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BadEconomics Discussion Thread, 02 October 2015 (self.badeconomics)

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[–]MoneyChurchChairman of the Kennywood Park Central Bank 3ポイント4ポイント  (3子コメント)

I am very upset. I have a gen ed that I have to take, and it meets at the same time as empirical design (basically a class on structural econometrics). Normally I like my school's gen eds, but uggggh this sucks.

[–]IntegraldsI am the rep agent AMA 0ポイント1ポイント  (0子コメント)

;_;

I guess the gen ed is required? You can't weasel your way out of it, into a different section, or put it off for a semester?

Tagging /u/wumbotarian #downwithgeneds

[–]DrSandbagsDow Jones Propaganda Index 4ポイント5ポイント  (1子コメント)

You're not missing out on much.

Sincerely,

Reduced Form Master Race

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 2ポイント3ポイント  (0子コメント)

Aren't you LATE for your seminar IV criticism pow-wow?

[–]UltSomnia 1ポイント2ポイント  (19子コメント)

So my school has an opportunity for me to take 2 grad classes as an undergrad (Mathmatiecal Economics and a choice between Advanced micro/macro/econometrics). This is a good idea right? It either prepares me/reduces the time of grad school if I decide to go, or puts a dank signal on my resume when I apply for jobs.

[–]IntegraldsI am the rep agent AMA 1ポイント2ポイント  (0子コメント)

Yes, take the courses.

In terms of signalling, Micro > Metrics > Macro.

Plan to spend twice as much time on grad courses as you do on undergrad courses.

[–]urnbabyurnNeoPanglossian 1ポイント2ポイント  (6子コメント)

This is good!

I'm a bit confused because Math Econ can mean different things. At my grad school, it was a second-year graduate class that covered the calculus of variations and dynamic optimization in continuous time, among other things. It built on the first year macro and micro sequence so it wouldn't have been something an undergrad would take (unless they happened to have already taken the first-year classes).

I would recommend taking one of the "advanced" classes (which I would assume are the first-year sequence classes for graduate level). Which one depends on your utility function: which topic is more interesting to you, and what is your plan after graduating.

If you are simply looking for a job, econometrics is king.

If you are looking at grad school, I would still suggest econometrics, but its less important as you will be taking it again. So you can choose the class you think will be more of a challenge for you in grad school to knock it out of the way and make your first year of grad school that much easier. I would recommend micro as the basics are taught almost identically in all graduate programs. Macro may vary slightly in the approach depending on where you go.

[–]complexsystemsMWG is my homeboy 0ポイント1ポイント  (0子コメント)

At my university the math econ course is taken as a reintroduction to micro optimization problems, followed by proofs of solving bellman equations and dynamic optimization, and at the end going over the RBC model. It's meant as a split between "some people are rusty so lets reinforce the material while they learn it in micro," and "Macro I," which is taken in the spring (macro II is taken after passing qualifying exams). It alleviates some of the burden on those classes as well to focus extensively on some of the methods.

[–]UltSomnia 1ポイント2ポイント  (4子コメント)

I have no idea what Math Econ means either. And yeah, it seems metrics would be best for my career but it also seems by far the least interesting of the three...

[–]urnbabyurnNeoPanglossian 1ポイント2ポイント  (3子コメント)

Do you have a course description and prereqs for math econ? Its a common class, but its taught at many different levels - the undergraduate level and graduate. Its a "tools" class rather than an economic theory/practice class.

[–]UltSomnia 1ポイント2ポイント  (1子コメント)

Syllabus: https://faculty.unlv.edu/smiller/MA_MATH_ECONOMICS_OUT_FALL_2013.pdf

[–]PonderayFollows an AR(1) process 1ポイント2ポイント  (0子コメント)

I took a course like this in undergrad. It established a solid math foundation which helped me in grad school.

[–]Lambchops_Legionwe should trade in cucumber melon hand soap 2ポイント3ポイント  (0子コメント)

For jobs, econometrics will help you the most. There are a lot of corporate analyst positions opening up everywhere that require a statistical skillset.

in the insurance industry, every company is hiring a million of them right now

[–]PonderayFollows an AR(1) process 3ポイント4ポイント  (0子コメント)

For jobs metrics always helps. For grad school take micro.

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 2ポイント3ポイント  (8子コメント)

I took masters math econ and micro as an undergrad. It really helped me in PhD micro with Mas-Colell as the book, which I'm taking now.

That said, I highly highly HIGHLY recommend you take an advanced math stats course if you're planning on a PhD in econ. It will prepare for metrics and save you a lot of time and headaches in the first month.

