tag:blogger.com,1999:blog-26706564.post115477780763785119..comments2024-03-25T07:51:47.758-04:00Comments on Thoughts On Economics: Bah, HumbugRobert Vienneauhttp://www.blogger.com/profile/14748118392842775431noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-26706564.post-1166676165793494662006-12-20T23:42:00.000-05:002006-12-20T23:42:00.000-05:00I don't know why you're down on Total Factor Produ...I don't know why you're down on Total Factor Productivity. Yeah, you can get it from the Solow model as the residual, but you can also get it from you equation (15), without assuming anything about Aggregate Production functions - just plug in 0 for dr/dt and g for dw/dt and you got your A(t) which is TFP. The thing is, either way you get pretty much the same answer. Hmmm, strange.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-26706564.post-1166622769086079202006-12-20T08:52:00.000-05:002006-12-20T08:52:00.000-05:00I suppose I should have acknowledged comments befo...I suppose I should have acknowledged comments before.<BR/><BR/>I can see why some object to some interpretations of Popper. Popper said that, in some sense, falsifiability is not a logical property of theories, but a sociological property of communities who hold those theories. If mainstream economists were serious, references to Shaikh and Franklin Fisher would be commonplace in papers that use aggregate production functions and Total Factor Productivity accounting. But they are not.<BR/><BR/>I think of aggregation arguments and cambridge capital controversy arguments about the meaning of capital as parallel to the argument in the post. I would not call the argument in the post a "model". I don't know why Radek thinks the failure of those equations to describe a mechanism by which interest is determined an objection. (I'll let you know when I present an alternate "model".)Robert Vienneauhttps://www.blogger.com/profile/14748118392842775431noreply@blogger.comtag:blogger.com,1999:blog-26706564.post-1166383262805158402006-12-17T14:21:00.000-05:002006-12-17T14:21:00.000-05:00«One cannot legitimately cite the goodness of such...«One cannot legitimately cite the goodness of such a fit as empirical evidence for the aggregate marginal productivity theory of distribution.»<BR/><BR/>No, but what it means is that IF an economy can be usefully represented by an aggregate production function then that function is Cobb Douglas (or some close version of it) as that's the only kind consistent with Kaldor's stylized facts and the data (constant shares, constant interest rates, balanced growth path with steady growth - let's leave aside for the moment how true these facts really are (Chuck Jones has some stuff on that)).<BR/><BR/>But speaking of interest rates and falsifiability (however you spell that). Your model doesn't even determine interest rates. How can it be falsifiable itself? What stylized facts does it fit? Where is there any empirical evidence that I should take it as a useful representation of reality? <BR/>In trying to answer those questions one might get some inkling of why some people still use APFs. That and because a lot of past empirical research in development and growth says that physical capital, fixed or circulating, isn't as important as we thought. Hence people feel like they're wasting their time arguing about what exactly the proper definition of capital should be. Of course you can spin that another way.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-26706564.post-1166360573277924052006-12-17T08:02:00.000-05:002006-12-17T08:02:00.000-05:00«As a matter of algebra, an aggregate Cobb-Douglas...«As a matter of algebra, an aggregate Cobb-Douglas production function fits the data.»<BR/><BR/>I like the «as a matter of algebra» :-).<BR/><BR/>But it is not just algebra: it is also about defining what "capital" etc. mean, as you know better than most.<BR/><BR/>«One cannot legitimately cite the goodness of such a fit as empirical evidence for the aggregate marginal productivity theory of distribution.»<BR/><BR/>But it can be cited as evidence that if the data can be made to fit the theory, by adopting suitable definitions for the data :-).<BR/><BR/>«The theory has not passed any potentially falsifying empirical test.»<BR/><BR/>I don't like this: this is vulgar popperianism, and who cares? To me the purpose of political economics is insight, not theory, never mind a mechanistic theory that can/cannot be falsified. <BR/><BR/>But I am not sure even of that... The problem with economics is that whatever laws or empirical relationships you find one decade, they will be different in a couple of decades.<BR/><BR/>Because the system under observation evolves *quickly*, often as a consequence of the observation.<BR/><BR/>«Why do economists continue to use measures of Total Factor Productivity and Solovian growth theory when they have neither theoretical nor empirical support?»<BR/><BR/>Because it helps their careers? Because it conveniently begs away a number of difficult questions? :-)<BR/><BR/>BTW, nice derivation of some amusing identities. And nice find of that article which has that nice "humbug production function" in the title.Anonymousnoreply@blogger.com