"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK
- A good post by Ryan Murphy on realistic and unrealistic assumptions. I'm not sure I agree with him on the reasonability or unreasonability of every point here, but it's a good post. While I sympathize with Friedman a great deal, I'm not entirely on board with his "ends justify the means" positivism, and part of the reason why that's not exactly my own "pragmatist" (for lack of a better word) approach is that I'm also not on board with logical deductionists who feel dependent on solid axiomatic foundations. Friedman says "if the conclusion is good, then the assumptions work for me". The deductionists say "if the assumptions are good, the conclusion will work". My view is "we are providing an explanation of the world and the whole explanation - from assumption to conclusion - will never be perfect but it needs to be plausible enough to be useful in understanding the world". So it's somewhat in between the two. Our assumptions ought to be similar to the kind of world we want to understand. Our conclusions ought to be similar to the kind of world we want to understand. I don't think it's appropriate to opt for one of those options like the positivists or the deductionists do. I do think if you've got a reasonable starting point and a reasonable ending point you are very likely to have a good model for thinking about the world. To the extent that you don't have one or the other, it seems very likely to me that the apparent "reasonableness" of either your conclusions or your assumptions is coincidental.
- A good post by DeLong on finance.
- A good post by Steve Waldman cautioning us about NGDP targeting. As I think I've said before, I'm cautiously supportive too.
More Musings on "Monetary Economics"
2 hours ago