Real Analysis is also an excellent signal. So if you can take real analysis, math stats, AND fit in grad math econ and micro, you're doing yourself a favor.

Also, make sure you know linear algebra like the back of your hand. All of it. Every last bit.

[–]PonderayFollows an AR(1) process 2ポイント3ポイント  (0子コメント)

Also, make sure you know linear algebra like the back of your hand. All of it. Every last bit.

Seconded. Everything is linear algebra.

[–]UltSomnia 1ポイント2ポイント  (6子コメント)

I was thinking masters not PhD and I all ready dropped Real Analysis so its too late for that. and I'm not sure what you mean by "math stats." I took stats for scientists and engineers, I'm not sure if math stats is a thing my school has.

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 1ポイント2ポイント  (4子コメント)

An upper level probability theory and statistics course. Most schools have "Probability and Statistics" with calc II as the prereq. If there is a "Mathematical Statistics" course of any kind beyond Prob and Stat, I recommend that.

[–]UltSomnia 1ポイント2ポイント  (3子コメント)

Yeah, my class was 400 level and had calc 2 as a pre req.

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 1ポイント2ポイント  (2子コメント)

Be sure you know every last bit of that class. See if there's a stat class above that level, but compared to mastering linear algebra and taking real analysis it's lower priority. If you're going for a masters only and you don't mind the ranking of your program, real analysis might be overkill.

[–]UltSomnia 1ポイント2ポイント  (1子コメント)

I had the easy professor for linear algebra (he was the only choice) so I'm a little worried I didn't learn as much as I should have from that class. Could you tell me a quick list of things I ought to be able to do in linear?

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 1ポイント2ポイント  (0子コメント)

The econometrics textbook (PhD level) by Greene, "Econometric Theory", has a matrix algebra appendix. Know everything mentioned there. You can get the book pdf online without pirating.

[–]urnbabyurnNeoPanglossian 1ポイント2ポイント  (0子コメント)

Even if you are leaning towards a Masters instead of a PHD, it is strongly suggested that you still apply for a PHD track. Apply as if you want the PHD for sure. You can always leave after year 2 with a MA, but top programs (outside of specific MA programs) are more interested in investing in people that are interested in going those whole 9 yards, and the MA is given as a consolation prize to those who decide to leave early.

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 2ポイント3ポイント  (9子コメント)

So the Institute for New Economic Thinking has a blog called "Reading MWG" by a professor and a PhD student from the New School. I think I'll read it as I read MWG this semester just to see what kind of stuff they teach at NSSR. I hope it isn't too preachy.

Edit: I was on mobile. Link to the blog.

[–]urnbabyurnNeoPanglossian 2ポイント3ポイント  (8子コメント)

Is it a critical reading of it?

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 2ポイント3ポイント  (7子コメント)

Yeah. For instance, the first post is titled, "is the weak axiom of revealed preference falsifiable?"

[–]PonderayFollows an AR(1) process 3ポイント4ポイント  (5子コメント)

Link I think their main issue is that you can never know that a choice of x over y reveals preference of x versus y because you can't rule out that x ~ y. I always thought the main empirical prediction of WARP was the compensated law of demand anyway.

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 1ポイント2ポイント  (2子コメント)

I always thought the main empirical prediction of WARP was the compensated law of demand anyway.

If the Walrasian demand function is also homogenous of degree zero and satisfies Walras' Law, then yes. But maybe they're just talking about WARP alone. Given how they quote Mas-Colell himself as saying, "the basic axioms of a theory must be operational – that is, they must be refutable by observable data generated from feasible experiments" in another article he wrote, I think they're trying to have a "Gotcha!" moment of pointing out that Mas-Colell thinks axioms should be falsifiable yet MWG derives the law of demand from an unfalsifiable axiom, WARP.

I'm unsure if I agree with them that having falsifiable axioms is truly "scientific footing". As far as I've read, Lakatos believes certain axioms in the core of a paradigm need not be falsifiable, while Herbert Simon said that a theory's assumptions should just be close-ish approximations of reality. I'm unsure where falsifiability is relevant here. Then again, I'm unsure of what modern philosophy of science has to say about it.

[–]PonderayFollows an AR(1) process 1ポイント2ポイント  (1子コメント)

I'm unsure if I agree with them that having falsifiable axioms is truly "scientific footing". As far as I've read, Lakatos believes certain axioms in the core of a paradigm need not be falsifiable, while Herbert Simon said that a theory's assumptions should just be close-ish approximations of reality. I'm unsure where falsifiability is relevant here.

