Category Archives: StudentBlogs

RE: Attacking economics is a diversionary tactic

Simon Wren-Lewis is a professor of Economic Policy at the Blavatnik School of Government, Oxford University. Below is a brief summary and what I thought about his recent blog post: Attacking economics is a diversionary tactic.

Simon Wren-Lewis’s preliminary thoughts explain that the financial crisis in the UK was a result of the loss of financial assets, specifically in the shares of the US subprime market due to the housing market collapse in 2008. Similar to Roger Farmer, Wren-Lewis critiques mainstream macroeconomists and their exclusion of the financial sectors and the leverage it has in the macroeconomy. Dramatic increases in bank capital requirements are proposed as a viable solution to future banking crises but Wren-Lewis tells us that banking lobbies are too powerful and that there is a lack of consensus between policymakers and economists.

He criticizes both sides of heterodox economists, neoliberals & right-wing. He calls the neoliberal idea economics bowdlerized and the right-wings to be in denial and politically biased.

There seems to be a relatively positive outlook on economists in general throughout the blog post. Wren-Lewis expands on the idea that economists do far more good for the macroeconomy than bad. He explains that the wrong predictions of a few economists shouldn’t reflect the success of the others. “Attacking economists over Brexit is designed to discredit those who point out awkward and uncomfortable truths” (Wren-Lewis).

I agree with Wren-Lewis on a lot of the points he made. I believe that most macroeconomic and financial inefficiencies are the result of political and social constraints. To a certain degree, more trust must be placed in economists in executive positions. We should acknowledged success as much as failure, but also strive for fundamental progression.

Source: https://mainlymacro.blogspot.com/2017/01/attacking-economics-is-diversionary.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MainlyMacro+(mainly+macro)

What is your model of the macro economy? What is the model in your head?

My model for the macro economy is to comprehensively include all of the ins and outs of an economy that can be manipulated in order to predict outcomes of various macroeconomic situations. Variables in this model include GDP growth rate, technological advances, market failures, trade surplus and deficits, investments, inflation, predictions, etc. The model will have to be very complex and would include several other interconnected models to output more accurate results. Models such as DAD-DAS can be used along with Income Expenditure and the Neoclassical Growth Model. Results would also include important markets that influence our economic progress. These markets include but are not limited to the housing, stock, and manufacturing markets. The model will also take in account monetary and fiscal policy. Both forms of policy are instrumental in how our economy is functioning and both must work together and be complimentary of each other to achieve the most optimal results. The model as a whole must be based on mathematical equations and be derived from theory that has been continuously proven to be true. I believe that economic models, and economics as a field, are seen to be conclusive and free from error which is not necessarily the case. Models should be tweaked and improved over times as knowledge surfaces and challenges the status quo. Theories and models should be based on real-life scenarios and should not neglect outliers. Economic anomalies should be studied further and used to advance models and inferences. The health of the overall economy is dependent on many different variables and leaving any of them out is neglectful and can lead to both unpredictable and devastating outcomes.