Wednesday, February 16, 2011

Automatic stabilizers

Alex Tabqarrok talks about Keynes never gets tried in this post. My themes that there is no Great Exogenous, and any economic theory that assumes one is not valid. One of the comments:
If we accept Keynesian analysis, shouldn't the policy be "do as much Keynesianism as you can get through a democratic republic and just understand you probably won't reach any kind of ideal"?
We can call that an automtic stabilizer, otherwise known as a channel component adjusting in the face of a channel restriction.  This does not invalidate all 20 years of stochastic analysis,  which is intrepreted as approximate channel analysis done with aggregate data.

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