Archivio per 26 giugno 2014

26
Giu
14

Why Standard Macro Models Fail During Crises

David Hendry and Grayham Mizon show why the models used by many policymakers perform so poorly in the face of uncertainty

The standard macroeconomic model used by most central banks and other policymakers are “dynamic stochastic general equilibrium models” or “DSGE” as they are known (economists have a knack for catchy branding).  There has been much discussion and debate about why these models performed so poorly during the 2008 financial crisis.  Not only did these models fail to anticipate the crisis, but during the crisis itself – when they were most needed by policymakers – they often failed to give useful or correct advice. The Institute for New Economic Thinking at Oxford’s David Hendry and Grayham Mizon in a recent paper show that these standard models crucially depend on the assumption of “stationarity” – that there are no unanticipated or structural changes to the world that could affect agent’s decision making.  Of course the real world is far from stationary – particularly in times of crisis.  Hendry and Mizon show that economic history is full of “location shifts” when the means of distributions change.  For example they identify four major epochs in British employment history, the pre WWI era 1860-1914, the period from WWI to 1939, the post-war reconstruction until 1979, and then the modern era from 1979 to present.  Both the means and variances of employment shifted significantly across these epochs. Unfortunately such shifts run afoul of the rational expectations hypothesis (REH) that macroeconomic DSGE models are built on.  In the rational world of these models agents may face uncertainty about the future, but are supposed to have well defined, stationary probabilistic models to make their decisions on.  But in the real world they do not, and as Hendry and Mizon show, this is very damaging for the performance of DSGE models.

 

Source: ineteconomics.org

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26
Giu
14

Why Standard Macro Models Fail During Crises

See on Scoop.itBounded Rationality and Beyond

David Hendry and Grayham Mizon show why the models used by many policymakers perform so poorly in the face of uncertainty

The standard macroeconomic model used by most central banks and other policymakers are “dynamic stochastic general equilibrium models” or “DSGE” as they are known (economists have a knack for catchy branding).  There has been much discussion and debate about why these models performed so poorly during the 2008 financial crisis.  Not only did these models fail to anticipate the crisis, but during the crisis itself – when they were most needed by policymakers – they often failed to give useful or correct advice. The Institute for New Economic Thinking at Oxford’s David Hendry and Grayham Mizon in a recent paper show that these standard models crucially depend on the assumption of “stationarity” – that there are no unanticipated or structural changes to the world that could affect agent’s decision making.  Of course the real world is far from stationary – particularly in times of crisis.  Hendry and Mizon show that economic history is full of “location shifts” when the means of distributions change.  For example they identify four major epochs in British employment history, the pre WWI era 1860-1914, the period from WWI to 1939, the post-war reconstruction until 1979, and then the modern era from 1979 to present.  Both the means and variances of employment shifted significantly across these epochs. Unfortunately such shifts run afoul of the rational expectations hypothesis (REH) that macroeconomic DSGE models are built on.  In the rational world of these models agents may face uncertainty about the future, but are supposed to have well defined, stationary probabilistic models to make their decisions on.  But in the real world they do not, and as Hendry and Mizon show, this is very damaging for the performance of DSGE models.
See on ineteconomics.org

26
Giu
14

La crise économique sur le divan du psychanalyste

L’analyse économique repose sur un postulat faux : la rationalité des acteurs. La nouvelle norme est celle du chaos perpétuel. Même le FMI a avoué qu’il avait beaucoup de mal à analyser avec les outils « classiques » de l’économie l’enchaînement de crises qui se succèdent depuis 2008 dans le monde. Deux économistes de renom, Vivien Levy-Garboua, « senior adviser » de BNP Paribas, et Gérard Maarek, conseiller scientifique de l’Edhec, prennent acte de ce constat d’impuissance dans ce nouveau livre qui propose ni plus ni moins une sorte de révolution pour leur discipline. Le problème, expliquent les deux auteurs, l’un et l’autre praticiens aguerris des modèles économétriques, c’est que ces modèles reposent sur l’hypothèse de rationalité de l’homo oeconomicus, de moins en moins pertinente pour analyser les évolutions convulsives de notre économie financiarisée et mondialisée. « Depuis quelques décennies, observent-ils, le psychisme de l’homme moderne s’est profondément modifié et, avec lui, celui des groupes constitués, familles, entreprises, peuples, dans lesquels il s’insère. »

