FWIW, in the recent discussion I did not mention neoclassical economics, except in passing. In one case, I used a neoclassical theory (the theory of the second best) against crude free-market ideas. In the other, I referred to the "neoclassical worship of equilibrium conditions as being some kind of underlying reality," but you can drop the word "neoclassical" (and replace it with "orthodox" or "mainstream") without changing the phrase's meaning.
I've defined neoclassical economics (as I see it) but I won't do so again here. The point is that my criticism was instead of the crude and reified application of mathematical economics, specifically as applied to finance. That mathematics helps us understand the world ... except when it doesn't. Notable is the fact that in all of the defense of orthodox finance theory, Julio never mentions the crucial contributions of Keynes, e.g., his theories of "betting on a beauty contest" and the game of "snap" (musical chairs). I think both of those contribute ten times more to our knowledge of financial markets (specifically, bubbles and their popping) than anything the advocates of the EMH have said. On Wed, Mar 5, 2008 at 3:29 PM, Julio Huato <[EMAIL PROTECTED]> wrote: > Doyle Saylor wrote: > > > You can't cite transformation then say this. > > The difficulty on lists is not appealing to > > young people but finding the way together. > > Jim and you don't propose how to resolve > > disconnect, or contradiction. Which while > > not realistic to expect on my part is where > > the tension lies. Not disagreement. > > I humbly admit that my ability to transform myself and others is > pretty limited. With due respect, I'm not sure I want to follow Jim > to wherever he fancies to shift the subject. > > Too ping pongy. My initial post replied to Gene's remark on economics > being sterile, finance being fruitful and opposite to economics. Jim > jumped in, taking literal shots at my reply, parsing it paragraph by > paragraph, even taking some paragraphs apart -- thereby missing the > message. To be sure, a bit of parsing is okay. Too much parsing > sprays the discussion into all directions. Some of the issues require > a bigger effort to straighten out than I am willing to make. I can > give it a try, but at some point I just need to move on. > > This morning, when I checked the list archives, I found Gene's > response to my reply and wanted to reflect on it a bit. It was about > the disconnect in definitions. I even thought about sharing something > about my background, including the not-so-relevant fact that my > teacher of "modelos matemáticos" back in 1984 was the beautiful wife > (now widow) of the recently diseased actor Sergio Corrieri (Memorias > del Subdesarrollo, etc.). I couldn't. Jim's long reply was there. I > read it and felt I had to address at least some part of it. So I got > sidetracked. > > Anyway, recently, Max made an ironic remark. This is America and > we're all entitled to our own definitions. These are limits of our > communication. Like a bridge, if one side falls, the whole bridge > collapses. I take my part of that. Here in the U.S. (New York City), > I've been on and off grad school (2 and then 5 years), professional > practice (4 years), and academia (3 years): 14 years altogether! > Almost half my life dealing with this stuff called "economics" as > understood here and now. Not in some far away galaxy, in some distant > past, but here and now. > > When Gene says "neo-classical" my idea of "neo-classical" doesn't > match his. (Same with Jim and others on PEN-L.) Gene seems to think > that "neo-classical" means "static." That's not my understanding. > More importantly, I'm sure that's not what most regular (not > necessarily progressive) economists today would think of if you say > "neo-classical." The notion I have is, I believe, the common usage > outside of PEN-L: In macro, "neo-classical" defines a very narrow > group of growth models. They share a few *postulates*, used to > simplify matters and keep the focus on certain general aspects of the > growth of an economy. *Per se*, nothing wrong with *that*. Here's > why: > > Take a discrete chunk of software code written ex professo to do a > certain computational task. Sure, you can assess that piece of code > in terms of its ability to do the task. But then you need to be > specific about the task. The task has to be well defined. And > sufficiently narrow. You cannot pretend that the task of a discrete > piece of code is to do everything computational -- to solve the > universal problem of computation. The "solution" to the universal > computational problem is the whole practical evolution of computer > science, software, and hardware in general. > > Without specifying the task, you can only judge a discrete piece of > code on the basis of its internal consistency. Does it have bugs? > Does it crash when you try to compile it? What corrections to the > code would debug it? Etc. Now, if you specify the task, then you can > measure how well it does that job at some expense. Etc. Similarly, > you cannot reject the neo-classical model because it's not fully > descriptive of the growth of real economies in their full complexity. > You cannot pull the standard against which to measure the quality of > the code off your hair. > > Back to the neo-classical theory, how pivotal are its postulates in > spitting out implications re. the big picture growth behavior of an > economy? As far as I can see, none of the most fundamental results of > economic theory today requires the "neo-classical" framework. None. > Let's go over them. The two big blocks of macro are growth and > business cycles (short-run). A more detailed list of the blocks > making up conventional micro would include: input-output choice > (technology/cost/profit), consumer choice, duality, inter-temporal > choice, uncertainty/risk, general equilibrium, econometrics, welfare, > externalities, public choice, agency, and mechanism design. Only > growth and intro to micro reasoning rely (out of convenience, not out > of necessity) on the "neo-classical" assumptions. All else doesn't > depend on them. So it doesn't seem right to me to equate conventional > or standard economics with *neo-classical* theory. > > To be more specific, in this context, "neo-classical" means that the > production function of the one good in the economy is Cobb-Douglas, > consumption is a fixed fraction of income, and little else. I mean, > that's drastic. But, in growth theory, fundamentally the same results > can be derived under more relaxed frameworks, letting consumption be > endogenously determined, etc. So, the neoclassical assumptions per se > happen to be unnecessary to derive the main conclusions of the most > general growth models (general-equilibrium growth models). > > Now, all these models are *dynamic*. They are growth models. They > highlight general aspects of the growth of an economy, the effect of > the accumulation of productive assets vis-a-vis technology, etc. > Cannot be static. What are the boundaries of "neo-classical" > economics according to Gene (or Jim)? Not clear to me. > > The other common reference point here is Marx. So I often refer to > Marx as well. Some things lend themselves easily to be cast in Marx's > conceptual framework. More often than not, the opposite is the case. > In many ways, at least on the strictly economic aspects of it, the > modern framework is more general and flexible than Marx's. That's > understandable. Hindsight is 20-20. Then, keep in mind that > "neo-classical" wasn't around when Marx lived. Neo-classical, > rational expectations, efficient markets, etc. are conventional terms > in wide use today. Marx is not. So we need to adhere to the > conventional definitions (or something close to them) or at least make > explicit what we mean by them. Otherwise it's two deaf people > screaming at each other. > > If I think it helps, I'll discuss things as best I can. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
