Over at Equitable Growth: Slides for a Talk: Thoughts on Making a Better Economics: Daily Focus

https://www.icloud.com/keynote/AwBUCAESEDBM_vLkLCQgT0Nu6oV4ZSsaKde5vm771OMPZatz7f4g5QMkCxthNIhPQ4-dDpWFxltBtWRq4rjoXxe_MCUCAQEEIEnMxkSumJovn1H0CTuhapGtUDqrCSAHUbr3ycqNRe1P#2014-11-13_INET_Presentation.key

Over at Equitable Growth:

Economic Methodology, Economic History, and Economic Thinking##

Creating and supporting intellectual spaces in which insightful thoughts about how the economies of the present and the future work can be thought. As I see it, this requires combining a broad catholic range of empirical and theoretical inputs with effective quality control. But how? READ MOAR

Four Gaps:

Between what economists should say and what they do say
Between what economists do say among themselves and what they are heard to say outside the community
Between what economists are heard to say and what the public sphere concludes
Between what the public sphere concludes and what policies are actually implemented
Concentrate for now on the first two

What Went Wrong?:

In the development of economic theory
In the application of theory to policy before 2008
In the application of theory to policy since 2008
What economics was relevant?

Larry Summers and Martin Wolf at Bretton Woods
Bagehot, Minsky, Kindleberger
(Eichengreen, Akerlof, Woodford)

What Is Good and Bad Theory?:

Good theory is and can be nothing other than crystalized history
Microfoundations from first principles?

Paul Dirac's relativistic electron's magnetic moment: 1, 1.00118, 1.00115965221±4
Does this help us with protein folding and pharmaceutical molecule design?
Isaac Newton: "I can calculate the movement of the stars, but not the madness of men"

Lost £20000

True then, true now

Bad Theory:

Assuming infinitely-lived rational-expections representative agents
Waving your hands
Hoping that all heterogeneity and frictions will cancel out
Almost as bad theory

Assuming ILRERA
Adding one friction
Hoping that all other heterogeneity and frictions will cancel out

Robert Solow:

"Attaching a realistic or behavioral deviation to the Ramsey model does not confer microfoundational legitimacy on the combination"
"Quite the contrary: a story loses legitimacy and credibility when it is spliced to a simple, extreme, and... irrelevant special case"

Two Branches:

Creating space to build better economic theory * Better communicating economic theory
Second branch easier

Second Branch: Better Communicating Economic Theory:

What does history teach us?
Keynes: The End of Laissez-Faire

J.R. McCulloch's parrot
Triumph of the popularizers
Marketeers: markets are efficient, governments are incompetent or corrupt
In Keynes's day there were planners: governments harness collective purpose to technocratic plans, markets are wasteful

Need a grammar of forms of organization--market, hierarchy, plan, collective, yardstick competition, regulated monopoly, etc.--and when they work and when they do not
Consider that, historically, education, health, pensions, infrastructure, technology, security not amenable to market provision--and that those are growing

First Branch: Space to Build Better Economic Theory:

Knowledge of history the sine qua non
Catholic approach to modeling strategies--broadening the tool set
Somehow, exercising effective quality control