This is the first of two guest pieces by Paul Ormerod, the author of “Pos­i­tive Link­ing” (Ama­zon USA; Ama­zon UK) and sev­er­al oth­er impor­tant books on non-equi­lib­ri­um eco­nom­ics.

Paul and I have been research col­leagues and friends for over a decade now, and I regard him as the fore­most expo­nent of mul­ti-agent and net­work eco­nom­ics today. As reg­u­lar read­ers will know, I pre­fer a “tops down” approach to eco­nom­ics over the mul­ti-agent approach, main­ly because the phe­nom­e­non of emer­gence is a sig­nif­i­cant con­cep­tu­al bar­ri­er between the “macro” sys­tems we wish to describe and the “micro” behav­iour of the indi­vid­ual enti­ties that com­prise the sys­tem. Paul has a flair for being able to devel­op mod­els that pen­e­trate that bar­ri­er suc­cess­ful­ly. I par­tic­u­lar­ly like the mod­el in this paper on com­pe­ti­tion and mar­ket struc­ture, and I use it in my own lec­tures as an exam­ple of how com­pe­ti­tion should be mod­elled by econ­o­mists, in con­trast to the Neo­clas­si­cal myths of per­fect & imper­fect com­pe­ti­tion and oli­gop­oly.

As some read­ers will know, I am devel­op­ing a dynam­ic macro­eco­nom­ic mod­el­ing tool–code-named “Minsky”–with the help of an INET Grant. The grant of US$128,000 has allowed me to hire Dr Rus­sell Stan­dish to devel­op the pro­gram. Rus­sell is a long-time research col­lab­o­ra­tor of mine who was the Direc­tor of UNSW’s High Per­for­mance Com­put­ing Cen­tre before it was dis­con­tin­ued. He is now a vis­it­ing Pro­fes­sor of Math­e­mat­ics at UNSW and a free­lance pro­gram­mer spe­cial­is­ing in high-per­for­mance numer­i­cal pro­gram­ming.

This grant has pur­chased rough­ly 1,000 hours of Rus­sel­l’s time, and with about half that grant expend­ed, we now have a func­tion­al if very ear­ly pro­to­type of the pro­gram which can be down­loaded from here on our Source­forge site.

When­ev­er I fear that my well of inspi­ra­tion for this blog might run dry, my neo­clas­si­cal mates rush to the res­cue with some price­less pearl of wis­dom that sim­ply demands a rejoin­der. They are the Abbotts to my Costel­lo (and I’m not talk­ing Aus­tralian pol­i­tics here – though the Tony and Julia show reached tru­ly great heights with Gillard’s recent bril­liant ora­to­ry on misog­y­ny).

Today’s help­ing hand was a com­ment from French econ­o­mist Olivi­er Blan­chard. He qual­i­fies as a ser­i­al offend­er on the com­ic state­ments front, since when wear­ing the hat of found­ing edi­tor of the Amer­i­can Eco­nom­ic Review: Macro­eco­nom­ics, he uttered the now immor­tal line that “the state of macro [eco­nom­ic the­o­ry] is good” – one year and six days after the finan­cial cri­sis began.

He was the chief econ­o­mist for the IMF pri­or to that gig, and he sub­se­quent­ly returned to the IMF, where he now has the curi­ous title of “eco­nom­ic coun­sel­lor” (now there’s anoth­er poten­tial gag, but I digress).
While deliv­er­ing the bale­ful news in the lat­est IMF World Eco­nom­ic Out­look that the glob­al econ­o­my is slow­ing, Olivi­er not­ed that:

“In most coun­tries, fis­cal con­sol­i­da­tion is pro­ceed­ing accord­ing to plan.”

“Accord­ing to plan?” Well, yes, if the plan is to inspire the rise of fas­cist dic­ta­tor­ships in south­ern Europe, I sup­pose you could say that.

The site has had a cas­cade of prob­lems, com­menc­ing with us exceed­ing the server’s size lim­its, and end­ing with our ISP shut­ting the site down because they inter­pret­ed our attempts to move giga­bytes of mate­r­i­al off-line as sus­pi­cious!

We were final­ly allowed back up today, and are now mov­ing the site to a dif­fer­ent ISP.

There may be some fur­ther dis­rup­tions in this process, but it will be worth it.

