Post Walrasian Macroeconomics: Beyond the Dynamic Stochastic General Equilibrium Model

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
List of Contributors......Page 9
Foreword......Page 15
THE ROLE OF INFORMATION......Page 16
MODEL UNCERTAINTY......Page 19
SOCIAL AND ECONOMIC INTERACTION AND NOTIONS OF EQUILIBRIUM......Page 21
CONCLUSION......Page 22
Introduction......Page 25
ALTERNATIVE MACROECONOMIC RESEARCH PROGRAMS......Page 26
The Walrasian Question and the DSGE Synthesis......Page 28
THE POST WALRASIAN QUESTION......Page 31
THE DIFFERENT QUESTIONS POSED......Page 33
THE DIFFERENT TOOLS AND MODELS USED......Page 34
IS THE TIME RIPE FOR A POST WALRASIAN MACRO?......Page 38
IS POST WALRASIAN THE CORRECT NAME FOR THE NEW DEVELOPMENTS IN MACRO?......Page 39
THE ROLE OF THIS VOLUME......Page 40
CONCLUSION......Page 46
PART I WHERE WE ARE IN MACRO AND HOW WE GOT THERE......Page 49
WICKSELL AND FISHER......Page 51
CAPITAL THEORY......Page 52
THE METAMORPHOSIS OF NEOCLASSICISM......Page 53
MARSHALL’S AGENTS......Page 55
KEYNES......Page 56
HOW ECONOMISTS UNDERSTAND THE WORLD THEN AND NOW......Page 58
ON KEYNES’S PROBLEMS AND PROBLEMS WITH KEYNES......Page 59
LOSING TRACK......Page 61
THE MONETARIST CHALLENGE......Page 63
NAIRU......Page 65
COMPLETING THE METAMORPHOSIS: RATIONAL EXPECTATIONS......Page 66
A POST WALRASIAN MACROECONOMICS?......Page 68
A SMALL POSTSCRIPT......Page 69
CLASSICAL MACROECONOMICS......Page 70
THE KEYNESIAN REVOLUTION......Page 74
THE NEOCLASSICAL/NEOKEYNESIAN SYNTHESIS......Page 77
Dissent......Page 81
Why the Dissident Views Were Lost......Page 83
PRECURSORS OF THE NEW CLASSICAL REVOLUTION......Page 84
THE NEW CLASSICAL REVOLUTION......Page 87
THE NEW SYNTHESIS......Page 91
BEYOND THE NEW SYNTHESIS: POST WALRASIAN MACROECONOMICS......Page 93
3 The Problem of Time in the DSGE Model and the Post Walrasian Alternative......Page 94
Classical Economics and Time......Page 95
The Twentieth Century......Page 97
The Post Walrasian View......Page 100
CONCLUSION......Page 103
4 Who Is Post Walrasian Man?......Page 104
THE VIEW FROM THE LAB......Page 107
THE VIEW FROM THE THEORIST’S OFFICE......Page 111
THE VIEW FROM THE FIELD......Page 115
PART II EDGING AWAY FROM THE DSGE MODEL......Page 119
5 Social Interactions and Macroeconomics......Page 121
A Baseline Model......Page 122
Multiple equilibria......Page 125
Social multipliers......Page 126
Identification and the Reflection Problem......Page 127
Self-selection......Page 128
Unobserved Group Effects......Page 130
Economic Growth......Page 132
Fluctuations......Page 135
CONCLUSIONS......Page 139
6 Macroeconomics and Model Uncertainty......Page 140
General Ideas......Page 142
Macroeconomics and Forecast Errors......Page 144
Implications for Empirical Practice......Page 145
Expectations......Page 146
Preferences......Page 149
MODEL UNCERTAINTY AND POLICY EVALUATION......Page 152
AN EXAMPLE......Page 155
CONCLUSIONS......Page 158
7 Restricted Perceptions Equilibria and Learning in Macroeconomics......Page 159
TOWARDS AN EQUILIBRIUM CONCEPT CONSISTENT WITH MUTH......Page 161
Muth’s Rational Expectations Hypothesis......Page 163
Misspecification Consistent with the Model: Restricted Perceptions Equilibrium......Page 166
Related Equilibrium Concepts......Page 168
EXTENDING THE RPE: MISSPECIFICATION EQUILIBRIUM (ME)......Page 170
Cobweb Model......Page 173
Lucas Model......Page 176
A Simple Model......Page 179
Misspecification Equilibrium with No Policy......Page 181
Misspecification Equilibrium with Optimal Policy......Page 182
CONCLUSION......Page 183
8 Not More So: some Concepts Outside the DSGE Framework......Page 185
EFFECTS OF UNCERTAIN CONSEQUENCES OF CHOICES WITH EXTERNALITY......Page 187
Multiple Equilibria......Page 190
The Conventional Wisdom......Page 191
DISTRIBUTION OF CLUSTER SIZES, AND ENTRIES BY NEW TYPES OF AGENTS OR GOODS......Page 192
Ultrametrics......Page 193
CONCLUDING REMARKS......Page 194
PART III LEAPING AWAY FROM THE DSGE MODEL......Page 197
9 Agent-based Computational Modeling and Macroeconomics......Page 199
THE BASIC ACE METHODOLOGY......Page 202
FROM WALRASIAN EQUILIBRIUM TO ACE TRADING......Page 211
Walrasian Bliss in a Hash-and-Beans Economy......Page 212
Plucking Out the Walrasian Auctioneer......Page 214
The ACE Trading World......Page 215
Defining ‘‘Equilibrium’’ for the ACE Trading World......Page 217
