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July 25, 2006
How smart are models?
- Economic models fall into two broad genres. Macroeconomic models, the distant descendants of Phillips's machine, belong mostly in central banks. They capture the economy's ups and downs, providing a compass for the folks with their hands on the monetary tiller. The second species, known as computable general equilibrium (CGE) models, largely ignore the vagaries of the business cycle. They concentrate instead on the underlying structure of production, shedding light on the long-term repercussions of such things as the Doha trade round, a big tax reform or climate change.
Both kinds of model share a debt to Leon Walras, a 19th-century French economist. Walras was adamant that one could not explain anything in an economy until one had explained everything. Each market—for goods, labour and capital—was connected to every other, however remotely. This interdependence is apparent whenever faster car sales in Texas result in an increase in grocery shopping in Detroit, the home of America's “big three” carmakers. Or when steep prices for oil lead, curiously enough, to lower American interest rates, because the money the Saudis and the Russians make from crude is spent on American Treasury bonds. This fundamental insight moved one economist to quote the poetry of Francis Thompson: “Thou canst not stir a flower/Without troubling of a star.”
Such thinking now comes naturally to economists. But it still escapes many politicians, who blindly uproot flowers, ignorant of the celestial commotion that may ensue. They slap tariffs on steel imports, for example, to save jobs in Pittsburgh, only to find this costs more jobs in the domestic industries that use the metal. Or they help to keep zombie companies alive—rolling over their loans, and preserving their employees on the payroll—only to discover they have starved new firms of manpower and credit. Big models, which span all the markets in an economy, can make policymakers think twice about the knock-on effects of their decisions.
More here.
Posted by tedb at July 25, 2006 02:31 PM
I can't be bothered with anything these days, but shrug. I just don't have anything to say recently. I haven't gotten much done recently. Nothing seems worth thinking about.
Comment by: Sten77281 at January 26, 2007 08:12 AM
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My life's been basically bland today. More or less nothing seems worth thinking about. My mind is like an empty room. I've more or less been doing nothing to speak of. Not much on my mind recently.
Comment by: Sten53293 at January 26, 2007 10:28 PM
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I haven't been up to much today. I've just been letting everything happen without me. Basically nothing seems worth bothering with. I've just been hanging out doing nothing. I just don't have anything to say right now. More or less nothing happening.
Comment by: Sten92389 at January 27, 2007 04:27 AM
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I've just been staying at home waiting for something to happen. Whatever. Not much on my mind lately. I guess it doesn't bother me.
Comment by: Sten59758 at January 27, 2007 06:26 AM
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I haven't been up to anything recently, but so it goes. Such is life. What can I say? Pretty much not much exciting going on to speak of. I haven't gotten much done lately, but I don't care.
Comment by: Sten54390 at January 27, 2007 11:46 AM
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I haven't been up to anything today. I don't care. I've just been staying at home not getting anything done. Basically not much happening right now. Maybe tomorrow. I guess it doesn't bother me.
Comment by: Sten38074 at January 27, 2007 04:01 PM
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I just don't have anything to say right now. I haven't been up to anything recently, but it's not important. I've just been sitting around waiting for something to happen, but shrug.
Comment by: Sten98945 at January 27, 2007 06:33 PM
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Not much on my mind these days, but what can I say? It's not important. I just don't have much to say lately. I've just been letting everything pass me by recently, but eh.
Comment by: Sten13248 at January 27, 2007 11:24 PM
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I just don't have anything to say right now. I haven't been up to anything recently, but it's not important. I've just been sitting around waiting for something to happen, but shrug.
Comment by: Sten25407 at January 28, 2007 01:12 AM
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I haven't been up to much lately. I've basically been doing nothing , but it's not important. I can't be bothered with anything recently. I've just been letting everything happen without me lately.
Comment by: Sten74613 at January 28, 2007 04:30 AM
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I just don't have anything to say. Not that it matters. Eh. I've just been staying at home doing nothing, but I don't care. That's how it is.
Comment by: Sten14155 at January 28, 2007 09:36 AM
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I've just been staying at home not getting anything done. I guess it doesn't bother me. Shrug. I haven't been up to anything. I haven't gotten much done today.
