This Blog hosts discussion of issues relevant to the book, Inside the Economist's Mind, coedited by Nobel Laureate Paul A. Samuelson and William A. Barnett, published by Wiley/Blackwell, and the newer book by William A. Barnett, Getting It Wrong, published by MIT Press.
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William A. Barnett is Oswald Distinguished Professor of Macroeconomics at the University of Kansas and Director of the Center for Financial Stability in New York City. He was previously Research Economist at the Board of Governors of the Federal Reserve System in Washington, DC; Stuart Centennial Professor of Economics at the University of Texas at Austin; and Professor of Economics at Washington University in St. Louis. William Barnett has been a leading researcher in macroeconomics and econometrics. He is one of the pioneers in the study of chaos and nonlinearity in socioeconomic contexts, as well as a major figure in the study of the aggregation problem. He is Editor of the Emerald Press monograph series International Symposia in Economic Theory and Econometrics, and Editor of the journal Macroeconomic Dynamics, published by Cambridge University Press. He received his B.S. degree from M.I.T., his M.B.A. from the University of California at Berkeley, and his M.A. and Ph.D. from Carnegie Mellon University. He has published 20 books (as either author or editor) and over 140 articles in professional journals. His research has been published in 7 languages.
Paul A. Samuelson was the first American to win the Nobel Prize in Economics. He is Professor Emeritus of Economics and Institute Professor at the Massachusetts Institute of Technology. Institute Professor is the highest rank awarded by MIT. His landmark 1947 book, Foundations of Economic Analysis, based upon his Ph.D. dissertation at Harvard University, established him as "the economists' economist" by raising the standards of the entire profession. Paul Samuelson's classic textbook, Economics, first published in 1948, is among the most successful textbooks ever published in the field. The book's 16 editions have sold over four million copies and have been translated into 41 languages. He received his B.A. degree from the University of Chicago and his M.A. and Ph.D. from Harvard University. As one of the profession's most productive scholars for over a half-century, he remains an intellectual force of towering stature.
Glad to see there is interest on this eminent blog about what I’m doing at the Center for Financial Stability (CFS) in NY City. That said, I probably should mention that interpretation of Divisia money is more difficult than it may seem. In index number theory, there are quantities, prices, and weights. With Divisia, the growth rate weights are the expenditure shares, which depend upon all quantities and prices, not just one price. The prices and the weights are not the same thing. With the Divisia monetary aggregates, the prices are foregone interest (opportunity costs). Those prices are not the same as the weights, but often are misinterpreted as weights.
Consider, for example, the case of a Cobb-Douglas aggregator function. The expenditure shares are constants for Cobb-Douglas. Regardless of what happens to the prices, the shares will not change. Hence the Divisia weights will not change.
What about other aggregator functions, not Cobb-Douglas? Suppose the price of a good goes up. Will its share (and thereby its Divisia weight) go up? That’s unpredictable, since it depends upon whether the own price elasticity of demand of the good is greater than or less than 1.0.
The CFS Reports section, which is not yet online, will try to help with accurate interpretation. My new book also does that in Appendix E. Once you get the hang of it, it all becomes clear. It’s all about the microeconomic aggregation theory that we all know from the CPI, the National Accounts, etc.
All very interesting. The relevant theory is in the appendixes to my new book, Getting It Wrong. The source of the new Divisia data is the program I now direct at the Center for Financial Stability in NY City. The program is called Advances in Monetary and Financial Measurement (AMFM).
AMFM will include a Reports section discussing monetary conditions. Although not yet online, that section will address many of the concerns rightfully appearing in the excellent blogs, The Money Illusion, The Market Monetarist, and Monetary Freedom. The distinction between the AMFM Reports section and the AMFM Library, which is already online, is that the AMFM Library only relates to articles published in peer-reviewed journals and books, while the AMFM Reports section will relate to the public media and online blogs.
There will be a press release when the full AMFM site is ready to go online.
"We economists have long been inured to the fact that anything touched by Paul Samuelson at once turns to gold. And, unlike the ancient legend, this bit of alchemy is a benefit to us all. As far as I am aware, this book is a new line of enterprise for him, since I do not know of any other collection of interviews that he has overseen. In any event, this book makes for reading that is both interesting and illuminating. In short, it is literally a volume of edited interviews with a well chosen set of leaders in our field, conducted from the mid 1990s onward, and a number of which have previously appeared in the journal Macroeconomic Dynamics."The review ends as follows:
"I must end as I began—this is a book well worth reading. It has considerable information of substance, valuable insights and just enough gossip to ensure that it is rewarding and enjoyable to the reader."Between the first and last paragraphs are many insightful comments on the interviews in the book.