Source: www.lesechos.fr

26
Giu
14

La crise économique sur le divan du psychanalyste

See on Scoop.itBounded Rationality and Beyond

L’analyse économique repose sur un postulat faux : la rationalité des acteurs. La nouvelle norme est celle du chaos perpétuel. Même le FMI a avoué qu’il avait beaucoup de mal à analyser avec les outils « classiques » de l’économie l’enchaînement de crises qui se succèdent depuis 2008 dans le monde. Deux économistes de renom, Vivien Levy-Garboua, « senior adviser » de BNP Paribas, et Gérard Maarek, conseiller scientifique de l’Edhec, prennent acte de ce constat d’impuissance dans ce nouveau livre qui propose ni plus ni moins une sorte de révolution pour leur discipline. Le problème, expliquent les deux auteurs, l’un et l’autre praticiens aguerris des modèles économétriques, c’est que ces modèles reposent sur l’hypothèse de rationalité de l’homo oeconomicus, de moins en moins pertinente pour analyser les évolutions convulsives de notre économie financiarisée et mondialisée. « Depuis quelques décennies, observent-ils, le psychisme de l’homme moderne s’est profondément modifié et, avec lui, celui des groupes constitués, familles, entreprises, peuples, dans lesquels il s’insère. »

See on lesechos.fr

26
Giu
14

Instinct Can Beat Analytical Thinking

A Q&A with psychologist Gerd Gigerenzer.

Researchers have confronted us in recent years with example after example of how we humans get things wrong when it comes to making decisions. We misunderstand probability, we’re myopic, wepay attention to the wrong things, and we just generally mess up. This popular triumph of the “heuristics and biases” literature pioneered by psychologists Daniel Kahneman and Amos Tverskyhas made us aware of flaws that economics long glossed over, and led to interesting innovations inretirement planning and government policy.

It is not, however, the only lens through which to view decision-making. Psychologist Gerd Gigerenzer has spent his career focusing on the ways in which we get things right, or could at least learn to. In Gigerenzer’s view, using heuristics, rules of thumb, and other shortcuts often leads to better decisions than the models of “rational” decision-making developed by mathematicians and statisticians. At times this belief has led the managing director of the Max Planck Institute for Human Development in Berlin into pretty fierce debates with his intellectual opponents. It has also led to a growing body of fascinating research, and a growing library of books for lay readers, the latest of which, Risk Savvy: How to Make Good Decisions, is just out.

During a visit to HBR’s New York office, Gigerenzer discussed his work for an Ideacast podcast, which you can listen to here:

Source: blogs.hbr.org

26
Giu
14

Instinct Can Beat Analytical Thinking

See on Scoop.itBounded Rationality and Beyond

A Q&A with psychologist Gerd Gigerenzer.

Researchers have confronted us in recent years with example after example of how we humans get things wrong when it comes to making decisions. We misunderstand probability, we’re myopic, wepay attention to the wrong things, and we just generally mess up. This popular triumph of the “heuristics and biases” literature pioneered by psychologists Daniel Kahneman and Amos Tverskyhas made us aware of flaws that economics long glossed over, and led to interesting innovations inretirement planning and government policy.

It is not, however, the only lens through which to view decision-making. Psychologist Gerd Gigerenzer has spent his career focusing on the ways in which we get things right, or could at least learn to. In Gigerenzer’s view, using heuristics, rules of thumb, and other shortcuts often leads to better decisions than the models of “rational” decision-making developed by mathematicians and statisticians. At times this belief has led the managing director of the Max Planck Institute for Human Development in Berlin into pretty fierce debates with his intellectual opponents. It has also led to a growing body of fascinating research, and a growing library of books for lay readers, the latest of which, Risk Savvy: How to Make Good Decisions, is just out.

During a visit to HBR’s New York office, Gigerenzer discussed his work for an Ideacast podcast, which you can listen to here:

See on blogs.hbr.org




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