Selgin’s flawed criticism of endogenous money

George Selgin has recently been arguing against the now mainstream view that banks are not intermediaries between lenders and borrowers, and in fact create credit out of nothing. He has criticized this Bank of England working paper, calling the paper rubish. It is somewhat difficult to parse exactly what George is arguing.  He appears toContinue reading “Selgin’s flawed criticism of endogenous money”

Assumptions in Macroeconomics

Physics models can have a wide variety of different simplifying assumptions.  Models in some areas will include a full description of relativistic behaviour, while others will not.  Some models describe objects based on the quantum mechanical interactions between particles, some treat gas molecules as essentially point particles that don’t interact.  These different models and differentContinue reading “Assumptions in Macroeconomics”

Do Microfoundations address the Lucas Critique?

Modern macroeconomics has been endlessly criticized, not only by critics of mainstream economics, but also by many prominent mainstream economists. For example, nobel price winners such as Paul Romer, Paul Krugman, and Joseph Stiglitz have written articles in which they disparage modern macroeconomists. Even economists who have been very involved with such models such asContinue reading “Do Microfoundations address the Lucas Critique?”

S=I: The most misunderstood equation in economics

The saving equals investment identity (S=I) is probably the most misunderstood equation in economics. Achieving the top rank in this highly competitive category requires an extraordinary level of miscomprehension, and the S=I identity does not disappoint. PhD students and many professors frequently misunderstand it, and misrepresent when teaching their students. In fact, it is sometimesContinue reading “S=I: The most misunderstood equation in economics”