I am sor­ry that the site has been down for so long, but with no sup­port staff to look after these things and no time to do it myself (let alone exper­tise!), I have had to wait until vol­un­teers were able to sort out the prob­lems.

By Philip Soos

The Con­ver­sa­tion

Few Aus­tralian hous­ing poli­cies are more con­tentious than neg­a­tive gear­ing.

Despite the pub­lic­i­ty it has received and its pop­u­lar­i­ty with gov­ern­ment and prop­er­ty investors, lit­tle analy­sis of neg­a­tive gear­ing can be found with­in easy reach, with much of it acces­si­ble only in aca­d­e­m­ic jour­nals. Only an occa­sion­al frag­ment is found in the main­stream media.

I had hoped to post this on the day of my pre­sen­ta­tion to UMKC, but the site fell over that day and it has tak­en vol­un­teers sev­er­al days to sort out the prob­lems. I had to buy addi­tion­al stor­age space on the serv­er, and large sys­tem logs had to be delet­ed. These are some of the issues that have moti­vat­ed the devel­op­ment of Debunk­ing Eco­nom­ics as a sub­scrip­tion site: with pro­fes­sion­al staff sup­port, this prob­lem would nev­er have occurred; with­out them, and with me being too busy to do the work myself, it’s result­ed in the site being down for about 4 days.

Irv­ing Fish­er (1867–1947) was a neo­clas­si­cal econ­o­mist. I say “was” not mere­ly because he is dead, but also because he emphat­i­cal­ly reject­ed the neo­clas­si­cal approach after his “Near Death Expe­ri­ence” dur­ing the Great Depres­sion.

Fish­er was worth over $US100 mil­lion in today’s mon­ey when The Great Crash began. Unlike most econ­o­mists, he was also an inven­tor, and he invent­ed a pre­de­ces­sor of the Rolodex – the iPad of its day. He sold his inven­tion to the pre­de­ces­sor of Unisys in return for shares and a seat on the board – and like so many oth­ers back then, lev­ered his wealth by buy­ing shares on mar­gin.

I’ve just uploaded the first 8 lec­tures in my Behav­ioral Finance class for 2012. The first few lec­tures are very sim­i­lar to last year’s, but the con­tent changes sub­stan­tial­ly by about lec­ture 5 when I start to focus more on Schum­peter’s approach to endoge­nous mon­ey.

I don’t have time to write an out­line of the con­tent of these lec­tures here–maybe at the end of the year. For now, here are the videos.

Lecture 1: Individual Behavior

Lecture 2: Market Demand and Supply

Lecture 3: Finance Markets Theory

This is the pre­sen­ta­tion I gave today at the Amer­i­can Mon­e­tary Insti­tute 2012 annu­al con­fer­ence in Chica­go.

Pre­sen­ta­tions were also giv­en by Michael Kumhof of the IMF, who has incor­po­rat­ed endoge­nous mon­ey into a Neo­clas­si­cal DSGE frame­work (a world first), Kaoru Yam­aguchi with an endoge­nous mon­ey ver­sion of his Ven­sim dynam­ic mod­el of an econ­o­my, and Michael Hud­son pre­sent­ing a paper based on “The Bub­ble and Beyond” and a joint paper he’s work­ing on with Dirk Beze­mer and me.

If you are inter­est­ed in more dis­cus­sions about this and sim­i­lar sub­jects, check out my site, Debunk­ing Eco­nom­ics here. SK

I’m off to the USA on Thurs­day for two con­fer­ences:

• The Amer­i­can Mon­e­tary Insti­tute con­fer­ence in Chica­go on Sept. 20–23; and
• The Post Key­ne­sian con­fer­ence at the Uni­ver­si­ty of Mis­souri Kansas City on Sep­tem­ber 27–29

The lat­ter will re-unite the par­tic­i­pants at the Fields Insti­tute MMT-MCT sem­i­nar held in Toron­to  on July 3rd this year: myself, Stephanie Kel­ton, Scott Full­wiler, Michael Hud­son, Steve Keen, Matheus Gras­sel­li and Nathan Cedric Tankus.

I start­ed this post sim­ply because Nathan has been at me for ages to post the pho­tos, and then I real­ized that, though I had put the videos up on Youtube, I had­n’t made a spe­cif­ic post here.