tag:blogger.com,1999:blog-6638187113544241481.post4665570556152064080..comments2024-02-27T01:53:25.186-05:00Comments on Synthenomics: Axiomatic Monetary CredibilityYichuan Wanghttp://www.blogger.com/profile/15398092824604478764noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-6638187113544241481.post-3881508645717086732012-09-12T06:06:07.266-04:002012-09-12T06:06:07.266-04:00Economic conditions are getting worse because of t...Economic conditions are getting worse because of the monetary policy as stated by <a href="http://www.foxbusiness.com/investing/2012/09/10/obama-chose-monetary-policy-and-youre-feeling-it/" rel="nofollow">Ed Butowsky</a> in his article posted in Fox News, "Obama Chose Monetary Policy - And You're Feeling It".Anonymoushttps://www.blogger.com/profile/02593247850024366654noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-61564267262937330362012-07-23T21:14:53.000-04:002012-07-23T21:14:53.000-04:00Philo, I think it's the nature of the social s...Philo, I think it's the nature of the social sciences to come up with jargon for ostensibly simple concepts, and Economics is no exception. From what I can see the term "dynamic inconsistency" came about because of the inconsistency that the central bank faces in the process of dynamic optomization by manipulating the inflation rate, with the problem as I described in the post. In your example, the inconsistency would be the reason why the person would have a hard time committing to a diet. Any given ice cream cone isn't going to make him fat, but if he ate all of them he would never fulfill the diet. That's why rule based systems (in this case, weight watchers), are created. Your ice cream example is great, it's just "temptation" sounds almost biblical and "Ice cream inconsistency" doesn't sound like something you'd put in an academic journal.Yichuan Wanghttps://www.blogger.com/profile/15398092824604478764noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-50010449592533175082012-07-22T11:52:31.122-04:002012-07-22T11:52:31.122-04:00I love the taste of ice cream, but I want to avoid...I love the taste of ice cream, but I want to avoid getting fat. Shall I eat some ice cream now? There will be an immediate positive result (taste), and a long-run negative result (body fat). But this is hardly more than an ordinary trade-off; why glorify it with the pretentious term ‘dynamic inconsistency’?<br /><br />Same question for the central bank’s trade-off concerning inflation.Philohttps://www.blogger.com/profile/02814125172453918700noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-47941951220042015082012-07-16T10:45:34.828-04:002012-07-16T10:45:34.828-04:00Fascinating stuff. But there's a factor I don&...Fascinating stuff. But there's a factor I don't see accounted for. Expectations are created when the game is repeated and there's a history of consistently hitting the target by the Central Bank in question. Agree with that. But one huge whole in the theory is the actual METHOD of measuring of inflation. You are assuming that the methodology of measuring inflation is static -does not change and is universally accepted. In fact, that is not true. The substitution effect, the hedonics component, and changes in the weights of the CPI basket are characteristics that distort -or accommodate, depending on what is your perspective- the "actual" level of inflation, which are used by the central bank to make the "actual" level of inflation approach the stated target and increase their "batting average" and therefore their credibility. <br /><br />http://www.peakprosperity.com/crashcourse/chapter-16-fuzzy-numbers<br /><br />Something to think about.The Chinonomisthttps://www.blogger.com/profile/08106757954345596438noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-14058556615173704252012-07-14T12:00:46.550-04:002012-07-14T12:00:46.550-04:00Scott, I think the main issue now is to fine tune ...Scott, I think the main issue now is to fine tune the implementation of such a policy and what key indicators we should be looking for/at. That's why I've been thinking about these key market monetarist arguments in a more axiomatic fashion. While a lot of the expectations game has to do with non-linear causality, I don't think it's any reason for our explanations and lines of thoughts to be as nonlinear. I think you've done a very good job with showing how market monetarism would help policy now, and I just want to work around the edges to highlight some interesting theoretical results of market monetarism.<br /><br />The lack of a rigorous mathematical DSGE model is also, for better or for worse, a rather big deal. I remember Krugman talking about his trade models and noting that increasing returns didn't start playing a large part in trade models until there was Dixit-Stiglitz and a way to model monopolistic competition. But to build a model, we likely need to define a few "obvious" assumptions and, from there, work our way up to the common market monetarist arguments we hear about tight/loose monetary policy, interest rates, and expectations of the future.Yichuan Wanghttps://www.blogger.com/profile/15398092824604478764noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-1569814129981881012012-07-11T10:46:40.967-04:002012-07-11T10:46:40.967-04:00Excellent post. What part of market monetarism do...Excellent post. What part of market monetarism do you think is not well-defined?Scott Sumnerhttps://www.blogger.com/profile/15864819372390187247noreply@blogger.com