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ISET Economist Blog

A blog about economics in the South Caucasus.

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Another Friday – another post full of interesting links for our readers!

1.  Our own Michael Fuenfzig suggests visiting Investor.ge, not least for these two contributions from our ISET colleagues – Monica Ellena and Michael himself.

2.  Ever wonder who has the most natural resources in the world? Here’s the answer. Not quite surprising, is it?

3.  If you live in a poor country, let it at least be sunny – that’s what this story about solar energy teaches us. Oh, if Georgian readers are interested in how much an average resident of Manhattan pays for electricity – it’s somewhere in the middle of the article.

4.  An excellent – and I can’t emphasize it enough – piece from physicist Tom Murphy, about an argument between a physicist and an economist. And I certainly agree with the physicist on this one! Do you?

5.  Why is the US richer than Europe? The author of this article points, in essence, to urbanization.

6.  The Free Exchange blog has an interesting piece which discusses whether a cashless economy is more easily manageable.

7.  Nice article by Stephen Williamson on monetary policy and what Bernanke should really be doing.

8.  Roger Farmer is a guest on Noah Smith’s blog, where he provides interesting view on equilibrium in macroeconomics. Or, rather, equilibria (or is it  -ums?). And I know who will like and comment on this one! Btw, make sure to read Noah’s post to which this one is an answer.

9.  Finally, Acemoglu and Robinson clearly haven’t heard of Godwin’s Law when they discuss whether Keynesian economics is “left” or “right”. Still, interesting to read.

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Guest - Michael on Friday, 20 April 2012 20:22

1. Actually, I was just quoted in this article. And not even accurately. There is also this article (http://investor.ge/article.php?art=10), (mis)quoting another colleague at ISET.

5. I havent read the original McKinsey report, but in the article itself the author quite makes a jump from correlation to causation. So I take this with a grain of salt. Still, it shows that economic geography is an important field, possibly as important as say monetary economics or other fields that enjoy a lot of prominence.

1. Actually, I was just quoted in this article. And not even accurately. There is also this article (http://investor.ge/article.php?art=10), (mis)quoting another colleague at ISET. 5. I havent read the original McKinsey report, but in the article itself the author quite makes a jump from correlation to causation. So I take this with a grain of salt. Still, it shows that economic geography is an important field, possibly as important as say monetary economics or other fields that enjoy a lot of prominence.
Guest - Zak on Monday, 23 April 2012 15:21

8. OK, let me not let the author down and comment on this :)

Before I go into the juice of the comment, I want to point out the extreme usefulness of distinction between the equilibrium as used in economics and equilibrium in physical sense (which in economics we simply call a (very-)long-run).

I indeed liked both Noah's original post (especially the second half) and Roger Farmer's contribution to the debate (especially his concluding paragraph). There are two distinct approaches presented in these two posts: Noah (or rather Buchanan) talks about ABM while Farmer talks about models with large number of equilibria.

The latter one has a clear advantage of being still an equilibrium approach where you can characterize the economy in at least general terms. Bar equilibrium selection, which I think is a big problem. I like the approach for its rigor and its ability to discuss much wider range of phenomena than models with single equilibrium. However, equilibrium selection problem makes these models not very intuitive when it comes to policy applications.

ABM is more intuitive and straightforward to be used in policy analysis. But the problem it has is that it is not an equilibrium approach. Equilibrium state in these models is an emergent property (as you are not designing model from top-down but rather bottom-up), and it corresponds to the equilibrium in physical sense. Its bottom-up design usually also makes it difficult even to get the sense of number of equilibria you might be dealing with.

All in all these two approaches differ in definition of equilibria and I have not made my mind yet which definition is more relevant for (positive) economics.

8. OK, let me not let the author down and comment on this :) Before I go into the juice of the comment, I want to point out the extreme usefulness of distinction between the equilibrium as used in economics and equilibrium in physical sense (which in economics we simply call a (very-)long-run). I indeed liked both Noah's original post (especially the second half) and Roger Farmer's contribution to the debate (especially his concluding paragraph). There are two distinct approaches presented in these two posts: Noah (or rather Buchanan) talks about ABM while Farmer talks about models with large number of equilibria. The latter one has a clear advantage of being still an equilibrium approach where you can characterize the economy in at least general terms. Bar equilibrium selection, which I think is a big problem. I like the approach for its rigor and its ability to discuss much wider range of phenomena than models with single equilibrium. However, equilibrium selection problem makes these models not very intuitive when it comes to policy applications. ABM is more intuitive and straightforward to be used in policy analysis. But the problem it has is that it is not an equilibrium approach. Equilibrium state in these models is an emergent property (as you are not designing model from top-down but rather bottom-up), and it corresponds to the equilibrium in physical sense. Its bottom-up design usually also makes it difficult even to get the sense of number of equilibria you might be dealing with. All in all these two approaches differ in definition of equilibria and I have not made my mind yet which definition is more relevant for (positive) economics.
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