Aug 31, 2014

Modern Macroeconomics: Its Origins, Development and Current State

I am rereading the book Modern Macroeconomics: Its Origins, Development and Current State (2005) by Brian Snowdon and Howard R. Vane. 
A few points:
  1. This is one of the first, and few, macroeconomics books that dedicated a chapter to Austrian economics.
  2. More than a macroeconomics textbook, I see it as a history of macroeconomic analysis (in the Schumpeter way). It starts with the classical approach, then with the orthodox Keynesian model, then the IS-LM model for an open economy, monetarism and son on. 
  3. The history of macroeconomics analysis is a history of revolutions and counterrevolutions. There are as well schools of thought that developed parallel to the "mainstream."
  4. There is some chronological overleaping as well, for example the Mundell-Fleming model was developed by the time the monetarism revolution was starting in the early 1960s. 
  5. The history of macroeconomic analysis is fascinating and the book makes it clear that it is an evolving field, and very likely what is in vogue today might well not be discuss in a few years - some current theories will be incorporated into the "mainstream," but not necessarily

Aug 28, 2014

El Amanecer de la Libertad

He leído algunos capítulos del libro El Amanecer de la Libertad de Carlos Sabino. Es un libro muy interesante sobre el pasado de Latino América.
El autor cuenta sobre el movimiento pendular en la historia latinoamericana entre caudillismo y libertad. El afán de libertad conduce a respuestas dictatoriales que motivan, a su vez, movimientos de liberación. La obsesión por el poder y la perpetuación en éste, ha sido constante en el pasado de América Latina.

El libro, o por lo menos los capítulos que he leído, deja la duda de por qué el gobierno federal se mantuvo y tuvo éxito en Estados Unidos, mientras que en Centroamérica, por ejemplo, fracasó. Esto puede verse a la luz de lo que Barry Weingast ha escrito sobre todo en el tema de “federalismo auto-sostenible” (self-enforcing federalism). Donde expone que los estados en Estados Unidos tenían sus propias leyes que de una forma u otra servían de contrapeso al abuso de poder del gobierno central. Los pesos y contrapesos fueron muy importantes para garantizar el funcionamiento de una democracia en Estados Unidos. Generalizando, Weingast sugiere que fue la facultad de los individuos para coordinar acciones de defensa ante el abuso de poder lo que contribuyó al éxito del sistema político estadounidense. Como corolario, podemos pensar que nuestra dificultad de coordinar en contra del abuso de poder en Latinoamérica pudo, o puede, estar obstaculizando un sistema efectivo de pesos y contrapesos. Mas fundamentalmente, aunque no lo suficiente, lo que puede estar pasando es que los incentivos no están alineados para que las estrategias compartidas, las normas y las reglas permitan que coordinemos en equilibrios mas eficientes.

En Latino América, estos movimientos pendulares siguen viéndose, aunque las cosas han mejorado mucho. Sin embargo hay ciertas fuerzas que generan optimismo. La tan acelerada globalización y el flujo de información, como nunca antes visto, pueden ser ejemplos de esas razones.

En todo caso, el lector puede aprender mucho de este libro, que, sobre todo, es una fuente útil de estimulación intelectual.

Aug 25, 2014

Coase on economics expansion

In the essay "Economics and contiguous disciplines" (1978) Ronald Coase wrote about how economists were extending their analysis into other disciplines. He was a great writer, and had a good sense of humor. He said:
What is the reason this is happening? One completely satisfying explanation (in more than one sense) would be that economists have by now solved all of the major problems posed by the economics system, and, therefore, rather than become unemployed or be forced to deal with the trivial problems which remain to be solved, have decided to employ their obviously considerable talents in achieving a similar success in the other social sciences. However, it is not possible to examine any area of economics which which I have familiarity without finding major puzzles for which we have no agreed solutions or, indeed, questions to which we have no answers at all. The reason for this movement of economists into neighbouring fields is certainly not that we have solved the problems of the economic system; it would perhaps be more plausible to argue that economists are looking for fields in which they can have some success. p. 37 (in the book).
For him, "the expansion" of economics was a good thing if it contributed to understanding economic systems better. In fact, he argued that only very few economists would be successful at influencing the way other social scientists see their own fields. 

