The Biggest Crock in All of Economics

This is the damage which Robert Lucas has done to macroeconomics:

Let’s deal with some of Mark’s specific complaints about what he thinks practicing macroeconomists have been up to:

Macroeconomic models have not fared well in recent years – the models didn’t predict the financial crisis…

I’m so sick of hearing that one I could . . . → Read More: The Biggest Crock in All of Economics

Frydman & Goldberg on Robert Lucas & F. A. Hayek

From Roman Frydman and Michael Goldberg’s new book Beyond Rational Markets: Asset Price Swings, Risk, and the Role of the State:

The problem that haunts the Rational Expectations Hypothesis is the same one that doomed socialist planning: no fully predetermined mechanism that drives market outcomes can, in principle, be uncovered. Basing the explanation of market . . . → Read More: Frydman & Goldberg on Robert Lucas & F. A. Hayek

macro: Willem Buiter on the Uselessness of “State of the Art” Macroeconomics

When Robert Lucas created modern “state of the art” macroeconomics, time and time again Lucas explained that he was attempting to recapture the pre-Keynesian “equilibrium” macroeconomics pioneered by Friedrich Hayek. But as any Hayekian will tell you (see the work of Roger Garrison, e.g. here, here, and here) Lucas essentially blew it. Lucas “didn’t get . . . → Read More: macro: Willem Buiter on the Uselessness of “State of the Art” Macroeconomics

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.. that central question of all social sciences: How can the combination of fragments of knowledge existing in different minds bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess? — F. A. Hayek

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