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on History and Philosophy of Economics |
| By: | Francis X. Diebold (University of Pennsylvania, and NBER) |
| Abstract: | Engle’s footsteps range widely. His major contributions include early work on band-spectral regression, development and unification of the theory of model specification tests (particularly Lagrange multiplier tests), clarification of the meaning of econometric exogeneity and its relationship to causality, and his later stunningly influential work on common trend modeling (cointegration) and volatility modelling (ARCH, short for Auto Regressive Conditional Heteroskedasticity). More generally, Engle’s cumulative work is a fine example of best-practice applied time-series econometrics: he identifies important dynamic economic phenomena, formulates precise and interesting questions about those phenomena, constructs sophisticated yet simple econometric models for measurement and testing, and consistently obtains results of widespread substantive interest in the scientific, policy, and financial communities. |
| Keywords: | Econometric Theory, Finance |
| JEL: | B31 C10 |
| Date: | 2004–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp200411&r=hpe |
| By: | David E. Lindsey (before his retirement in 2003: Division of Monetary Affairs at the Board of Governors of the Federal Reserve System); Athanasios Orphanides (Division of Monetary Affairs at the Board of Governors of the Federal Reserve System, Centre for Economic Policy Research, Center for Financial Studies); Robert H. Rasche (Federal Reserve Bank of St. Louis) |
| Abstract: | This study offers a historical review of the monetary policy reform of October 6, 1979, and discusses the influences behind it and its significance. We lay out the record from the start of 1979 through the spring of 1980, relying almost exclusively upon contemporaneous sources, including the recently released transcripts of Federal Open Market Committee (FOMC) meetings during 1979. We then present and discuss in detail the reasons for the FOMC’s adoption of the reform and the communications challenge presented to the Committee during this period. Further, we examine whether the essential characteristics of the reform were consistent with monetarism, new, neo, or old-fashioned Keynesianism, nominal income targeting, and inflation targeting. The record suggests that the reform was adopted when the FOMC became convinced that its earlier gradualist strategy using finely tuned interest rate moves had proved inadequate for fighting inflation and reversing inflation expectations. The new plan had to break dramatically with established practice, allow for the possibility of substantial increases in short-term interest rates, yet be politically acceptable, and convince financial markets participants that it would be effective. The new operating procedures were also adopted for the pragmatic reason that they would likely succeed. |
| Keywords: | Federal Reserve, FOMC, Paul Volcker, monetary reform, operating procedures |
| JEL: | E52 E58 E61 E65 |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp200501&r=hpe |
| By: | Jimena Hurtado |
| Abstract: | The economic approach to the study of human behavior has been presented by its foremost representative as the most effective method of studying social phenomena. Gary Becker’s view supposes that, on the one hand, all social phenomena can be explained as a consequence of individual actions and, on the other, there is a stable pattern of individual behavior economics has been able to understand thoroughly. Hence, economics, according to this view, is no longer limited to the study of a certain domain of human actions or to the understanding of material wealth or the necessary conditions for the material reproduction of society. Economics is a method that gives the social scientist the necessary tools to understand and even transform the world that surrounds him/her. Becker clearly acknowledges the direct link between his approach and Jeremy Bentham’s theory. Beyond the apparent connections regarding their conception of human nature there is one central point that links the two authors: their view of economics as an attitude of the human mind, an inherent capacity to calculate that explains all human actions. This paper argues that Bentham provides the philosophical groundings for Becker’s theory. The application of the principle of utility to every aspect of human behavior justifies economic imperialism by transforming economics into a method of general analysis of human behavior. Indeed, economics is no longer defined according to its subject matter but according to its method, which means an increasing scope explaining Becker’s claim that the economic approach provides a rigorous framework for the analysis of all social phenomena. |
| Keywords: | Gary Becker, |
| JEL: | A12 |
| Date: | 2005–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:col:000138:001085&r=hpe |
| By: | Christopher L. Gilbert (Università degli Studi di Trento); Duo Qin (Queen Mary, University of London) |
| Abstract: | We characterize modern econometrics in terms of the emergence a widely accepted analytical framework. A major theme which dominated much of the debate through the century was whether and how econometric models can reflect theory-generated economic structures. In the period prior to the 2nd world war, economists adopted a wide variety of analytical methods, some ad hoc but others reflecting advances in statistical methodology. Business cycle analysis and demand analysis were the two major areas in which statistical theory was employed. Methods became increasingly formalized but problems of data adequacy, estimation and identification were not always well distinguished. During and immediately after the war, Cowles Commission research sought to base econometrics on autonomous probabilistic models specified in terms of underlying structural parameters. Least squares would not normally be consistent in such models and maximum likelihood estimation was to be preferred. Subsequently, however, the pendulum swung back towards least squares-based methods and this was reflected ion the textbook expositions of what was accepted as standard econometrics in the late sixties and early seventies. Subsequently, the paradigm was undermined by the challenges imposed by rational expectations modelling, which challenged standard identification assumptions, and by the poor forecasting performance of many macroeconomic models by comparison with black box time series competitors. The result was a revival of non-structural modelling, particularly in the analysis of macroeconomic data. |
| Keywords: | Econometrics, History, Estimation, Identification. |
| JEL: | B23 C10 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp544&r=hpe |
| By: | Metin Cosgel (University of Connecticut) |
| Abstract: | Interdisciplinary citation patterns and other indicators of the flow and sharing of academic knowledge suggest that economists and anthropologists do not talk to each other. Previous studies of this puzzling trend have typically attributed the problem to methodological differences between the two disciplines. Although there are significant differences between economics and anthropology in behavioral assumptions and modes of inquiry, similar differences exist between them and other disciplines (some with much heavier volumes of cross-citations with economics or anthropology), suggesting that the source of the problem lies elsewhere. This paper considers the problem at a deeper level by examining systematic differences in the preferences, capabilities, and literary cultures of economists and anthropologists. Adopting a rhetorical perspective, I consider not the firms, households, or tribes as the principal objective of analysis in the two disciplines, but the conversations between these units. These conversations (through non-verbal as well as verbal media) can be grouped into two genres, based on the type of problem they aim to solve. Those in the first genre aim to solve the problem of interest--how to align the incentives of the parties involved. Those in the second genre deal with the problem of knowledge--how to align localized, and dispersed information. Economists are interested and capable of dealing with primarily, if not exclusively, the first genre, and anthropologists focus on the second. This difference has far reaching consequences for how economists and anthropologists conduct their own scholarly conversations with their own colleagues, why they are having difficulty talking to each other across disciplinary boundaries, and what can be done to change the patterns of communication. |
| Keywords: | anthropology, conversation, interest, incentive, knowledge |
| JEL: | A12 B4 O5 Z1 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2005-29&r=hpe |