Tuesday, October 17, 2017

Elsewhere

  • A July 24 Jonathan Schlefer article, "Market Parables and the Economics of Populism: When Experts are Wrong, People Revolt", in Foreign Affairs. Schlefer cites the Cambridge Capital Controversy as a demonstration that the neoliberal political project of remaking the world around unembedded markets is doomed to failure.
  • A September 11 interview with Daniel Kahneman in which he basically credits Richard Thaler with inventing behavioral economics. (In his memoirs, Misbehaving, Thaler is also explicit about the disciplinary boundaries between economics and psychology.)
  • Richard Thaler's anomaly columns in the Journal of Economic Perspectives
  • I have not read Nancy Maclean's Democracy in Chains. Marshall Steinbaum reviews this book in Boston Review. Henry Farrell & Steven Teles respond.

Another ongoing brouhaha is about Alice and Wu's undergraduate paper documenting the sexism on Economic Job Market Rumors.

Wednesday, October 11, 2017

Others With Points Of View Like Sraffa's

In Production of Commodities by Means of Commodities, Sraffa writes:

"others have from time to time independently taken up points of view which are similar to one or other of those adopted in this paper and have developed them further or in different directions from those proposed here." -- P. Sraffa (1960): pp. vi - vii.

Who is Sraffa talking about? I suggest the following, and their works, at least:

  • Tjalling C. Koopmans (1957). Three Essays on the State of Economic Science. New York: McGraw-Hill
  • Wassily W. Leontief (1941). Structure of the American Economy, 1919-1929.
  • Jacob T. Schwartz (1961). Lectures on the Mathematical Method in Economics. New York: Gordon & Breach.
  • John Von Neumann (1945-1946). A Model of General Economic Equilibrium, A Model of General Economic Equilibrium. V. 13, No. 1: pp. 1-9.

I thought about listing David Hawkins and Herbert Simon, given how frequently the Hawkins-Simon condition is cited in expositions of Leontief input-output analysis. I might also mention Nicholas Georgescu-Roegen, the creator of the non-substitution theorem. The work of Ladislaus Bortkiewicz, Georg von Charasoff, Vladimir K. Dmitriev, and Robert Remak, as I understand it, mostly predates Sraffa's long period of preparation of his masterpiece.

Sunday, October 08, 2017

Economic Impact Of Regional Disasters: A Job For Input-Output Analysis?

This post, unfortunately, is inspired by current events.

Economists can provide guidance on disaster recovery - for example, from earthquakes and hurricanes.

Economists, for a long time, have been developing input-output models of local economies and interactions between them. I think of Walter Isard as a pioneer here. Such models are of practical importance to my post topic.

Regional input-output models can describe disasters with either a supply-side or demand-side approach. In a supply-side approach, the output of an industry is reduced because the inputs into that industry are not available at the pre-disaster level. Some of the outputs of that industry are inputs into other industries. Other outputs satisfy final demands, for example, for household consumption. Input-output modeling can help trace these consequences.

In a demand-side approach, an industry's output is constrained because those who purchase its outputs cannot do so at the pre-disaster level. If those industries who purchase your products are suddenly reduced in size, you must need cut back your output, too.

Some issues arise here. Can supply-side and demand-side approaches be combined without double counting? How should one model the effects of external infusions of aid? Multiplier effects seem to sit comfortably with the demand side approach. The assumption of fixed coefficients in the Leontief input-output approach seems to be an important restriction here. When it comes to modeling resiliency, I think of the work of Adam Rose. Apparently, some use Computational General Equilibrium (CGE) models for this reason.

I do not know enough to have a firm opinion of CGE models. I have the impression that "Computational" is a misnomer; it does not relate to computational theory and Turing machines, as studied in computer science. I am also not sure that the GE in CGE is what I understand as GE. Anyways, practical considerations interact here with the ideological demands impacting economic theory. I like to think that economists are useful in the hard problem of what to do when disaster strikes.

Reference
  • Walter Isard. 1951. Interregional and Regional Input-Output Analysis: A Model of a Space-Economy. Review of Economics and Statistics. Vol. 33, No. 4: pp. 318-328.