[P2P-F] Fw: William Lazonick: How Wall Street Hurts the Innovative Enterprise + Woodford and Davidson respond to Kay

Fri Oct 7 10:42:17 CEST 2011

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From: Institute for New Economic Thinking <Institute_for_New_Economic_Think at mail.vresp.com>
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Sent: Friday, 7 October 2011, 3:04
Subject: William Lazonick: How Wall Street Hurts the Innovative Enterprise + Woodford and Davidson respond to Kay

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Hi Robert Searle, Today we present you the latest video of our grantee interview series "30 Way to Be an Economist", as well as direct responses from Michael Woodford and Paul Davidson to John Kay's recent INET paper "The Map Is Not the Territory."
William Lazonick - How Government Helps, and Wall Street Hurts, the Innovative Enterprise

Innovation drives economic growth and welfare, and the industrial corporation drives innovation, says William Lazonick. But just how do corporations innovate? The key idea is commitment. People with knowledge of and experience in particular industries commit to a business model that ventures into unknown territory. The main problem is that modern financiers are not prepared to support commitment, and the modern executive pushes for stock buy-backs -- that is how Wall Street undermines innovation. Understanding how organization drives innovation -- this is new economic thinking.Link to video
Michael Woodford: What's Wrong With Economic Models? A Response to John Kay

Woodford, John Bates Clark Professor of Political Economy at Columbia University, takes issue with the rational expectations postulate. A researcher's aspiration to internal consistency and to explanation of people’s choices in terms of individual rationality, he says, does not imply the postulate of rational expectations. The future of macro may well make "the formation and revision of expectations an object of analysis in its own right."Link to blog post
Paul Davidson: A Response to John Kay
Davidson, Editor of the Journal of Post Keynesian Economics, and Visiting Scholar at the Schwartz Center for Economic Policy Analysis, takes issue with the “classical” axioms, in particular with what he calls the "ergodic axiom": the notion that the future is predetermined by the past and present state of affairs, that past and knowable probability distributions govern future events. He praises rigor, consistency, and the deductive approach, but says the classical axioms are inapplicable to the world we live in: “The financial crisis of 2007-2009 should have been sufficient empirical evidence to indicate that the axiomatic basis of the mainstream theory needs to be replaced.”Link to blog post
Sincerely,Perry MehrlingINET Senior Advisor
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History of Economics Playground
Progress in Economics: A Commentby YANN GIRAUDFor an historical point of view, first, I think it is important to understand that what we call "progress" is something that has changed dramatically over time...Bretton Woods, Past and Present: 3. Models in Economicsby PEDRO DUARTE with video produced by THE KIDSI cannot resist but to start quoting Mary Morgan's second entry to the second edition of the New Palgrave: “Modeling became the dominant methodology of economics during the 20th century.” ...
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Economics and Realityby HARALD UHLIGThe Chairman of the Economics Department of the University of Chicago poses the question of how reality in the form of empirical evidence does or does not influence economic thinking and theory, and suggests some answers.The Map Is Not the Territory: An Essay on the State of Economicsby JOHN KAYJohn Kay spells out methodological critiques of economic theory in general, and of DSGE models and rational expectations in particular. The paper is concerned with the relation of quantitative models to the world in which we live, and with evergreens such as the implications of unrealistic assumptions in economic theory. The Money View
Lords of Finance Redux: Forget the G7, Watch the C5by PERRY MEHRLINGMartin Wolf endorses Adam Posen's call for quantitative easing at the Bank of England, and then goes one better, calling for direct monetary finance of government spending, i.e. helicopter money. Problem is, the world doesn't want pounds, it wants dollars...Europe Ground Zero: Financial Globalization versus the Nation Stateby PERRY MEHRLINGAt its core, this rolling crisis is really about financial globalization.  Both words are important.  When I say globalization I do not mean primarily trade in goods and services, but rather the integration of previously national money markets and capital markets...
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Welcome to our newly redesigned newsletter featuring more content than we've ever offered before. We think you're going to like it. INET recommends

Olivier Blanchard on fiscal policy: A complicated gameKeynes versus Tinbergen and the role of Keynes in the history of econometricsBlog by DAVE GILES
From the archive
Wendy Carlin: The Challenge of EuropeBRETTON WOODS TALKThe institutional wage bargaining that characterizes the German labor market was not available in the periphery, and that's one reason why inflation was low in Germany and high in the periphery, says Wendy Carlin.

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