Wednesday, October 15, 2014

A Comment on StrawKrugman

I am going to critique something Krugman didn't quite say about Tirole. What he really said is here. can't resist jumping in the deep end and discussing what Nobel memorial prize winner appreciates about another. I think the best title is "calculated silliness was a Trojan horse". In a parody of your version (StrawKrugman's view) consideration of imperfect competition was made possible if examples were allowed as theory, and this was good. But then things went too far and a smart graduate student could provide and example of everything and the opposite of everything. My reply to StrawKrugman is that there is no legitimate way in which this was is going too far. The examples of everything and the opposite of everything existed in the world of math (hyper-Urania). Ignorance is strength but time is stronger. In fact, I think the reason economists insisted (and some still insist) on assuming perfect competition is that it was easy to guess that there were no results out there -- no implications of imperfect competion by itself -- that anything could happen. I think the useful role of Tirole et al was to give the impression that there were interesting general results following from imperfect competition and/or asymmetric information. Once the approach was accepted, the pretense that theory without evidence tells us something about the world can't survive the onslaught of smart graduate students who need PhD topics. I don't think the intent was destructive, but I bet it was as if you, he and MIT played a trick on the profession,

1 comment:

Anonymous said...

he can hardly say cunning trojan horse now can he