Mark Thoma has linked to a post by Rajiv Sethi on the significance of nonlinear macrodynamic models derived from that of Richard Goodwin in 1951. I see this tradition linking with that from Minsky in two current schools of macroeconomic thought that I see as offering a wise way forward, the Bielefeld School and the related Ancona School. The former stresses "Keynes-Metzler-Goodwin" dynamics in such books as _Foundations for a Disequilibrium Theory of the Business Cycle: Qualitative Analysis and Quantitative Assessment_, 2005, Cambridge University Press, by Carl Chiarella, Peter Flaschel, and Reiner Franke, in the Foreword to which I coined the moniker "Bielefeld School," labeling it a species of Post Keynesianism, although some of them do not like that because of a perceived anti-math bias among some Post Keynesians. The "Ancona School" (a term I believe that I am neologizing here now) is exemplified by the recent book by Domenico Delli Gatti, Edoardo Gaffeo, Mauro Gallegati, Gianfranco Giulioni, and Antonio Palestrini, _Emergent Macroeconomics: An Agent-Based Approach to Business Fluctuations_, 2008, Springer. While the former school is somewhat more aggegated-oriented and the latter is more "bottom-up" agent-based oriented, they link through the University of Urbino where chaotician Laura Gardini, a sometime coauthor of Delli Gatti and Gallegati, has held conferences where they have interacted with Carl Chiarella, who has become involved with agent-based modeling of financial and economic markets. Both schools emphasize modeling nonlinear interactions between financial and real output markets.
The Bielefeld School is somewhat older, with most of its members being based elsewhere, but with much of the work in terms of numerous books and papers being done while those people have visited Bielefeld, where Peter Flaschel has been permanently based. Chiarella's main base is the University of Technology-Sydney while Franke is at the University of Bremen. Some others who have coauthored with this group include Willi Semmler who is halftime at Bielefeld and the New School (where mentor Duncan Foley is located), Toichiro Asada of Chuo University in Japan, Peter Skott of the University of Massachusetts-Amherst (who provides a link to more conventional Post Keynesians such as Phil Arestis), and Rajiv Sethi himself, who was a grad student at Bielefeld for two years and has coauthored with Franke, among some others.
The key figure in the Ancona School is Mauro Gallegati, with all the authors of the above-mentioned book being his former grad students (I think) except for longtime coauthor Delli Gatti who is at Milan with Pasinetti, with both of them having worked with Minsky shortly before his death. Gallegati co-founded with Alan Kirman the Workshop on Economic Heterogeneous Interacting Agents (WEHIA, also known as ESHIA), which now has its own journal, the Journal of Economic Interaction and Coordination. Besides his c0-founding role, Gallegati's home base in Ancona deserves the moniker for this school as the conferences of WEHIA for the first several of its years of existence took place there at the Universita di Politecnica de Marche (sp?), where Gallegati is based. He and Kirman and some others edited volumes of proceedings from those conferences, most of them published by Springer. Again, while these two schools have some differences in their approaches, I see them as closely related in methodology and general views, and some combination of the two looks to me to provide as good a view of what is going on now as we have, as well as a promising way forward in terms of research and understanding.
I note that I gave the name of the university in Ancona improperly. It is Universita Politecnica delle Marche. In English that is more or less "Polytechnic University of the Marches," the Marches being the region of Italy (equivalent to US states) of which Ancona is the capital, and which includes Urbino, birthplace of Raphael. Ancona is on the east coast, about halfway down.
Doesn't Ping Chen belong in here somewhere? Ping Chen has done much interesting work on nonlinear models and complexity
Pardon my ignorance but in what way do all these names and "schools" represent a "wise way forward"? My own sense is that heterogenous interacting agents are better then some dipshit representative agent and that the dynamics are damn well more likely to be non-linear than linear. So far so good. But what solid empirical evidence is there that this kind of math leads to better outcomes in terms of happiness, employment, environment or income equality. Of course you didn't say it did and I'm not accusing you of saying it does. But then in what way do you expect this "wise way forward" will contribute to human welfare?
From the Amazon "product description" of a link provided by someone else of the latest treatise from the "Bielefeld school":
This book provides an introduction to basic as well as advanced macrodynamics, viewed as a disequilibrium theory of fluctuating growth. It builds on an earlier attempt to reformulate the foundations of macroeconomics from the perspective of real markets disequilibrium and the conflict over income distribution between capital and labor. It does so, not because it seeks to support the view that this class conflict is inevitable, but rather from the perspective that an understanding of this conflict may help to formulate social principles and policies that can help to overcome class conflict at least in its cruder forms. It is further hoped that such an understanding can even lead to rational procedures and rules that may turn this conflict into a consensus-driven interaction between capital and the employable workforce."
