Wednesday, January 29, 2014

Economics Too Hard For Kartik Athreya

I have been trying to read Kartik Athreya's Big Ideas in Macroeconomics: A Nontechnical View. I find it quite dry. So far, it is all theory. (I guess some might quibble with that, given the overview of results from experimental economics.) There is no history of ideas and no context suggesting that those who might have developed these ideas were any more than disembodied consciousnesses. And no hint is given that whole groups of economists would find these views controversial. (Caveat: he does mention, for example, Ariel Rubinstein and Ricardo Caballero.) For Athreya, Paul Davidson, Wynne Godley, Alan Kirman, and Lance Taylor, for example, just do not exist.

I think Athreya might have misjudged his audience. He says that he is attempting to target two audiences:

  • Advanced undergraduates considering graduate school and beginning graduate students.
  • Popular readers with an interest in macroeconomics.

But the lack of any leavening from a presentation of details of theory will make this book a hard sell for the second audience. Maybe my opinion will change as I read further.

But I want to point out a display of ignorance of the logic of prices in general equilibrium:

"...notice there are likely to be many types of laborers involved in the production of barstools... Thers are also many possible input materials, and different possible production processes. Importantly, the myriad ways in which various inputs can be substituted for each other in barstool production is knowledge that can only be acquired through experience in the field.

In our W[alrasian] C[learing]H[ouse], each furniture maker will, at various prices, carefully consider all the ways in which inputs can be substituted for each other. If, for example, walnut is particularly expensive relative to oak, and oak can easily be substituted for walnut because it won't also necessitate the use of harder-tipped and more expensive saw blades, for instance, the oak will be used. In this way, the experience and almost-inevitably accumulated wisdom of those who have specialized in the production of any given product are brought to bear fully in the industry's use of inputs even though no firms are assumed to communicate with any others within the industry..." [emphasis in original]

As I pointed out many times, prices are not indices of relative scarcity, and neoclassical economists, such as Christopher Bliss, Frank Hahn, and Paul Samuelson have noted the logic of general equilibrium is not that of substitution. (Andreu Mas-Colell has an accessible overview of capital theory.) When will (some) mainstream economists accept their own logic?

1 comment:

Anonymous said...

I've been trying to read your work, but I found it nonexistent.