Aug 22, 2014

Kindle versus paper books, ceteris paribus?

The researchers suggest that "the haptic and tactile feedback of a Kindle does not provide the same support for mental reconstruction of a story as a print pocket book does".
That is from an article by Alison Flood at The Guardian shared in Marginal Revolution

There is a minor point I would like to make, from a limited perspective. When comparing books and e-books, like Kindle-books, for example, we might be comparing different products. Let me tell what I mean. In several occasions I have bought Kindle books from rural areas in Guatemala. That means that from, lets say, Sipacapa, San Marcos, in the highlands (and that is far away from the capital) one can have in a matter of seconds a recent book from Amazon, for example, that might not be even available in bookstores in Guatemala City. Getting the same book in hard copy might take more time, may be weeks, and one might have to go to the customs office. So, basically, one can buy two or more e-books for the same amount of money that buys one book. Price differences probably exist as well even if one buys from a developed country. Frequently, having a Kindle e-book is, of course, better that not having the book at all. 
Wikimedia Commons
If other things are equal probably books are better that e-books, but things are not equal in the "real world." 

Aug 21, 2014

Challenges in social dilemmas

"Institutional arrangements can be understood as responding 
to a world in which there are some sociopaths and some saints, 
but mostly regular folks who are capable of both kinds of behavior."
Colin Camerer (in Ostrom, 2005: 124)

We are reading Understanding Institutional Diversity by Lin Ostrom (2005) in my institutional economics class. It is a slow read, specially the first two chapters where she sets up the theoretical framework. The framework is a guide to analyze social dilemmas (where there are incentives for individuals to pursue actions that are not socially beneficial -- prisoner's-dilemma-like situations). As the book evolves it gets deeper and very interesting. I am still on chapter four, and these two paragraphs called my attention especially:
Without farther progress in developing our theories and models of human valuation in social dilemma situations, those convinced that all human behavior can be explained using rational egoist models will continue to recommend Leviathan-like remedies for overcoming all social dilemmas. . .
In focusing on social dilemmas, we need to address how to focus on the role of norms and other-regarding preferences. Simply explaining puzzling findings post hoc, as "they must somehow share some norms," is not a satisfactory strategy in the log run. Focusing on norms and other-regarding preferences is not enough, however, to explain fully how individuals do overcome social dilemmas. Rules are needed to back up these norms (or counteract dangerously escalating negative reciprocity). We then need to dig into the analysis of institutions so that we can understand how individuals adopt norms as well as rules to overcome social dilemmas.
Both are in page. 120. 

In chapter four she explains what she means by norms. In the literature you will find many definitions of norms, institutions, and rules, and frankly in it can be quite confusing. Ostrom defines norms as "prescriptions held by an individual that an action or outcome in a situation must, must not, or may be permitted." p. 121. I see that definition as a clear starting point. She adds "[n]orms can definitely change behavior but may do not. Whether norms have an impact on behavior depends both on the strength of the norm and the context of the situation." p. 123

Chapter four ends with this:
When individuals learn the artisanship of crafting rules, they can experiment and learn to create more productive outcomes (as well as participants) over time. Learning to craft rules that attract and encourage individuals who share norms of reciprocity and trustworthiness, or who learn them over time, is a fundamental skill needed in all democratic societies.