I had a laugh at this:
" paine said in reply to Barkley Rosser...
as usual the omnibus of first takes
in some sense you are such a child of
that glass boat under sea world
we label the academy
you remind me of captain nemo
without a grudge
circling the earths oceans gobbling up
hunting with a camera not a gun
is another way to put it i guess
i wish you were more dangerous
to the establishment"
Hmmmm.... that thought did occur to me ;-)
john c. halasz,
"...but rather from the perspective that an understanding of this conflict may help to formulate social principles and policies that can help to overcome class conflict at least in its cruder forms. It is further hoped that such an understanding can even lead to rational procedures and rules that may turn this conflict into a consensus-driven interaction between capital and the employable workforce."
Does this mean that from a global and national perspective that the Chinese government is the odd man out?
Strange that non-economists haven't heard of these research traditions until now.
These are exciting times for economics. Usually paradigm shifts come about by amalgam. Very seldom to you get revolutionary shifts. With representative agency and general equilibrium being questioned, I wonder if this is stacking up to be one?
Barkley seems to know where all the bodies are hidden.
Great post. It seems strange that it is taking so long for these new macro schools to catch on. Using ACE to model a mix of Minsky/Stockholm school/Keynes seems to be the most interesting way to do macro and a step towards making economics-to paraphrase Katsuhito Iwai-a theory of process without the teleology of equilibrium.
Well, Ping Chen has indeed long been involved in nonlinear dynamics modeling of the economy, as has a rather long list of other people. A physicist and student of the late Ilya Prigogine, Chen published a controversial paper with William Barnett back in 1987 arguing that Divisia index-defined monetary aggregates behave chaotically, which was published as a book chapter. He also coedited an excellent volume with Richard Day on Nonlinear Evolutionary Dynamics in Economics. Long at the University of Texas-Austin, where he is a friend of Jamie Galbraith's, in more recent years he has been spending a lot of time in China, holding appointments at both Peking University in Beijing and Fudan University in Shanghai. But he is not directly involved in either of these two schools.
Well, these schools are not going to solve all our problems (hack, cough), but they are a lot better at modeling and understanding speculative bubbles than most existing and widely touted approaches to macro. Seems I remember you once claiming that reduced working hours would reduce bubbles, although I expressed skepticism on that one.
John C. Halasz,
Thanks for the quote.
Yeah, well, as I said to paine, sometimes I have gone after the Establishment waving a club only to find them saying nice things about me after first ignoring me and telling me to go away and leave them alone. What the heck.
wjd123 and Joe V.,
Yes, these schools have been around for some time, the Bielefelders longer than the ACErs. But they have been largely ignored by most macroeconomists and have gone under the radar for some time. So, this does seem the time for them to get more attention as they do seem a lot more suited to explaining what the heck is going on than idiot DSGE models and their relatives. I figure giving them names helps given them identities that people might remember and notice. Time to push them forward so they can help us move forward.
"...sometimes I have gone after the Establishment waving a club [sandwich?]..."
And in another version of that story, a flea is floating down the river on his back with a hard-on shouting, "raise the drawbridge!"
One way to contribute to this dicussion, though, is to add a little social trend analysis. (I tend to look at the bigger picture anyway.) If the market continues to act like Oprah's ratings, then we are in trouble. There seems to be a connection between the TV "star" and the market "star." in regards to social trends. I posted some of the article below and the rest you can find here: http://www.graspthemarket.com/articles/20091125a.php
An interesting part of the Tribune article was a graph that showed the average daily
viewership slipping from approximately 9 million in 2005 to 6.2 million in the beginning of 2009 (the graph only showed 2009 as a single point, not month to month). That is a drop of about 31%. The Dow Jones Industrial Average was trading at about 10,500 at the beginning of 2005, and hit a low of 6,469 in March of 2009. This is a drop of about 38% during that time period. Both percentages are very close to each other. Is there a connection? I think there might be.
Kalecki identified a problem addressed by these nonlinear dynamic models: the need to integrate models of long run growth and the business cycle. Goodwin was very conscious of this problem, but then he drew on Schumpeter's ideas.
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