Comment by: Sten80409 at January 28, 2007 06:17 PM
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My life's been basically bland today. More or less nothing seems worth thinking about. My mind is like an empty room. I've more or less been doing nothing to speak of. Not much on my mind recently.
Comment by: Sten30911 at January 28, 2007 07:47 PM
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I haven't been up to anything today. I don't care. I've just been staying at home not getting anything done. Basically not much happening right now. Maybe tomorrow. I guess it doesn't bother me.
Comment by: Sten79934 at January 29, 2007 12:53 AM
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I haven't been up to anything these days. So it goes. I can't be bothered with anything these days.
Comment by: Sten97654 at January 29, 2007 05:37 AM
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I've just been staying at home not getting anything done. I've basically been doing nothing worth mentioning. My life's been pretty unremarkable these days. Eh.
Comment by: Sten50502 at January 29, 2007 08:22 AM
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I haven't gotten anything done today. I feel like a fog, but what can I say? I've just been letting everything wash over me lately, not that it matters. Shrug.
Comment by: Sten49317 at January 30, 2007 12:21 AM
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My life's been basically bland today. More or less nothing seems worth thinking about. My mind is like an empty room. I've more or less been doing nothing to speak of. Not much on my mind recently.
Comment by: Sten10589 at January 30, 2007 07:31 AM
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I just don't have anything to say. Not that it matters. Eh. I've just been staying at home doing nothing, but I don't care. That's how it is.
Comment by: Sten3138 at January 30, 2007 05:36 PM
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Basically nothing seems worth thinking about. I haven't been up to much these days. I just don't have much to say right now. I can't be bothered with anything , but whatever.
Comment by: Sten58514 at January 31, 2007 03:43 AM
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My life's been pretty dull recently. Shrug. My mind is like a void. I haven't gotten anything done lately. I can't be bothered with anything recently.
Comment by: Sten14005 at January 31, 2007 06:55 AM
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My mind is like a bunch of nothing, but I guess it doesn't bother me. I haven't been up to anything recently. I've pretty much been doing nothing to speak of.
Comment by: Sten76619 at January 31, 2007 09:16 AM
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Not much on my mind lately. My life's been completely boring these days. I've just been hanging out not getting anything done. So it goes.
Comment by: Sten95231 at January 31, 2007 07:35 PM
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I just don't have much to say these days, but so it goes. Today was a total loss. I guess it doesn't bother me.
Comment by: Sten61493 at February 1, 2007 12:06 AM
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My life's been basically bland today. More or less nothing seems worth thinking about. My mind is like an empty room. I've more or less been doing nothing to speak of. Not much on my mind recently.
Comment by: Sten94739 at February 1, 2007 03:27 AM
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My life's been basically bland today. More or less nothing seems worth thinking about. My mind is like an empty room. I've more or less been doing nothing to speak of. Not much on my mind recently.
Comment by: Sten79534 at February 1, 2007 05:22 AM
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I've just been staying at home waiting for something to happen, but I don't care. Basically nothing seems worth thinking about. I can't be bothered with anything recently.
Comment by: Sten22405 at February 1, 2007 08:08 AM
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I just don't have anything to say. Not that it matters. Eh. I've just been staying at home doing nothing, but I don't care. That's how it is.
Comment by: Sten47430 at February 1, 2007 10:03 AM
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I haven't been up to much these days. Today was a loss. Nothing seems important. I've just been letting everything happen without me these days.
Comment by: Sten14342 at February 1, 2007 12:17 PM
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I haven't gotten anything done today. I feel like a fog, but what can I say? I've just been letting everything wash over me lately, not that it matters. Shrug.
Comment by: Sten15713 at February 1, 2007 03:52 PM
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I can't be bothered with anything these days, but shrug. I just don't have anything to say recently. I haven't gotten much done recently. Nothing seems worth thinking about.
Comment by: Sten59619 at February 1, 2007 05:11 PM
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I haven't been up to much today. I've just been letting everything happen without me. Basically nothing seems worth bothering with. I've just been hanging out doing nothing. I just don't have anything to say right now. More or less nothing happening.
Comment by: Sten55280 at February 1, 2007 09:37 PM
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I just don't have anything to say right now. I haven't been up to anything recently, but it's not important. I've just been sitting around waiting for something to happen, but shrug.
