I've been reading a lot of post-Keynesian material for my Macro Political Economy class (starting Monday), and like any heterodox school the readings have a lot of discussion of history of thought and institutional history. One of the old debates was over aggregation.
One of the striking things is that the fights that post-Keynesians were involved in about this several decades ago (and perhaps that Austrians at that time were involved in too?) were largely over the technical questions around aggregation: can you aggregate meaningfully?
After reading a lot of this, I can't help but feeling like the modern critics of aggregation are a lot more superficial in the more literal sense of the word "superficial" that they're just worried that you miss important sub-aggregate processes when you aggregate that have a story to tell.
Friday, August 24, 2012
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Specially what debates?
ReplyDeleteShould note though that an Austrian did summarize some of the debates between the neoclassicals and the neo Ricardians (who were the people representing the Cambridge UK school) and then offering a critique of it. Check out Ludwig Lachmann's paper "Macro-economic Thinking and the Market Economy" (it's free online)
Sorry I mean "specifically what debates"
DeleteWho are the "modern critics of aggregation" that you specifically refer to, Daniel Kuehn?
ReplyDeleteAlso, I wouldn't buy too deeply into Post Keynesian economics. Whilst they have made some interesting contributions, they tend to define uncertainty as "complete ignorance", when uncertainty modelled on the weight of evidence index is actually less than unity, but GREATER than nil.
As you know, Daniel Kuehn, they have made some questionable decisions with regard to their academic publications.
Dr. Michael Emmett Brady has pointed out, their depiction of Keynes's D-Z model is incorrect. They also lack the training to understand A Treatise on Probability, and they often rely on the erroneous book reviews written by Frank P. Ramsey.
Dr. Michael Emmett Brady has written an article with Rogerio Arthmar correcting the erroneousness of the Post Keynesian school on Keynes's logical theory of probability. It shall appear in Italy's History of Economic Ideas, and finally detail the mechanics of Keynes's probability theory.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1546726
Nevertheless, Dr. Michael Emmett Brady has given credit where it's due to Post Keynesian icon Hyman Minsky in the following book reviews.
http://www.amazon.com/review/R2JR6TLJJ3Y6UY/
http://www.amazon.com/review/R263ZHZI949TZQ/
http://www.amazon.com/review/R34SWL4LIXU3O6/
Keep in mind that if the debates he is referring to are the neo Ricardians (like Robinson or the like) they don't view uncertainty like that the Post Keynesians.
DeleteAlso, I don't think any PKian are as skeptical to "certainty" like that of George Shackle. It is true though that most are heavily influenced by Shackle's writings but that doesn't mean they agree with it
I'm afraid I have to disagree with it. Post Keynesianism has been accused of nihilism before, and in a lot of contexts, Paul Davidson seems to use "uncertainty" in the sense of complete and total ignorance. I'm afraid that Post Keynesians consider the weight of evidence to be nil in all cases, which isn't really true in practice.
DeleteThanks for clarifying who Daniel Kuehn was referring to though, Isaac.
There are certainly two distinctly different problems with aggregation. There is the concern about missing what's occurring within the aggregates that concerns Austrian economists. And, there's also the problem of whether the aggregates can be properly analyzed. This is an "axiom of choice" type problem. Can we definitively say what "money", for example, is? No, not really, but it's possible to zero in on the problem quite closely in practice. All of them have this kind of problem.
ReplyDeleteAt present I'm quite interested in how real investment is defined. The investment aggregate is properly called net capital formation. It measures all producer goods output (net of destruction of producer goods) that are not consumed in some other process within a year. How depreciation is done here is a tricky point. Destruction of fixed capital to make other fixed capital is considered here (that's why it's a net figure). There are lots of practical problems too. I'd love to know how statisticians have deflated the cost of the two spectrum analyzers I have at work. How would the improved features of something like that be considered? I expect in practice that lots of the investment aggregate is approximated at cost (ie real=nominal) or deflated by components of the investment aggregate that can be easily dealt with.
One of the most interesting aspects of Post Keynesian thought is the rejection of the Neo-Classical and Austrian obsession with microfoundations. On the contrary, they rightly point out that it's just as likely that aggregate analysis actually encapsulates more than the individual components themselves do as vice versa. Indeed, by ignoring the "macrofoundations of microeconomics", Neoclassicism and the Austrian School have made the same type of error in turning to "microfoundations".
ReplyDelete