Aug 20, 2014

Austrian models? Possibilities of evolutionary computation

The agents in a computational model need not be given much knowledge of one another, or of the model's working. They lack just as we in our world lack, any direct lines to the gods. They do not 'know the model' they are in, and need to struggle to learn what is going on. Agents like this might strike Austrian economists as somewhat interesting. We would not expect the virtual agents of such computational models ever to be terribly creative creatures, by our standards. They could be interpreted as creative for their world, however, in the sense that they will experiment with modes of behavior they stumble upon, learn from their experience and adopt the ones that seem to work. The set of all possible modes of behavior that are there to stumble into will be available only to the gods. This seems similar, in the relevant respect, to the circumstance in which  we mortals find ourselves within our world. pp 554-55.
That is a paragraph from the chapter "Austrian models? Possibilities of evolutionary computation" by Don Lavoie, in The Elgar companion to Austrian economics, edited by Peter Boettke (1994). Lavoie is obviously referring to Agent Based Models (ABM). 

Lavoie was a professor of Austrian economics, among other subjects, at GMU and influenced several important economists. He was interested in different approaches to understand society. The paragraph above is one example which tells about his interest in evolutionary computation. He was also interested in culture and economics, hermeneutics, among other fields. 

ABMs have been around for several years. One example is the Sugarscape model by Epstein and Axtell. Currently important macroeconomists are exploring those models to understand outcomes and dynamics that can not be explored by using standard macroeconomic models that usually assume homogeneous agents and equilibrium. See here an example of a project to develop an ABM for an economic crisis. Rajiv Sethi has a very interesting post on ABM vs Dynamic Stochastic General Equilibrium (DSGE) models.

Aug 17, 2014

Ronald Coase: Aportes y Método

Una de las partes que mas me gustó del libro Madmen, Intellectuals, and Academic Scribblers fue la discusión sobre Ronald Coase. Coase recibió el premio Nobel de Economía en 1991 por ayudarnos a entender el significado de los costos de transacción y derechos de propiedad en la economía. Su trabajo se caracterizó, en parte, por entender y aclarar las maneras en que los individuos pueden organizarse para resolver problemas de externalidades y proveer bienes públicos. 

Una de las cualidades de Coase en su método de estudio fue tratar de entender problemas "reales," en el sentido de que el "salío a la calle" y entrevistó a personas involucradas en ciertas industrias. Cosa que raramente hacen los economistas. Dado mi gusto por la antropología y la etnografía para entender mejor ciertos fenómenos económicos, Coase es un gran ejemplo. Sus entrevistas fueron importantes para su entendimiento sobre cómo los individuos pueden proveer bienes públicos, tal es el caso de su investigación sobre los los faros (aunque debo aclarar que varios de los escritos de Coase no se basaron en entrevistas, como es quizá el caso de su estudio sobre la Comisión Federal de Comunicaciones en Estados Unidos). Lo que a su vez, representó una crítica al gran economista Paul Samuelson quien proponía que los faros eran precisamente un ejemplo de un bien que no existiría sin provisión estatal. 

Uno de los aportes mas importantes de Coase fue su idea de que el espectro radioeléctico debe considerarse un bien económico como cualquier otro, y por lo tanto debe ser distribuido de acuerdo con la oferta y la demanda. Es posible que sin esta contribución de Coase tu no tendrías un teléfono celular. 

Un artículo reciente en el Journal of Institutional Economics hace una revision del trabajo de Coase, desde sus aportes a la teoría de la firma hasta sus último libro sobre China. Este es el abstract de dicho articulo:
Ronald Coase had a profound impact on scholarship worldwide, and not for his ideas alone. Coase's ideas about transaction costs, the nature of the firm, the role of government, and the problem of social cost have been hugely influential. Throughout his long life, he also worked to change the conduct of economics, urging economists to ground their conclusions in careful study of empirical reality rather than theories that work only on the blackboard. Less well known, perhaps, is his work to nurture and shape the emerging fields of law and economics and new institutional economics, or his support to young scholars studying institutional issues around the world. In his final years, he was preoccupied by the rapid transformation of China and the institutional structure of production. This article summarizes Coase's significant intellectual contributions to economics, pointing out along the way some of the traits that made him such a powerful thinker and exceptionally influential scholar.
El titulo es "El Impacto de Ronald Coase en la Economía," y fue escrito por Mary Shirley, Ning Wang, y Claude Menard.