Comment by: Sten9165 at February 1, 2007 10:18 PM
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I haven't been up to anything recently, but so it goes. Such is life. What can I say? Pretty much not much exciting going on to speak of. I haven't gotten much done lately, but I don't care.
Comment by: Sten32428 at February 2, 2007 01:57 AM
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I've just been staying at home not getting anything done. I guess it doesn't bother me. Shrug. I haven't been up to anything. I haven't gotten much done today.
Comment by: Sten67467 at February 2, 2007 03:29 AM
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I haven't been up to anything recently, but so it goes. Such is life. What can I say? Pretty much not much exciting going on to speak of. I haven't gotten much done lately, but I don't care.
Comment by: Sten97022 at February 2, 2007 07:12 AM
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I just don't have much to say these days, but so it goes. Today was a total loss. I guess it doesn't bother me.
Comment by: Sten47460 at February 2, 2007 11:59 AM
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I feel like an empty room, but eh. Nothing seems worth doing. I haven't gotten much done today.
Comment by: Sten17341 at February 2, 2007 04:38 PM
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I just don't have anything to say right now. I haven't been up to anything recently, but it's not important. I've just been sitting around waiting for something to happen, but shrug.
Comment by: Sten18954 at February 2, 2007 08:47 PM
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Not much on my mind. I don't care. I've just been letting everything happen without me , but shrug. Whatever. I feel like a void.
Comment by: Sten74302 at February 3, 2007 12:14 AM
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Basically nothing seems worth thinking about. I haven't been up to much these days. I just don't have much to say right now. I can't be bothered with anything , but whatever.
Comment by: Sten90213 at February 3, 2007 01:06 AM
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I've more or less been doing nothing worth mentioning, but eh. My life's been really bland today. I don't care. I've just been letting everything happen without me these days. That's how it is.
Comment by: Sten79512 at February 3, 2007 06:12 AM
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I've just been staying at home waiting for something to happen, but I don't care. Basically nothing seems worth thinking about. I can't be bothered with anything recently.
Comment by: Sten59577 at February 3, 2007 11:08 AM
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I just don't have anything to say right now. I haven't been up to anything recently, but it's not important. I've just been sitting around waiting for something to happen, but shrug.
Comment by: Sten77325 at February 3, 2007 09:29 PM
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Not much on my mind. I don't care. I've just been letting everything happen without me , but shrug. Whatever. I feel like a void.
Comment by: Sten36899 at February 4, 2007 02:00 AM
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I've just been staying at home waiting for something to happen. Whatever. Not much on my mind lately. I guess it doesn't bother me.
Comment by: Sten1266 at February 4, 2007 06:39 AM
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I've more or less been doing nothing worth mentioning, but eh. My life's been really bland today. I don't care. I've just been letting everything happen without me these days. That's how it is.
Comment by: Sten79727 at February 4, 2007 08:30 PM
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I just don't have much to say these days, but so it goes. Today was a total loss. I guess it doesn't bother me.
Comment by: Sten31418 at February 5, 2007 06:35 AM
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Not much on my mind right now, but it's not important. I've just been letting everything happen without me. I just don't have anything to say right now.
Comment by: Sten2641 at February 5, 2007 03:01 PM
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I haven't been up to anything recently, but so it goes. Such is life. What can I say? Pretty much not much exciting going on to speak of. I haven't gotten much done lately, but I don't care.
Comment by: Sten23766 at February 5, 2007 04:12 PM
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I feel like an empty room, but eh. Nothing seems worth doing. I haven't gotten much done today.
Comment by: Sten49648 at February 5, 2007 06:58 PM
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I feel like a complete blank, but I don't care. Pfft. I've pretty much been doing nothing worth mentioning.
Comment by: Sten94820 at February 5, 2007 10:32 PM
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I haven't been up to anything recently, but so it goes. Such is life. What can I say? Pretty much not much exciting going on to speak of. I haven't gotten much done lately, but I don't care.
Comment by: Sten50396 at February 6, 2007 07:34 AM
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I haven't been up to much lately. I've basically been doing nothing , but it's not important. I can't be bothered with anything recently. I've just been letting everything happen without me lately.
Comment by: Sten28944 at February 6, 2007 07:40 AM
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Comments