I'm very close to finished with his tremendous book The Big Ideas in Macroeconomics and as I've said in the past I'm very impressed-but what's news is that after finishing the whole thing I remain very impressed. Here is the book.
http://www.amazon.com/Big-Ideas-Macroeconomics-Nontechnical-View-ebook/dp/B00HO102ZQ/ref=sr_1_1?s=books&ie=UTF8&qid=1402623310&sr=1-1&keywords=athreya+macroeconomics
As he has previously given my permission to reprint our email conversations I will presume he continues to have no problem with it so here is my email comment I left for him today followed by his reply.
"Hello again Dr. Athreya! I know your a busy guy, but I just wanted to say I'm close to finished your book and as I've already said, I'm very impressed. There is certainly a great deal to digest and I think you wrote something here that hasn't even been attempted before-professional econ for the interested layman."
"Re: adaptive expectations--they are riddled with the same arbitrariness problems that afflict almost all alternatives to RE."
"The ends of major hyperinflations also seem inconsistent with any sort of slow-moving expectations. This was important in the early arguments against such slow-moving expectations formation."
http://www.minneapolisfed.org/
"Also, AE can lead to very unpalatable policy implication-a model with adaptive expectations might then imply that an "optimal" policy is one where the policy authority tries (and will succeed, under AE) to fool the citizenry--for their "own good." This seems a risky proposition, unless one really trusts the political system."
"Here are some notes on the more general topic at hand here: how should we model agents are learning about the environs in which they operate?"
http://www.wouterdenhaan.com/
"Thanks for reading the whole book, and I'm glad you've found it of some use."
http://www.amazon.com/Big-Ideas-Macroeconomics-Nontechnical-View-ebook/dp/B00HO102ZQ/ref=sr_1_1?s=books&ie=UTF8&qid=1402623310&sr=1-1&keywords=athreya+macroeconomics
As he has previously given my permission to reprint our email conversations I will presume he continues to have no problem with it so here is my email comment I left for him today followed by his reply.
"Hello again Dr. Athreya! I know your a busy guy, but I just wanted to say I'm close to finished your book and as I've already said, I'm very impressed. There is certainly a great deal to digest and I think you wrote something here that hasn't even been attempted before-professional econ for the interested layman."
"One question of theory if I might. On the question of Rational Expectations, if I understand you, basically you don't feel there's anything better to replace it with and if we did chuck RE we'd be left basically like a boat without a rudder where economists are basically free to come up with any theory they like and there'd be no way to call them on it."
"However, what comes to my mind is that one thing econ conceivably could do is Adaptive Expectations. Now some might think this was better or worse-my guess is that most mainstream economists today would think it worse but there's one possibility."
"What about AE? What were its shortcomings?"
I didn't have much doubt that he wouldn't like AE but wanted to get at why. His reply:
"Your read of my view is correct--though recent advances having to do with the modeling of "rational inattention" and "sticky information" are promising alternatives to full-blown RE."
"The ends of major hyperinflations also seem inconsistent with any sort of slow-moving expectations. This was important in the early arguments against such slow-moving expectations formation."
http://www.minneapolisfed.org/
"Also, AE can lead to very unpalatable policy implication-a model with adaptive expectations might then imply that an "optimal" policy is one where the policy authority tries (and will succeed, under AE) to fool the citizenry--for their "own good." This seems a risky proposition, unless one really trusts the political system."
"Here are some notes on the more general topic at hand here: how should we model agents are learning about the environs in which they operate?"
http://www.wouterdenhaan.com/
I certainly found of a a lot of use. I really would recommend it for anyone who debates the issue of orthodox vs. heterodox econ. I know a lot of my readers are heterodox-though I will admit some pride that some major orthodox guys read me too, like Nick Rowe-and clearly Athreya himself among others-and I tend to share their viewpoint. However, if you're really serious about understanding this debate I really would recommend this book very highly. Dr. Athreya is clearly a very sincere educator that really cares about informing the public and giving iit a real chance to understand the matters at hand.
In this sense he's at least more palatable than a Sumner who acts as if the public writ large is unable to 'walk on its hind legs' as it were. I don't think you can chalk him up to being just an ideologue-at least not deliberately. I mean as I said in my comment to him it will take me awhile to digest it all, much less decide how much I think he's right or wrong.
This book actually seems to me to make a great companion piece with Steve Keen's Debunking Economics
http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned-ebook/dp/B00A76WZZK/ref=sr_1_1?s=books&ie=UTF8&qid=1402623364&sr=1-1&keywords=steve+keen+debunking+economics
To read the two together would seem to me to be best as you get one orthodox and one heterodox guy, both from deep in the field.
As to the question of Adaptive Expectations I won't try to answer that definitively here-for now. However, the first thought that comes to me with his concern about the government having the power to 'fool citizenry-I'll leave to one side the question of why AE necessarily entails fooling people-is I don't remember us being a totalitarian state during the time that economists believed in AE.
