Talk at PIDE Nurturing Minds Seminar on 29th Nov 2017. Based on “Lessons in Econometric Methodology: Axiom of Correct Specification”, International Econometric Review, Vol 9, Issue 2. Modern econometrics is based on logical positivist foundations, and looks for patterns in the data. This nominalist approach is seriously deficient, as I have pointed out in Methodological Mistakes… Read More Choosing the Right Regressors

The title is an inversion of De-Finetti’s famous statement that “Probability does not exist” with which he opens his famous treatise on Probability. My paper on “Subjective Probability Does Not Exist“ (revised and updated Dec 2019), discussed below, shows that the arguments used to establish the existence of subjective probabilities, offered as a substitute for… Read More Subjective Probability Does Not Exist

Olivier Blanchard and Lawrence Summers has recently called for a reflection about the macroeconomic tools required to manage the outcomes of the 2008 global crisis  in their paper Rethinking Stabilization Policy. Back to the Future. The relevant question they address is: Should the crisis lead to a rethinking of both macroeconomics and macroeconomic policy similar… Read More Blanchard and Summers: Back to the future?

Lecture 5 of Advanced Microeconomics at PIDE. The base for this lecture Hill & Myatt Anti-Textbook Chapter 4 on Consumer Theory. Hill and Myatt cover three criticisms of conventional microeconomic consumer theory. Economic theory considers preference formation as exogenous. If the production process also creates preferences via advertising, this is not legitimate. Consumers are supposed… Read More AM05 Consumer Theory

The bull charges the red flag being waved by the matador, and is killed because he makes a mistake in recognizing the enemy.  A standard strategy of the ultra-rich throughout the ages has been to convince the masses that their real enemy lies elsewhere. Most recently, Samuel Huntington created a red flag when he painted… Read More The Shifting Battleground

{bit.ly/gd29gfc} Karl Marx said that “The advance of capitalist production develops a working class which by education, tradition and habit looks upon the requirements of that mode of production as self-evident natural laws.” Modern economic theory is a tool of central importance in making the laborers and the poor accept their own exploitation as natural… Read More Completing the Circle: From GD ’29 to GFC ’07

Varian start his intermediate micro text by stating the maximization and equilbrium are the core principles of micro. Krugman recently stated that I am a “maximization and equilibrium” kind of guy. The goal of this lecture is to show that these two principles fail completely to help us understand behavior is a very simple model of… Read More AM04 Duopolies

Building on the analysis of Supply and Demand in Chapter 3 of Hill and Myatt’s Anti-Textbook, this lecture constructs a very simple model of monopoly and duopoly, to show that policy implications in these cases differ dramatically from what conventional textbooks teach. The higher level goal is to teach students Meta-Theoretical thinking. This goes beyond… Read More AM03 Monopolies