynesian authors have offered various classifications of uncertainty ... A common distinction is that of epistemological versus ontological uncertainty, with the former depending on the limitations of human reasoning and the latter on the actual nature of social systems ... Models of ontological uncertainty tend to hinge on the existence of information that is…
Daniel Waldenström — Sveriges egen Dr Pangloss | LARS P. SYLL
Idag presenterades LO:s årliga rapport om inkomstskillnader i vårt land -- Makteliten: i raketfart från verkligheten. Den visar att näringslivets direktörslöner fortsätter att dra ifrån rejält och idag ligger på en historiskt hög nivå. Den genomsnittliga inkomsten för vd:arna vid de 50 största svenska företagen motsvarade år 2023 mer än 70 industriarbetarlöner. Men för vår…
Keynes’ critique of econometrics is still valid | LARS P. SYLL
Mainstream economists often hold the view that Keynes' criticism of econometrics resulted from a sadly misinformed and misguided person who disliked and did not understand much of it. This is, however, nothing but a gross misapprehension. To be careful and cautious is not the same as to dislike. Keynes did not misunderstand the crucial issues…
Knapsack problem (student stuff) | LARS P. SYLL
. And, yes, there is a strong connection between the knapsack problem and Bellman's principle of optimality through dynamic programming, which leverages the principle of optimality to break the problem into smaller subproblems and build up the solution ...
Open letter to my students | LARS P. SYLL
Yours truly has a reputation for being tough on grading students. It is true. I am tough. And for a reason. Social science is hard. Getting a grade in it is not something you have a right to. You have to show that you master the material. You have to earn it! One of the…
What is wrong with game theory | LARS P. SYLL
Back in 1991, when yours truly earned his first PhD with a dissertation on decision making and rationality in social choice theory and game theory, I concluded that "repeatedly it seems as though mathematical tractability and elegance -- rather than realism and relevance -- have been the most applied guidelines for the behavioural assumptions being…
Dynamic Programming for Dummies (student stuff) | LARS P. SYLL
. Dynamic programming is a cornerstone of optimal control theory. By recursively breaking down complex problems into smaller, more manageable subproblems, it serves as a powerful tool in economics. Economic analysis often involves decisions with long-term consequences, and dynamic programming helps model how different agents make optimal choices when each decision depends on the current…
The Pygmalion syndrome and the failings of modern economics | LARS P. SYLL
As Lars Syll wrote here last month, too much of the profession “has since long given up on the real world” and is happy to investigate the “thought-up worlds” of unrealistic economic models. Too much attention is focused on how the parts of the model fit together, rather than on how well the models fit …
Om ‘statsbudgetpolis’ och otillräckliga räntesänkningar | LARS P. SYLL
Sällan eller aldrig har man anledning vara nöjd med ekonomijournalistiken i press, radio och television. Ytterst få ekonomijournalister och börsanalytiker tar sitt jobb på allvar och bedriver ekonomisk journalistik värd namnet. De flesta av oss har därför sedan länge gett upp. Synd bara att allmänheten ska behöva nöja sig med det tyckmyckentrutade nonsens näringsliv och…
What is a good economic model? | LARS P. SYLL
Whereas increasing the difference between a model and its target system may have the advantage that the model becomes easier to study, studying a model is ultimately aimed at learning something about the target system. Therefore, additional approximations come with the cost of making the correspondence between model and target system less straight- forward. Ultimately,…
Econometrics — a ‘realist’ critique | LARS P. SYLL
A popular idea in quantitative social sciences is to think of a cause (C) as something that increases the probability of its effect or outcome (O). That is: P(O|C) > P(O|-C) However, as is also well known, a correlation between two variables, say A and B, does not necessarily imply that one is a cause…
John Nash and the limits of game theory | LARS P. SYLL
. John Nash made groundbreaking contributions to game theory, particularly through his development of the concept of the Nash Equilibrium, which became a cornerstone of the analysis of strategic interactions in economics. Late in his life Nash, however, also came to be aware of a fundamental methodological weakness of game theory. Overemphasizing the reach of…
Om detta må vi berätta | LARS P. SYLL
Vi talar ofta i dag om tilltagande kriminalitet, sämre hälsa och ökade psykiska problem. Men nästan aldrig om vad dessa symptom i hög grad är orsakade av -- arbetslösheten. 8,5% arbetslöshet är den högsta på ett decennium och sysselsättningsgraden har successivt sjunkit sedan 80-talet. Detta har lett till en ökning av främst otrygga jobb och…
How evidence is treated in mainstream macroeconomics | LARS P. SYLL
'New Keynesian' macroeconomist Simon Wren-Lewis has a post on his blog discussing how evidence is treated in modern macroeconomics (emphasis added): It is hard to get academic macroeconomists trained since the 1980s to address this question, because they have been taught that these models and techniques are fatally flawed because of the Lucas critique and…
‘Autonomy’ in econometrics | LARS P. SYLL
The point of the discussion, of course, has to do with where Koopmans thinks we should look for "autonomous behaviour relations". He appeals to experience but in a somewhat oblique manner. He refers to the Harvard barometer "to show that relationships between economic variables ... not traced to underlying behaviour equations are unreliable as instruments…
Social sciences — a plaidoyer | LARS P. SYLL
One of the most important tasks of social sciences is to explain the events, processes, and structures that take place and act in society. However, the researcher cannot stop at this. As a consequence of the relations and connections that the researcher finds, a will and demand arise for critical reflection on the findings. To…
Ofrivillig arbetslöshet — ett politiskt val | LARS P. SYLL
Trots sin 30-åriga frånvaro i praktiken lever målet om full sysselsättning kvar i retoriken. Social-demokraternas nya partiprogram anger till exempel att full sysselsättning bör vara det övergripande målet för den ekonomiska politiken. För att det ska bli mer än tomma ord behöver den ekonomiska politiken läggas om. Vi föreslår följande. 1. Låna till investeringar Det enklaste…
Starta Pressarna om MMT | LARS P. SYLL
. I veckans avsnitt av Starta Pressarna försöker Daniel Suhonen och Max Jerneck att -- tillsammans med Peo Hansen och yours truly -- reda ut vad MMT (Modern Monetär Teori) är för något och varför så många nationalekonomer ännu idag fortfarande håller fast vid teorier och modelller om pengar som verkligheten sedan länge sprungit förbi.…