CONSTRUCTIVE UNDERSTANDING......Page 220
Strategic Rivalry......Page 221
Procurement Support......Page 222
Interactions among Attributes, Institutions, and Behaviors......Page 223
CONCLUDING REMARKS......Page 224
10 Multi-agent Systems Macro: A Prospectus......Page 227
SOME PHILOSOPHY OF EMERGENCE: RESULTANT VS. EMERGENT......Page 228
MAS AS MICROFOUNDATIONS......Page 229
Agent Heterogeneity, Parametric and Behavioral......Page 231
Behavioral Realism: Taking Experimental Economics to the Social Level......Page 232
Direct Interaction: Peers, Neighborhoods, Networks......Page 233
Putting the Pieces Together......Page 234
Emergence: Multi-Agent Norms, Conventions, Institutions......Page 236
Emergence: Macroregularity, Microadaptation......Page 237
The Need for Very Large-Scale MAS......Page 238
MAS MACRO VS. ANALYTICAL MACRO......Page 239
Estimating MAS Macromodels......Page 240
SUMMARY: WHITHER ANALYTICAL MACRO?......Page 241
Agent Computing: Substitute or Complement?......Page 242
Reform or Revolution?......Page 243
11 Agent-based Financial Markets: matching Stylized Facts with Style......Page 245
EMPIRICAL FEATURES......Page 246
EMPIRICAL EXAMPLES......Page 248
AGGREGATION AND BEHAVIOR......Page 256
CONCLUSIONS......Page 258
PART IV LETTING THE DATA GUIDE THEORY......Page 261
12 The Past as the Future: the Marshallian Approach to Post Walrasian Econometrics......Page 263
The Cowles Commission Program......Page 264
The Lucas Critique......Page 265
The Sims Critique......Page 267
An Uneasy Alliance......Page 269
Walrasian Methodology......Page 270
Marshallian Methodology......Page 272
Synthetic Microanalysis......Page 273
Econometric Examples......Page 275
AFTER WALRASIAN ECONOMETRICS......Page 280
13 Old World Econometrics and New World Theory......Page 282
BACKGROUND......Page 283
STRUCTURE AND REDUCED FORM IN RATIONAL EXPECTATIONS MODELS......Page 284
THE OLD WORLD APPROACH......Page 285
A NEW WORLD TWIST......Page 286
STRUCTURE AND REDUCED FORM......Page 287
THE LUCAS CRITIQUE AND NEW WORLD THEORY......Page 289
LACK OF IDENTIFICATION AND ITS CONSEQUENCES......Page 290
DISCRIMINATING BETWEEN DETERMINATE AND INDETERMINATE MODELS......Page 292
A MORE CONCRETE EXAMPLE......Page 294
POLICY CHANGE AS A NATURAL EXPERIMENT......Page 297
WHICH PARAMETERS ARE IDENTIFIED?......Page 298
CONCLUSION......Page 299
14 Four Entrenched Notions Post Walrasians Should Avoid......Page 301
ENTRENCHED NOTIONS IN MACROECONOMETRICS......Page 302
THE IMPORTANCE OF COMPREHENSIVE TESTING OF MODELS......Page 304
CONCLUSION......Page 310
INTRODUCTION......Page 311
EXTENDING THE DSGE MODEL TO A STATE SPACE MODEL......Page 312
MODEL BUILDING AND THE ROLE OF MAXIMUM LIKELIHOOD......Page 315
Which Statistical Model to Choose?......Page 319
HOW RELIABLE ARE ASYMPTOTIC RESULTS WITH A NEAR UNIT ROOT?......Page 321
CONCLUDING DISCUSSION......Page 323
INTRODUCTION......Page 325
INFLATION AND MONEY GROWTH......Page 327
The Status of Variables......Page 330
The Notion of Shocks......Page 331
Persistence and the Notion of Stochastic and Deterministic Trends......Page 332
The Notion of Equilibrium......Page 334
Causality......Page 336
PULLING AND PUSHING FORCES IN THE CO-INTEGRATED VAR......Page 337
The Pushing Forces......Page 340
The Pulling Forces......Page 342
The Role of Expectations......Page 344
DEDUCTIVE INFERENCE: EXTRACTING INFORMATION FROM THE DATA......Page 345
INDUCTIVE INFERENCE: A EUROPEAN VIEW ON EMPIRICAL MACRO......Page 350
CONCLUSIONS......Page 353
PART V POLICY IMPLICATIONS......Page 357
17 Economic Policy in the Presence of Coordination Problems......Page 359
Coordination Game......Page 360
ECONOMIC POLICY......Page 361
Government Policy in a Coordination Game......Page 362
Optimal Government Policy......Page 364
Social Interactions: the Reflection Problem......Page 365
Technological Complementarities......Page 366
Creating or Destroying Multiplicity......Page 368
Government Policy and Identification Revisited......Page 369
CONCLUSION......Page 370
SOME BACKGROUND......Page 371
1. Interest-rate Rules......Page 374
2. The Harrod Problem......Page 378
3. Keynes Cagan Tobin Instability......Page 380
4. Uncertainty-Avoidance by the Private Sector......Page 382
5. Learning-induced Volatility......Page 384
6. Monetary Theory and Policy......Page 385
7. Inflation Targeting......Page 388
CONCLUSION......Page 391
Bibliography......Page 393
Index......Page 425