Liverpool 4 – Man U 1
Hell yes. Twice in one year – beautiful.
I don’t think we are in range to win the title – but this win has to give us hope.
Quote 19: Dani Rodrik on the problems of economics again
This was a quality quote (ht Economist’s View):
Paradoxically, then, the current disarray within the profession is perhaps a better reflection of the profession’s true value added than its previous misleading consensus. Economics can at best clarify the choices for policymakers; it cannot make those choices for them.
I have to admit – I agree with Dani Rodrik a more during a credit crisis than I do outside of one (although, it is a small sample 😉 ).
Note the last statement in the quote – we cannot make choices for policymakers. Why? Because it involves making value judgments we are ill equipped to make. I was concerned that economists had forgotten about this – but it turns out I was just looking at the wrong economists!
However, given his own argument – why did he term contemporary macro a failure? Is it because he thinks that the use of a scarce resource (time) in a role that isn’t offering the best social return is bad? I think we need someone to frame a potential incentive issue for macroeconomists here (wink wink Rauparaha 😉 )
The post March 09 MPS $NZ bounce
Realising that I am probably low on content Bill Bennet (his blog) gave me a question to write a post on:
Why did the NZ$ shoot up against the A$ when the official NZ interest rate dropped below Australia’s? The declared rate was pretty much the one anticipated and the $’s climb was dramatic.
There are two primary reasons:
- The recovery in the US market which was “increasing risk aversion” (yuck) at a similar time (and we are a “riskier dollar”),
- The distribution of expectations surrounding the rate cut.
Here is a picture with the bounce:
Source (NBNZ)
And below is the email I sent discussing the expectations issue.
LEANZ March 09 Wellington Seminar
Topic: Seeing the future: Prediction markets and the wisdom of crowds
Speaker: Matt Burgess, Chief Executive, iPredict
Date: Monday 23 March 2009
Venue: Level 17, Chapman Tripp, 10 Customhouse Quay, Wellington (please note that there is no access to the building after 6pm)
Time: Refreshments from 5:30pm, seminar at 6pm
RSVP: to: angela.bamford@bellgully.com (please note that an RSVP is not compulsory, but we would appreciate hearing from you if you plan to attend)
Topic
Prediction markets have been counted among the most intriguing institutional innovations of the last quarter-century. A prediction market is a share market for future events in any field, including politics, business, and social outcomes. Traders in a prediction market take a position on the likelihood or expected outcome of a future event. The market price that emerges from trading is the prediction, and reflects the wisdom of the crowd.
In the twenty years since their invention in the United States, prediction markets have developed an extraordinary forecasting record and have outperformed every competing forecasting institution, most notably election polling. Prediction markets have several characteristics that give them strong advantages over rival forecasting methods. They are robust to manipulation, they require only a few traders to produce excellent forecasts, they can be run using real or play money, and market-based forecasts are a low cost alternative to polling, experts and group deliberation.
Matt Burgess describes what prediction markets are and their history, shows that they are one example of a recent harnessing of the wisdom of crowds, compares their performance to a range of alternative forecasting methods, and looks at the performance of New Zealand’s real money prediction market iPredict since its launch in September 2008.
Speaker
- Matt Burgess is the Chief Executive of iPredict, the real money prediction market owned by Victoria University and the Institute for the Study of Competition and Regulation (ISCR). He is a Research Associate at the ISCR.
Crampton, Walker on policy
Over at Eric Crampton’s excellent blog he did a round up of NZ economic issues. In this round up he stated:
On the whole, Key’s National government has so far done a lot less harm than have others
I agree.
Paul Walker takes issue with this stating:
This government can, in my view, do a lot better than it is
I agree.
These guys are both completely right. The government has been relatively constrained in the face of the crisis, which given our priors is a good thing. However, the policies that they have put through just aren’t good policies as we have suggested here (as even if what they are aiming to do is the right thing to do – there are far better ways of doing it).
If I had to pick a position then I would say I’m currently with Paul – I would rather try to push the government towards optimal policies than accept that what they are doing is “relatively better”. If everyone was jumping off a cliff would I think it was a better policy for my friend to jump off into a relatively soft area or not to jump at all …
The failure of contemporary macroeconomic theory?
Macroeconomics may have incentive problems, and there may be a lot of room for improvement or refocus, but I think saying that “contemporary macroeconomic theory has failed” is going too far.
Now, I’ve shown myself to be no fan of some of the economics that has, and will, be performed – I quoted approvingly when Dani Rodrik said that some economists had abused the theory. Similarly I nodded my head when Arnold Kling said the same thing. When Agoraphilia pointed out that the “rational expectations hypothesis” is constrictively narrow (namely in how it treats beliefs and expectations) I jumped around in an orgy of agreement.
However, I don’t think we can call contemporary macroeconomics on its predictive failures and then not attack the rest of the economics discipline on similar grounds.