Introduction
The current global crisis has not only strikingly showed the
importance of banking and financial markets for the dynamics of real
economies, it has also turned to be a "natural experiment"
for the economic analysis, showing the deep inadequacy of the dominant
theoretical framework.
The basic assumptions of mainstream DSGE models (e.g. optimizing
behaviours, equilibrium, rational expectations, "representative
agent", etc.) are to a large extent responsible for the failure to
forecast the crisis and seem also unable to propose a therapy to put
back economies on a "good" growth path. In fact, the crisis sets a
tall challenge also for alternative macroeconomic theories.
First of all, what are they? A crucial preliminary exercise involves
the identification of the major building blocks of those theories
which survived, at least in little enclaves, the extermination
systematically organized by "new classical" fundamentalism. They
include various strands of "new Keynesianism" which builds on explicit
microfoundation, often formalized by means of (myopically) maximizing
agents, but at the same time taking seriously those informational
asymmetries and coordination hurdles that are at the core of the
original Keynesian message. Indeed, the latter properties of any
economic system when taken seriously can for a long way in accounting
for multiplicity of macro equilibria (or dynamically, growth paths),
as distinct from those versions of "new Keynesianism" which one could
call homeopathic Keynesianism. That is, those following the
theoretical prescription: add the minimum possible amounts of
frictions, menu costs, habits, etc. to the DSGE in order to be able to
account for the econometric evidence after unrestricted voodoo
manipulations of the statistical evidence itself. Since we are
primarily interested in the ways ahead rather than beating a dead (but
still very much kicking) horse, the workshop is not meant to identify
the long list of shortcoming of the incumbent theory, but rather the
achievements, limitations, challenges for alternative
ones. Progressive new Keynesianism, as we might call it lacking a
better word, of course include:
1. Greenwald-Stiglitz (1993) models with their emphasis on informational asymmetries and, in a few cases, ensuing multiple equilibria;
2. Coordination-failure models à la Cooper and John (1988);
3. Again, relatedly, models of relations between financial vs. real dynamics, à la Minsky, and financial fragility (e.g. Fazzari et al 2008);
4. Models involving some 'bounded rationality', even when the 'boundedness' is relatively small but the theory takes it seriously (Akerlof and Yellen, 1985, is the ancestor but a few, Akerlof 2002 and 2007, develop the theme).
5. Other models more econometrically grounded have an explicit eye on estimations, and explicit links with models à la Phelps. A genre is highlighted by Goldberg and Frydman (2008).
At the other extreme, agent-based models with evolutionary roots,
simply abhor the 'new classical' (pseudo) microfoundations and try to
derive several properties of macro dynamics and the underlying micro
from evolving populations of heterogeneous agents (cf. Dosi, Fagiolo
and Roventini, 2006, and 2008; and Gallegati et al., 2005).
Finally, a variegated set of ('post-Keynesian') contributions remain far from neoclassical microfoundations and traces its roots directly to Keynes.
What is the state-of-the-art on these diverse fronts? A good deal of the workshop will be devoted to this issue.
Second, we think it is quite urgent to assess the state of the statistical evidence concerning (a) the properties of macroeconomic time series; (b) the relationship between the dynamics of such aggregate and the underlying microstatistical evidence; and (c) the circumstantial evidence on the transmission processes of fiscal and monetary shocks. The bottom-up, data-drive, spirit of the exercise is indeed well in tune with the recommendation of the Dahlem Report (Colander et al, 2008).
Third, the seminar is meant to start reflecting about the relations between the foregoing alternative theories and the statistical evidence, if any.
Program and Slides
- Wednesday, 22nd
- Marco Lippi (Università La Sapienza, Roma)
Macroeconometrics: Beyond Demand and Technology Shocks (slides)
- Pietro Dindo (Scuola Superiore Sant'Anna, Pisa)
Imperfect Knowledge Macroeconomics, The Contribution of R.
Frydman and M. D. Goldberg (slides)
- Andrea Roventini (Università di Verona)
Behavioral Macroeconomics and Macroeconomic Behaviour,
The Contributions of G. A. Akerlof (slides)
- Gerarld Silverberg (UNU-MERIT, Maastricht)
Bistability and Phase Transitions in Economics and Finance (slides)
- Thursday, 23rd
- Mauro Napoletano (OFCE, Nice)
Financial Market Imperfections, Financial Crises and
Macroeconomic Dynamics, the contributions of Minsky and Stiglitz (slides)
- Gerarld Silverberg (UNU-MERIT, Maastricht)
Phase Transitions in Networked Financial Systems: An Explanation of Financial Meltdown? (slides)
- Giovanni Dosi (Scuola Superiore Sant'Anna, Pisa)
Towards an Evolutionary, Agent-Based Macroeconomics (slides)
Date and Location
The meeting has taken place on 22-23 July 2009 at the Sant'Anna
School of Advanced Studies in Pisa (Italy)
This meeting is restricted to a small number of participants to discuss the various issues involved; it is going to be highly informal and is meant as preparation to a bigger event -where we intend to start also an urgently needed conversation on the policies measures required by the recent crisis - involving also a call for papers, to be held in the first part of 2010.
Organizers
- Giovanni Dosi, LEM Scuola Superiore Sant'Anna, Pisa
- Giorgio Fagiolo, LEM Scuola Superiore Sant'Anna, Pisa
- Laura Ferrari, LEM Scuola Superiore Sant'Anna, Pisa
- Andrea Roventini, University of Verona
- Mauro Napoletano, OFCE, Nice
- Pietro Dindo, LEM Scuola Superiore Sant'Anna, Pisa
