Happy Planet?

Sometimes words just fail me

Happy Planet Index

I genuinely thought this was an elaborate joke when I first came across it. It still wouldn't surprise me if someone popped up with the internet equivalent cry of 'April Fool'.

Resistance is Futile

On p.218 Krugman states that" "If I had to summarize Ball's position, I would say that he suggests that Bernanke was assimilated by the Fed Borg.." Whatever you think of his economic analysis, you have to respect a Nobel Laureate who can work a Star Trek metaphor into his argument. However, I do think he has missed a trick here - Bernanke is not just any Borg - he is Locutus of Borg, created specifically to speak for the collective and to prepare the rest of us for assimilation.

Paul Krugman on Fiscal Expansion

I have just finished reading Paul Krugman's book:

End this Depression Now

I find myself basically in sympathy with the general thesis but worry that he makes it all sound a bit too easy. In particular, I would be worried about extending his arguments for fiscal expansion from the US to the UK without significant modification. A fiscal expansion would create problems for the British economy because of the larger share of trade in the economy and the much larger marginal propensity to import than is the case for the US economy. Put simply, we can't afford to forget about the Balance of Payments (even though we seem to have been doing exactly that during the recent past).

Rationality in Economics

The following is an interesting online debate about the assumption of rationality in economics:

http://crookedtimber.org/2011/09/24/the-poverty-of-rationality/#more-21757

http://newmonetarism.blogspot.com/2011/08/john-quiggin.html

For what it's worth my sympathies are with Quiggin. Williamson makes the following extraordinary statement:

"Like the "efficient markets hypothesis," DSGE has no implications, and therefore can't be wrong. Indeed DSGE encompasses essentially all of modern macroeconomics. Which of our models is not dynamic, with uncertainty (and therefore stochastic), and with some equilibrium concept."

If DSGE genuinely has no implications and 'cannot be wrong' then it is not a valid scientific programme. Only falsifiable hypotheses can be considered scientific so Williamson's statement by definition rules DSGE out as a scientific programme.

Moreover this is an extraordinarily broad definition. Most Keynesian income-expenditure models are (1) dynamic (2) contain some degree of uncertainty and (3) have an equilibrium concept. However, no-one on either side of the debate would consider referring to these as DSGE.