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Can you drop some jargon, names and references for
  • any general equilibrium modeling that involves a small number of equilibria with well behaved dynamics requires absurdly heroic assumptions (is that Arrow-Debreu?)
  • the invalidity of using marginalist modeling of macroeconomic aggregates

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Sun Mar 22nd, 2009 at 04:20:00 AM EST
[ Parent ]
Ackerman 1999 (pdf) does a good job of covering the (separate) work of Mantel and Debreu in 1974, elaborating on the work of this german guy whose name I can only remember by copying it from a source.

The collapse of aggregate marginalist modeling of the economy emerged into economic theory in the Cambridge Capital Controversies, when Sraffa's "Making Things Using Things You Made" (sic) was used to demolish the aggregation of heterogeneous real capital (productive equipment) to determine the real interest rate, since heterogeneous real capital defined in real terms cannot be guaranteed to give a capital supply curve heading up and to the right ...

... of course, aggregate demand for spending on heterogeneous real capital can be defined as a schedule determined based on a nominal interest rate, as Keynes did in the General Theory, but then the interest rates is an input to the productive sector from the finance sector (the price of liquidity), money is not neutral, and we are tossed into the real world where the economy does not automatically trend to full employment.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Mar 22nd, 2009 at 11:48:33 AM EST
[ Parent ]


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