One of the defining features of neoclassical economics is the belief that macroeconomic analysis has to be not merely compatible with, but derivable from, microeconomic analysis. The development of economic theory has been driven far more by this belief than by the desire to make the theory compatible with the observed behaviour of the economy.
One of the advantages of being overseas right now is that it takes less effort to avoid listening to the insipid discourse that passes for political debate during this Australian election. As Kevin Rudd and Tony Abbott compete over who can be more obnoxious to refugees, I find myself pining for the days of sensible and humane policies under Malcolm Fraser. As politicians make themselves the butt of their own unintentional suppository jokes, I pine for someone who could deliver a killer line against his opponent, rather than against himself: Paul Keating.
I was delighted to see, in Paul Krugman’s post – ‘What Janet Yellen – And Everyone Else – Got Wrong’ – that he now identifies ‘the debt overhang’ as the reason this economic downturn has persisted for so long.
Dr. Russell Standish and I have been working on Minsky now for almost two years now–ever since we received the $125K from INET’s Spring 2011 grant round: Russell as builder (coding in C++ and Tcl/Tk) and me as architect (playing with each release, spotting bugs and suggesting features). It’s been a part-time endeavor: Russell, as a contract programmer, has to keep more than one iron in the fire, while I have a fair few balls in the air myself. Russell has put in about 2000 hours of coding over that time, and we still have funds to support about another 250 hours after the successful Kickstarter campaign earlier this year.
The latest “Petty” version of Minsky finally qualifies as a 1.0 release: there are enough system dynamic and user-interface features in it to declare it a stable release. We’ll modify it to remove any bugs that are identified–and I just spotted one intermittent one involving wiring (see https://sourceforge.net/p/minsky/tickets/324/)–but otherwise this will remain a stable release, with no new features to be added.
Another election is on in Australia, and the topic du jour – the political topic du century it seems – is that, horror of horrors, the government’s budget next year will be in deficit to the tune of $30 billion! It’s a scandal! Our debt is ballooning! And it’s all Labor’s fault! Why, all you have to do is look at the responsible Howard period – falling debt – and compare it to the irresponsible Labor period – rising debt – and you know who to vote for, don’t you?
Well there’s a rose in the fisted glove
And eagle flies with the dove
And if you can’t be with the one you love honey
Love the one you’re with
(Stephen Stills 1970)
I haven’t had much luck with ISPs recently! One had a total hardware crash that wiped my entire blog out–fortunately a supporter was able to reconstruct it (at a cost of many grey hairs!). I then moved to another… who had a serious systemic outage for several days.
This is the third article in a three-part series on the self-destruction of neoclassical economic theory. See part one here and part two here.
To say that the long self-destruction of the academic economic tradition was given a final push towards the cliff by the global financial crisis paints a pretty bleak picture of the future of the dismal science. But I can also see some rays of sunshine.
Floyd Norris, the chief financial correspondent of the New York Times, has written an article entitled “The Time Bernanke Got It Wrong” on Bernanke’s support of “policies that allowed the dangerous imbalances to grow and bring on the crisis” in which he cites Hyman Minsky and my work modelling Minsky’s Financial Instability Hypothesis.