Monday, January 5, 2009

Macroeconomic ramblings

I occasionally visit the chicagoboyz , and last night I found two good posts. One was about private equity funds and whether or not they had a future. The other was a link to site that I had never heard of, neptunuslex, where there was an interesting discussion on the current economic mess. The conversation was polite, and though there were some who wanted to blame everything on greed (which is sort of like blaming airplane crashes on gravity), there were insightful comments from OldTFlyer and especially Bob. Of course, the fact that I think their comments were insightful basically means that I agree with them. Bob was worried that the current mess may lead to policy that really fouls things up.

Microeconomics is unified by the concepts of economic efficiency and rational choice. There is no similiar unifying concept for macroeconomcis. I wonder if there has not been too much effort to force macroeconomics into equilibrium analysis when in fact it is basically disequilibrium analysis. The Samuelson cross, usually called the Keynesian cross, was an early attempt to make give it a supply-and-demand structure. Other attempts have been ISLM and the aggregate-supply, aggregate-demand framework. If I could set the framework, it would be a shock and feedback framework. To some extent that has emerged, but there still is too much emphasis on equilibrium and not enough on feedback.

One of the variables likely to change for the better in a few weeks is the reporting from the press. Because such a large part of it hates Bush and loves Obama, the glass will suddenly become half full rather than half empty. I wonder if anyone has explored the influence of the press on business activity. The press does not merely report, but they also shape news and perceptions, which is one of the prime attractions of being a member of the press.

Enough rambling for today.

1 comment:

MICHAEL J OAKES said...

I like he airplane-gravity comment, and may use it (with attribution) in the Adam Smith lecture. Surely some part of that lecture to freshmen ought to address the current macroeconomy.