Monday, May 27, 2013

Interesting paper from a commenter numero tres

Also in an attempt to relieve my agony about macroeconomic endogeneity, Grant McDermott shares this interview with Tom Sargent that appears in Macroeconomic Dynamics in 2005. Grant especially likes this passage:
"My recollection is that Bob Lucas and Ed Prescott were initially very enthusiastic about rational expectations econometrics. After all, it simply involved imposing on ourselves the same high standards we had criticized the Keynesians for failing to live up to. But after about five years of doing likelihood ratio tests on rational expectations models, I recall Bob Lucas and Ed Prescott both telling me that those tests were rejecting too many good models."
I believe he made a similar point in this interview, which I linked when he got the Nobel.


  1. Quoting from the interview...

    "Any decision theory is a type of behavioral economics. It is not
    a type of bounded rationality. The decision maker is actually smarter than a
    rational expectations agent because his fear of model misspecification is out in the

    If Thomas Sargent can say something like this, why won't Daniel P. Kuehn take decision theory more seriously? ;-)

    1. Well, I'm not sure whether you take decision theory seriously enough. Granted, you have told me that you aren't particularly interested in it.

      But, readers, please see the following links in this following post, and see if Daniel P. Kuehn really takes findings in decision theory seriously enough. While this might come off as appealing to authority, regarding Daniel Ellsberg's findings and the subsequent literature that developed after Daniel Ellsberg's article was published in the November 1961 issue of The Quarterly Journal of Economics as "not a big deal" is quite a thing to say on your part, Daniel P. Kuehn.

      It seems that you may need to review the primary sources for Subjective Expected Utility decision theory - the writings by Italian mathematician Bruno de Finetti, the British prodigy Frank P. Ramsey, and the American statistician Leonard J. Savage...


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