My previous post on house price data from the BIS (How to spot a housing bubble before it bursts, October 15) scotched one part of the ‘No Bubble Downunder’ case: Australia is one of four countries where house prices are more than twice as high as they were in real terms in 1985 (see Figure 1).
Anyone who has been motivated to read economics for the very first time by the economic crisis that began in 2007 should have realized at least one thing: that communication between economists resembles the Tower of Babel after the confounding of tongues. Economists who speak in one tongue hear what those in another say, but completely fail to understand it—and then shout back something that is just as incomprehensible to the others’ ears.
I would love to be in the audience watching the body language at this year’s “Nobel” ceremony for economics. Robert Shiller, who is far too polite a person to make it obvious, will nonetheless at least fidget as he listens to Eugene Fama’s speech, since Fama continues to dispute that bubbles in asset prices can even be defined. Shiller, in contrast, first came to public prominence with his warnings in the early 2000s that the stock and housing markets in the States were displaying signs of “irrational exuberance”.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
This is a set of 5 lectures that I delivered last week in Quito, Ecuador, at FLACSO–the Latin American Faculty of Social Sciences. In future years I hope to expand this into two complete courses–one on the history and development of economics from a disequilibrium perspective, and the other on dynamic monetary modeling in economics using Minsky, the Open Source system dynamics program that I have developed with the help of a grant from INET.
The Australian Business Deans Council has just released its new ranking of the quality of academic journals in economics. This listing in turn is used to rank the quality of academic research.
Kevin Rudd came to power for the first time on December 3rd 2007, just a few months after the global financial crisis commenced, and some time before its severity was truly appreciated by the political classes of any nation. On September 7, he lost office for the last time.
As regular readers here know, the main reason for developing Minsky was to make it possible to build monetary models of the economy. But it is also a pretty good tool for doing standard system dynamics modeling too, and in these two videos I show a range of famous chaotic oscillators modeled in Minsky:
This is the second part in a two-part series. To read the first part, click here.
Readers with long memories will recall Paul Krugman describing interest in the history of economic thought as “Talmudic scholarship” (see figure 1), and dismissing it with an emphatic “I Don’t Care”.