CERN Dis­cov­ers New Par­ti­cle Called The FERIR

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CERN has just announced the dis­cov­ery of a new par­ti­cle, called the “FERIR”.

This is not a fun­da­men­tal par­ti­cle of mat­ter like the Higgs Boson, but an inven­tion of econ­o­mists. CERN in this instance stands not for the famous par­ti­cle accel­er­a­tor strad­dling the French and Swiss bor­ders, but for an eco­nomic research lab at MIT—whose ini­tials are coin­ci­den­tally the same as those of its far more famous cousin.

Despite its rel­a­tive anonymity, MIT’s CERN is far more impor­tant than its phys­i­cal name­sake. The lat­ter merely informs us about the fun­da­men­tal nature of the uni­verse. MIT’s CERN, on the other hand, shapes our lives today, because the dis­cov­er­ies it makes dra­mat­i­cally affect eco­nomic pol­icy.

CERN, which in this case stands for “Crazy Economic Ration­al­iza­tions for aNoma­lies”, has dis­cov­ered many impor­tant sub-eco­nomic par­ti­cles in the past, with its most famous dis­cov­ery to date being the NAIRU, or “Non-Accel­er­at­ing Infla­tion Rate of Unem­ploy­ment”. Today’s newly dis­cov­ered par­ti­cle, the FERIR, or “Full Employ­ment Real Inter­est Rate”, is the anti-par­ti­cle of the NAIRU.

Its exis­tence was first mooted some 30 months ago by Pro­fes­sor Larry Sum­mers at the 2013 IMF Research Con­fer­ence. The exis­tence of the FERIR was con­firmed just this week by CERN’s par­ti­cle equi­li­bra­tor, the DESiGn.

Asked why the dis­cov­ery had occurred now, Pro­fes­sor Krug­man explained that ever since the GFC (“Global Finan­cial Cri­sis”), econ­o­mists had been attempt­ing to under­stand not only how the GFC hap­pened, but also why its after­math has been what Pro­fes­sor Sum­mers char­ac­ter­ized as “Sec­u­lar Stag­na­tion”.

Their attempts to under­stand the GFC con­tin­ued to fail, until Pro­fes­sor Sum­mers sug­gested that per­haps the GFC had destroyed the NAIRU, leav­ing the ZLB (“Zero Lower Bound”) in its place.

This could have hap­pened only if there was a mys­te­ri­ous sec­ond par­ti­cle, which was gen­er­ated when a NAIRU equi­li­brated with a GFC. Rather than remain­ing in equi­lib­rium, as sub-eco­nomic par­ti­cles do in DESiGn, NAIRU appar­ently van­ished instantly when the GFC appeared. Some­thing else must have taken its place. DESiGn was unable to help here, since it rapidly returned to equilibrium—while the real world that it was sup­posed to sim­u­late clearly had not.

CERN’s attempts to model this phe­nom­e­non in DESiGn were frus­trated by the fact that a GFC does not exist inside a DESiGn—in fact, the con­struc­tion of the DESiGn was pred­i­cated on the non-exis­tence of GFCs.

The ever-prac­ti­cal Pro­fes­sor Krug­man recently sug­gested a way to over­come this prob­lem. Why not turn to the real world, where GFCs (and its generic par­ti­cle fam­ily, ECs—“Economic Crises”), exist in abun­dance, and feed one of those into the DESiGn?

Unfor­tu­nately, the exper­i­ment destroyed the DESiGn, since the very exis­tence of a GFC within it put it through an exis­ten­tial cri­sis. How­ever, before it broke down (while mys­te­ri­ously singing the first verse of “Daisy, Daisy, give me your answer do”), the value for the NAIRU in DESiGn sud­denly turned neg­a­tive.

This led Pro­fes­sor Sum­mers to the con­jec­ture that per­haps there was a neg­a­tive anti-par­ti­cle to the NAIRU, which he dubbed the FERIR.

Lack­ing a func­tional DESiGn at the time, Sum­mers fed a GFC into the older SLIM equi­li­bra­tor lov­ingly main­tained by Pro­fes­sor Krugman—and he dis­cov­ered that the NAIRU took on a neg­a­tive value there. Since the NAIRU can­not be neg­a­tive, Pro­fes­sor Sum­mers realised that he had dis­cov­ered a new particle—the FERIR. When the FERIR inter­acted with a ZLB, the two par­ti­cles equi­li­brated in a Sec­u­lar Stag­na­tion Field.

Pro­fes­sor Summers—who expects to receive the Nobel Prize for his discovery—had some harsh words for crit­ics who had rub­bished the very attempt to explain the GFC using a sub-eco­nomic par­ti­cle equi­li­bra­tor.

They accuse us of adding ‘epicy­cles’ to our mod­els to make them fit the data. That’s non­sense: that’s so 15th cen­tury. We’re way beyond that now,” sneered Pro­fes­sor Sum­mers at length. “These days, we add new fun­da­men­tal par­ti­cles to our sub-eco­nomic menagerie: that’s way more sophis­ti­cated.”

