“Conceptual frameworks are not things to do. Conceptual frameworks are tools for understanding, tools to think with.” -Gardner Campbell
A lot of the points made by Gardner in his recent blog post, Conceptional Frameworks: some thoughts, really resonated with me. To start off, several of the issues of today’s educational system brought up in the post include some things that I have challenged with throughout the years, especially since I have came to Mary Washington. I have always found it counterproductive on how much the education system in the United States has become so standardized. Much of course assignments and class lectures are vigorously organized and concrete, which has limited free-thinking and creativity in the classroom. As Brittany said, I am a student that finds comfort in knowing what a professor expects from me. I spend a lot of time stressing on receiving specific grades and less time worrying if I understand course material or not. Dr. Greenlaw’s ECON 304: Macroeconomics was one of the few classes I have taken here at Mary Washington in which I was challenged to think abstractly. The exams were setup as free-response, rather than traditional multiple choice, and gave us an opportunity to show our understanding of the curriculum. We as the students were expected to use our imagination to provide examples to illustrate our answers and think beyond the classroom. I believe that professors should encourage students to think “outside the box” and to express different rationales to pending questions. Although setting identifiable goals in a class are important, I believe it is up to educators to emphasize that goals can be achieved through various different methods and reasoning.
Reading this article reminded me of a quote by Rob Siltanen, which reads “The people who are crazy enough to think they can change the world are the ones who do.”
Although I believe Rational Expectations are a far more efficient alternative to Adaptive Expectations I do believe there exist some flaws that are inherent in its fundamentals. As discussed in class last Wednesday and Friday, Rational Expectations (RE) are formulated and derived from models which in return is then used to create specific forecasts. In other words, the outcome is largely a result of people’s expectations as well as what the model dictates. With this being stated I believe that RE works well under relatively simple means of economic theory but are challenged and flawed when it is approached by complicated models that are routinely disputed upon by various schools of thought. If an expectation is derived from a model that is not consistently accurate or flat out wrong then the expectation itself is then flawed. This does not mean it shouldn’t be used but in economics but it does pose the question of their reliability and also contests regular forecasting procedures.
Here is a quick read on what Rational Expectations are as well as a the paper Greenlaw referenced in class, Rational Expectations and the Theory of Price Movements, written by John Muth in 1961.
One important theory that Friedman proposed during his lifetime was the Natural Rate Hypothesis (NRH) or the Non-Accelerating Inflation Rate of Unemployment (NAIRU). Next class, Brittany, Daley, and I will briefly explain this concept to you all but if you would like to learn about it beforehand I included an online article at the bottom that talks about it in-depth. The Natural Rate Hypothesis proposes that natural unemployment is unavoidable in the long-run and is a combination of frictional and structural unemployment. The NRH was later adapted into a long-run Phillips curve, which was the alternative to the contradictory notion of an inflation-unemployment trade-off.
The long-run Phillips curve is a vertical line at the natural rate of unemployment, so inflation and unemployment are unrelated in the long run (Boundless Economics).
Also, after researching the Natural Rate Hypothesis I came across a paper written by Roger Farmer. The ideas are conveyed in his book as well but I figured I would share it with you all as a refresher. The article is no more than 15 pages of text , including the title and sources, so it’s a relatively short read!
Source: Boundless. “The Long-Run Phillips Curve.” Boundless Economics Boundless, 20 Sep. 2016. Retrieved 09 Feb. 2017 from https://www.boundless.com/economics/textbooks/boundless-economics-textbook/inflation-and-unemployment-23/the-relationship-between-inflation-and-unemployment-105/the-long-run-phillips-curve-401-12498/
“Underlying most arguments against the free market is a lack of belief in freedom itself.” -Milton Friedman
Before our class this Wednesday I figured I would post a few short articles that you can read to better understand monetarism and Milton Friedman’s theories. The readings are not entirely comprehensive but they will provide some context to Brittany, Daley, and I’s presentation next class. The first article is relatively short but provides insight on one of Friedman’s most controversial claims at the time http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html.
Also, below I included a short video of one of Friedman’s presentations that expands on monetary policy https://www.youtube.com/watch?v=6LfUyML5QVY.
For those who find happiness in spending countless hours reading economic papers I also linked one of Friedman’s papers, The Role of Monetary Policy, here https://wwz.unibas.ch/fileadmin/wwz/redaktion/witheo/lehre/2009_FS/vwl4/doc/chapter8/Friedman_AER1968.pdf, as well as another article summarizing much of Friedman’s work as an economist http://www.econlib.org/library/Enc/bios/Friedman.html.
Here is an assessment and interpretation of Milton Friedman’s monetarism http://www.jstor.org.ezproxy.umw.edu/stable/2231691?Search=yes&resultItemClick=true&searchText=Monetarism:&searchText=An&searchText=Interpretation&searchText=and&searchText=an&searchText=Assessment&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3DMonetarism%253A%2BAn%2BInterpretation%2Band%2Ban%2BAssessment%26acc%3Don%26amp%3D%26amp%3D%26amp%3D%26amp%3D%26group%3Dnone%26wc%3Don%26fc%3Doff&seq=1#page_scan_tab_contents
Researching Friedman’s Rule and the Friedman Doctrine opens up a lot of articles expanding on the two ideas and other theories within monetarism!
Upon reading Simon Wren-Lewis’s blog post this past week I stumbled across several websites, articles, and videos pertaining to economic faults as a results of risky banking practices. I was initially directed to this website http://bankersnewclothes.com/ which then lead me to to other sources. I found a lot of the information to be interesting so I figured I would write a brief blog post to share it with you all!
Anat Admati, the main contributer to the works I found, is the George G.C. Parker Professor of Finance and Economics at
the Graduate School of Business, Stanford University. She has written a book called The Banker’s New Clothes, which takes an in-depth look at risks in banking and how those risks can impose significant costs on the economy. “Weak regulation and ineffective enforcement allowed the buildup of risks that ushered in the financial crisis of 2007-2009. Much can be done to create a better system and prevent crises” (Admati). The role of the financial & banking sector is something that I have been looking into the past few weeks; Admati has a lot to contribute to solve a problem that authors we all have encountered so far, Farmer and Wren-Lewis, have talked about. In my previous blog post Wren-Lewis talked about how an increase in bank capital requirements can help avoid future banking crises, which is an idea that Admati has proposed and researched.
I have also linked two short videos below that explain Admanti’s and her colleague Martin Hellwig’s take on the banking system and its influences on the macroeconomy.
Short Video: https://www.youtube.com/watch?v=ZDRpZvCOVrc
StanfordTedx Presentation: https://www.youtube.com/watch?v=s_I4vx7gHPQ