Books: Inside the Economist's Mind (I.T.E.M.) and Getting It Wrong

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.


The book, Inside the Economist's Mind, is coedited by Paul A. Samuelson and William A. Barnett. Although this Blog is hosted solely by the latter coeditor, the following is the information in the book's front matter about Paul Samuelson:

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.

Thursday, January 26, 2012

Kindle Edition Best Seller

The book, Getting It Wrong, now is available from Amazon as a Kindle Edition, and already is on the Kindle bestsellers lists for both Econometrics and for Money and Monetary Policy.

Tuesday, January 10, 2012

Short Review of Getting It Wrong

A short one-paragraph commentary on the book, Getting It Wrong, just appeared in The Economist Intelligence Unit, which is associated with the Economist magazine.

Sunday, January 08, 2012

A Rant on The Money Illusion Blog

A January 6 rant on The Money Illusion blog referred to "Paul Spindt’s debit weighted money figures." But Paul Spindt's MQ index uses turnover rates (not debits) as prices (not weights). My Divisia monetary aggregates use opportunity costs (foregone interests) to measure prices of monetary assets.  Prices in index numbers are not weights.  Weights normally are expenditure shares, which depend upon all quantities and prices

I am not aware of a current source of MQ data, and they will not be computed or supplied by the CFS. But if you are interested in MQ, you can read about it on pp. 212-213 of my new book, Getting It Wrong.

Wednesday, January 04, 2012

Prices versus Share Weights

I just posted this on The Money Illusion blog. As you may have noticed in the latest issue of the Economist Magazine, The Money Illusion blog is highly respected.

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.

My Reply

Regarding the insightful commentaries that just appeared on the three blogs, The Money Illusion, The Market Monetarist, and Monetary Freedom, I just posted the following reply on the Monetary Freedom blog.

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.

Blog Posts About Getting It Wrong

Blog posts and discussion of my new book, Getting It Wrong, just appeared in three widely read economics blogs: The Money Illusion, The Market Monetarist, and Monetary Freedom.