Maybe this is semantics but aren't axioms by definition unfalsifiable? To start any chain of reasoning we must assume something without evidence. Otherwise we just end up in an infinite regress.

I know Friedman's Methodology of Positive Economics has problems. But isn't the important thing about an axiom is that it generates predictions that are falsifiable. For example conservation of energy isn't really falsifiable but if you assume it you get a bunch of experimentally verifiable predictions.

[–]praxeologist4lyfeJoan Robinson did nothing wrong. 1ポイント2ポイント  (0子コメント)

Maybe this is semantics but aren't axioms by definition unfalsifiable?

Right, I'm pretty sure, but they should also be "reasonable" as MWG say. A rational preference relation is "reasonable" because it would make sense if people have transitive and complete preferences. We always need assumptions, but they should at least eventually attempt to be close-ish to reality outside of the baseline. Axioms are different than general assumptions, so from what little I know I think I agree with you there. That is, after all, what math does.

Then again, couldn't psychologists actually test these axioms if they wanted to? I see this whole thing about WARP being essentially of interest to psychologists trying to ground economic theory in something more behavioral. You could devise experiments which test how people actually make choices. Are they complete and transitive? Do they obey WARP? Homogeneity and Walras' Law are pretty much trivially true so forget testing those.

But isn't the important thing about an axiom is that it generates predictions that are falsifiable.

The problem with this is the Duhem-Quine Problem, which states that once a theory is rejected, how do we know which exact combination of assumptions/axioms made it fail? How can we then compare theories this way? This was the most serious criticism of Popper's falsificationism.

[–]urnbabyurnNeoPanglossian 3ポイント4ポイント  (1子コメント)

That sounds like a knife-edge issue. Just ignore the x~y cases like the rest of us and sleep soundly at night.

[–]PonderayFollows an AR(1) process 2ポイント3ポイント  (0子コメント)

Yeah. I always saw WARP as more of a toy model then a description of reality anyway.

[–]urnbabyurnNeoPanglossian 2ポイント3ポイント  (0子コメント)

"is the weak axiom of revealed preference falsifiable?"

Wot?

I'd be interested in seeing more.

Edit: http://ineteconomics.org/ideas-papers/blog/is-the-weak-axiom-of-revealed-preference-falsifiable

thanks /u/ponderay

[–]complexsystemsMWG is my homeboy 4ポイント5ポイント  (1子コメント)

The Caratheodory extension theorem claims that if I feel uncomfortable doing my practice tests I will probably be fucked on my test today.

ONCE MORE UNTO THE BREACH

[–]grevemoeskrHumans are horses! 2ポイント3ポイント  (0子コメント)

Yeah, but Cauchy-Schwartz tells us that something something upper bound on the expected value squared

[–]CatFortuneにゃんぱす! 4ポイント5ポイント  (1子コメント)

>Humans are horses

>Economists are horses

>Horses are animals

>Animals can predict disasters

>Economists are animals

>Economists can predict disasters

As someone studied in economics, what are the earliest signs you can see that something has failed? I'm talking about things that average Joes — or below average Moes like me — wouldn't see, but you and wumbo would exchange glances like "shit's going down."

Interpret this as broadly as you want, basically regarding anything that that is meant to succeed: businesses, economies, policies… anything.

[–]urnbabyurnNeoPanglossian 3ポイント4ポイント  (0子コメント)

what are the earliest signs you can see that something has failed?

people stop buying it.

[–]prillin101Fiat currency has a 27 year lifespan 5ポイント6ポイント  (4子コメント)

First!

I know economists want to get rid of the corporation tax, but what about capital gains? Are there any changes economists want to make of it, but keep it after that? Or, do they want to abolish it? What are the pros and cons of it?

[–]bdubs91Maestro Today and Maestro Forever 6ポイント7ポイント  (3子コメント)

Capital gains is highly distortionary as well.

Edit: my macro prof told me its the worst of all the taxes (consumption, income) because capital taxes make income smoothing the hardest

[–]Lambchops_Legionwe should trade in cucumber melon hand soap 2ポイント3ポイント  (0子コメント)

Wouldn't it decrease liquidity in financial markets?

[–]urnbabyurnNeoPanglossian 2ポイント3ポイント  (1子コメント)

Isn't it also quite progressive?

[–]alexhoyerI used to bullseye Keynesians in my T-16 2ポイント3ポイント  (0子コメント)

Maybe not? I think it would have to depend on the incidence.