The FERIR may now help econ­o­mists under­stand the per­sis­tence of the ZLB, which has con­founded all pre­dic­tions to date. Hav­ing expected the ZLB to evap­o­rate and be replaced fairly rapidly by an NRI (“Nat­ural Rate of Inter­est”), econ­o­mists have been flum­moxed by its persistence—eight years now and count­ing.

We have shown that the FERIR equi­li­brates with and main­tains the ZLB,” Pro­fes­sor Krug­man explained. “So Larry’s dis­cov­ery is really, really impor­tant”.

Now that econ­o­mists have explained the per­sis­tence of the ZLB, they can now turn their atten­tion to under­stand­ing its per­verse effects. The real prob­lem of the ZLB for econ­o­mists has been that it inverts the sta­tus and behav­iour of all other sub-eco­nomic par­ti­cles. In par­tic­u­lar:

  • Growth, which was high, is now low;
  • Infla­tion, which was bad & every­where, is now good & nowhere;
  • CBs (“Cen­tral Banks”) which pre­vent infla­tion, now try to cause it; and
  • HMDs (“Heli­copter Money Drops”) which were mad, are now sane

These inver­sions are caus­ing real prob­lems for econ­o­mists, who find them­selves argu­ing for poli­cies they used to oppose. Pro­fes­sor Sum­mers hopes that knowl­edge of the exis­tence of the FERIR will make it eas­ier for econ­o­mists to argue that night is day and rain­bows are grey, as they pro­vide pol­icy advice in these trou­bled times.

POSTSCRIPT: Writ­ten with the inspi­ra­tion of Axel Leijonhufvud’s bril­liant par­ody “Life Among the Econ” firmly in mind.

POST-POSTSCRIPT: The NAIRU—the “Non-Accel­er­at­ing Infla­tion Rate of Unemployment”—was a fic­tion of Mil­ton Friedman’s imag­i­na­tion, and count­less hours were wasted by econ­o­mists try­ing to cal­cu­late it. I fully expect a new gen­er­a­tion of econ­o­mists to waste their time try­ing to cal­cu­late the FERIR as well.

POST-POST-POSTSCRIPT: The seri­ous intent to this par­ody is the obser­va­tion that the approach to eco­nom­ics that failed to antic­i­pate the GFC—and that even believed such events were impossible—is unlikely to be able to advise what to do in the after­math to the GFC. We need a new the­ory, not merely a new fic­tional acronym in the fan­tasy uni­verse of main­stream eco­nom­ics.

POST-POST-POST-POSTSCRIPT: This post was orig­i­nally on Forbes, where it had reached almost 20,000 reads after about 12 hours. Then Forbes took it down because:

As a gen­eral rule we don’t allow con­trib­u­tors to post par­ody pieces on the site, because being posted under the Forbes ban­ner results more often than not, in con­fu­sion. It’s uncom­mon that the argu­ment for post­ing such a piece rises to the level of over­com­ing the con­cerns that arise.

In this case, we have a num­ber of con­trib­u­tors and staffers on the sci­ence beat who cover the real CERN and we don’t want to be in a posi­tion where our read­ers can’t trust if their head­lines are about real discoveries/events.

Per­son­ally I would pre­fer if they’d sim­ply edited the head­line to include the word Par­ody. So I’m post­ing this one here until I decide where else to place it.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • John Bent­ley

    Thanks for the par­ody Steve, love your work as always. I’ll show this one to a mate of mine who loves par­o­dies, con­spir­a­cies, &c.

    As Oz is one of the 7 coun­tries that belong to the “Zom­bies-to-be and Walk­ing Dead of Debt” could you please tell me is there any way out? You’ve spo­ken before about Debt Jubilees which can elim­i­nate debt in the pri­vate sec­tor, but is there any­thing else the Ztb­W­DoD need to do to rem­edy their predica­ment?

    Should, for exam­ple, the Gov­ern­ment be increase spend­ing on say infra­struc­ture or remu­nci­palise what were once pub­lic util­i­ties by buy­ing them pri­vate enter­prise. Of course part of the prob­lem here in OZ is that we reckon that we’re over­taxed when the oppo­site is true. The COALi­tion just had to Axe the Tax, but I don’t believe that Silly Billy has the balls to rein­state it.

    If you could give me a few point­ers on how the econ­omy may be revived, it’d be appre­ci­ated?

    Cheers

  • I enjoyed the live ver­sion in TO Steve!
    Good to meet you.
    Ted Schmidt

  • neiljhar­vey

    strange things are hap­pen­ing in the world of eco­nom­ics„„

    http://fortune.com/2016/06/03/imf-neoliberalism-failing/

    time to up the anti mr keen, the cracks are start­ing to appear!!!!!

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