Pissing Down Your Leg

Thoughts on Economics and Economic Policy

Archive for February 2012

The Needed Assumptions of DSGE

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Noah Smith has a great post on whether or not macroeconomic models are biased in one political direction or the other. He reaches the (correct, in my opinion) conclusion that they do have a conservative bias, mainly because they are so simplified that there can be no useful role for government.

I think the most useful post is the list of assumptions in the original Kydland and Prescott Real Business Cycle paper. With so many assumptions, that model is basically useless. Smith goes on to point out that if you relaxed even the ones that are most problematic (in my opinion: representative agent modeling, rational expectations, and flexible prices) you quickly get a model that is completely unwieldy.

Why so use these models at all? They are mathematically complex, they are micro-founded (sort of), and they give little to no role for government.

Personally, I didn’t like these models when I learned them, and I still don’t find them useful. Give me a partial-equilibrium model with a little more realism any day.


Written by Liam C Malloy

February 21, 2012 at 10:37 am

Posted in Uncategorized

Libertarians and Feminism

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I just came across two different posts that show libertarians uncomfortable stance toward feminism. The first was from Noah Smith showing that Peter Thiel thinks that allowing women to vote was a bad thing (at least for libertarians).

The second was from Mike Konczal that showed how uncomfortable women’s rights and female sexuality made Ludwig von Mises.

From a purely philosophical point of view, you would think that libertarians would welcome feminism as it increased the amount of freedom in the world by opening up new opportunities and giving new rights to half the population.

But libertarians (often, not always) seem to worry about protecting the rights and liberties of themselves and people like them, rather than extending them to others. Thus we end up with misogynistic and racist white male libertarians. One question is how women and minorities can feel comfortable in these groups.


Written by Liam C Malloy

February 13, 2012 at 4:35 pm

Posted in Libertarians