Exploring General Equilibrium Quotes

“In principle, we can estimate and even test the general equilibrium model. ...

In practice, we probably won't try to estimate or test the most general version of the model. The costs of gathering detailed data on tastes and technology, and of experimenting with the economy, are too high. If we decide not to test the general equilibrium model, I think we should keep it around to help organize our thinking about stylized facts and other data.”
― Fischer Black, Exploring General Equilibrium

“I think it's better to 'estimate' a model than to test it. I take 'calibration' to be a form of estimation, so I'm sympathetic with it, so long as we don't take seriously the structure of a model we calibrate. Best of all, though, is to 'explore' a model. This means creating many specific examples of a general model, where each one explains a single stylized fact or perhaps a few features of the world. It means using some of these examples to elucidate microeconomic evidence.”
― Fischer Black, Exploring General Equilibrium

“Those who do use models consistent with general equilibrium add assumptions that make their models much more specific. They may still aim for models general enough to explain many things, but they speak of 'identifying restrictions,' or restrictions that make it possible to 'reject' the models by looking at conventional economic data. I like creating more specific models, too, but only when I have strong economic reasons for the restrictions I add.”
― Fischer Black, Exploring General Equilibrium

“Estimation' suggests a Bayesian approach to data, while 'testing' suggests a classical approach. I prefer estimation, since I think researchers who want to test often choose models that are more specific than the economics require. They talk of adding restrictions for no reason other than making their models easier to reject.”
― Fischer Black, Exploring General Equilibrium

“I try to say things clearly. this means confronting the work of others directly, rather than citing it and moving on. It means a nonacademic writing style. It sometimes means stating as fact things that are clearly opinion. No doubt the reader's glasses differ from mine. But we are all looking at the same world, and the technology for making glasses is constantly improving. Someday it will all be clear.”
― Fischer Black, Exploring General Equilibrium

“Many of the models in the literature are not general equilibrium models in my sense. Of those that are, most are intermediate in scope: broader than examples, but much narrower than the full general equilibrium model. They are narrower, not for carefully spelled out economic reasons, but for reasons of convenience. I don't know what to do with models like that, especially when the designer says he imposed restrictions to simplify the model or to make it more likely that conventional data will lead us to reject it. The full general equilibrium model is about as simple as a model can be: we need only a few equations to describe it, and each is easy to understand. The restrictions usually strike me as extreme. When we reject a restricted version of the general equilibrium model, we are not rejecting the general equilibrium model itself. So why bother "testing" the restricted version? If we reject it, we will just create another version.”
― Fischer Black, Exploring General Equilibrium