Both are macroeconometric model builders who suffer from an inferiority complex by attempting to mimic the physical sciences with their mathematical models, when the social sciences must be studied from a completely different structure because they deal with human action.
Their models are make believe that, when followed to any degree, tend to result in blowing up economies.
Friedrich Hayek explained it all in The Counter-Revolution of Science.
This is what the Nobel Committee had to say:
How are GDP and inflation affected by a temporary increase in the interest rate or a tax cut? What happens if a central bank makes a permanent change in its inflation target or a government modifies its objective for budgetary balance? This year's Laureates in economic sciences have developed methods for answering these and many of other questions regarding the causal relationship between economic policy and different macroeconomic variables such as GDP, inflation, employment and investments.
These occurrences are usually two-way relationships – policy affects the economy, but the economy also affects policy. Expectations regarding the future are primary aspects of this interplay. The expectations of the private sector regarding future economic activity and policy influence decisions about wages, saving and investments. Concurrently, economic-policy decisions are influenced by expectations about developments in the private sector. The Laureates' methods can be applied to identify these causal relationships and explain the role of expectations. This makes it possible to ascertain the effects of unexpected policy measures as well as systematic policy shifts.
Thomas Sargent has shown how structural macroeconometrics can be used to analyze permanent changes in economic policy. This method can be applied to study macroeconomic relationships when households and firms adjust their expectations concurrently with economic developments. Sargent has examined, for instance, the post-World War II era, when many countries initially tended to implement a high-inflation policy, but eventually introduced systematic changes in economic policy and reverted to a lower inflation rate.
Christopher Sims has developed a method based on so-called vector autoregression to analyze how the economy is affected by temporary changes in economic policy and other factors. Sims and other researchers have applied this method to examine, for instance, the effects of an increase in the interest rate set by a central bank. It usually takes one or two years for the inflation rate to decrease, whereas economic growth declines gradually already in the short run and does not revert to its normal development until after a couple of years.
Although Sargent and Sims carried out their research independently, their contributions are complementary in several ways. The laureates' seminal work during the 1970s and 1980s has been adopted by both researchers and policymakers throughout the world. Today, the methods developed by Sargent and Sims are essential tools in macroeconomic analysis
I've alway been disappointed that Heloise never won the Noble in Home-Economics
ReplyDeleteIts important to note that the Nobel prize in economics is sponsored by the Central Bank of Sweden and is not the same "Nobel prize" that was given to Obama the warmonger. The economics prize is a total sham, given to only statist keynsian fools.
ReplyDeletehey why dont we create our own nobel prize...from economic policy journal that awards the real economists that did something useful/practical.
ReplyDeletesometimes observation, intuition and common-sense help keep the BS away.
"Both are macroeconometric model builders who suffer from an inferiority complex by attempting to mimic the physical sciences with their mathematical models, when the social sciences must be studied from a completely different structure because they deal with human action."
ReplyDeleteWow, an economist who gets it! Very impressed. Keep up the good work.
I think an Austrian Nobel is too self-serving. Far better to give an Ignoble Prize to the economist deemed to have contributed the most to economic destruction, or to have come up with the silliest theory. The citations would be fun to write and might actually get some of the right sort of attention!
ReplyDelete"... the application of mathematical methods from the social sciences creates a false and dangerous impression that society can itself be engineered."
ReplyDeleteIs this really such a tough concept to grasp?
Occasionally the Nobel Prize committee does get it right: http://www.nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html
ReplyDeleteI nominate Wenzel. Who's with me?
ReplyDelete@ Cletus III,
ReplyDeleteAs soon as he makes Krugman cry uncle and Krugman debates Murphy.
@ Cletus III
ReplyDeleteYes, but for the Pulitzer or the Nobel?
@ Anon at 9:35 am
What a wonderful audacious idea.
Sim's Vector Autoregression is a fancy name for something simple: that the future level of a variable is a function of its past levels. Really, it is fancy extrapolation.
ReplyDeleteVAR has some utility when all is well and good and unchanging, but is useless in times such as today, with the potential for violent changes.
"There models are make believe that, when followed to any degree, tend to result in blowing up economies."
ReplyDeleteErrors in spelling and punctuation like those above really do detract from an otherwise interesting and informative blog. Such mistakes are a "constant" in your "behavior." They make you seem lazy and/or illiterate.