P.S. I can't help but think though that as a telemarketer our job is basically to fool people-for one thing exaggerating the differences between products and also often on the nature of what kind of bargain it really is.
As I've done this the last few years I often am impressed with how long telemarketing has been around. Shouldn't rational agents have long since seen through it? Yet, despite that fact that the targeted prospects certainly do make 'adjustments' still telemarketers are always able to make our own adjustments and stay a step ahead. I mean if people could learn once and for all it's a fraud why shouldn't this method of sales be defunct by now?
It's complicated-what telemarketers do is not purely a lie but more like exaggerate. Still does the longevity of telemarketing show that you can't fool people consistently? To be sure in Mankiw's textbook he had a nuanced pro and con look at TMing and it seems that there are arguments that this somehow serves the goal of price discovery.
P.S.S. What Athreya's done is unprecedented-there's never been such a comprehensive attempt to exhaustively present professional econ to the interested layman. As I hinted above. I will reserve my judgment for now on the correctness/incorrectness of him on theory as this would be a massive undertaking with so much to digest. I'm thinking I may reread Keen first-I will no doubt follow him much better than the first time-when I knew much less about the orthodox econ he was lambasting.
I think it's of moment to look again at David Glasner's 'somewhat critical review' of Athreya-as Glasner himself described it-in retrospect.
"Steve Williamson recently plugged a new book by Kartik Athreya (Big Ideas in Macroeconomics), an economist at the Federal Reserve Bank of Richmond, which tries to explain in relatively non-technical terms what modern macroeconomics is all about. I will acknowledge that my graduate training in macroeconomics predated the rise of modern macro, and I am not fluent in the language of modern macro, though I am trying to fill in the gaps. And this book is a good place to start. I found Athreya’s book a good overview of the field, explaining the fundamental ideas and how they fit together."
.
http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned-ebook/dp/B00A76WZZK/ref=sr_1_1?s=books&ie=UTF8&qid=1402623364&sr=1-1&keywords=steve+keen+debunking+economics
To read the two together would seem to me to be best as you get one orthodox and one heterodox guy, both from deep in the field.
As to the question of Adaptive Expectations I won't try to answer that definitively here-for now. However, the first thought that comes to me with his concern about the government having the power to 'fool citizenry-I'll leave to one side the question of why AE necessarily entails fooling people-is I don't remember us being a totalitarian state during the time that economists believed in AE.
P.S. I can't help but think though that as a telemarketer our job is basically to fool people-for one thing exaggerating the differences between products and also often on the nature of what kind of bargain it really is.
As I've done this the last few years I often am impressed with how long telemarketing has been around. Shouldn't rational agents have long since seen through it? Yet, despite that fact that the targeted prospects certainly do make 'adjustments' still telemarketers are always able to make our own adjustments and stay a step ahead. I mean if people could learn once and for all it's a fraud why shouldn't this method of sales be defunct by now?
It's complicated-what telemarketers do is not purely a lie but more like exaggerate. Still does the longevity of telemarketing show that you can't fool people consistently? To be sure in Mankiw's textbook he had a nuanced pro and con look at TMing and it seems that there are arguments that this somehow serves the goal of price discovery.
P.S.S. What Athreya's done is unprecedented-there's never been such a comprehensive attempt to exhaustively present professional econ to the interested layman. As I hinted above. I will reserve my judgment for now on the correctness/incorrectness of him on theory as this would be a massive undertaking with so much to digest. I'm thinking I may reread Keen first-I will no doubt follow him much better than the first time-when I knew much less about the orthodox econ he was lambasting.
I think it's of moment to look again at David Glasner's 'somewhat critical review' of Athreya-as Glasner himself described it-in retrospect.
"Steve Williamson recently plugged a new book by Kartik Athreya (Big Ideas in Macroeconomics), an economist at the Federal Reserve Bank of Richmond, which tries to explain in relatively non-technical terms what modern macroeconomics is all about. I will acknowledge that my graduate training in macroeconomics predated the rise of modern macro, and I am not fluent in the language of modern macro, though I am trying to fill in the gaps. And this book is a good place to start. I found Athreya’s book a good overview of the field, explaining the fundamental ideas and how they fit together."
"Big Ideas in Macroeconomics is a moderately big book, 415 pages, covering a very wide range of topics. It is noteworthy, I think, that despite its size, there is so little overlap between the topics covered in this book, and those covered in more traditional, perhaps old-fashioned, books on macroeconomics. The index contains not a single entry on the price level, inflation, deflation, money, interest, total output, employment or unemployment. Which is not to say that none of those concepts are ever mentioned or discussed, just that they are not treated, as they are in traditional macroeconomics books, as the principal objects of macroeconomic inquiry. The conduct of monetary or fiscal policy to achieve some explicit macroeconomic objective is never discussed. In contrast, there are repeated references to Walrasian equilibrium, the Arrow-Debreu-McKenzie model, the Radner model, Nash-equilibria, Pareto optimality, the first and second Welfare theorems. It’s a new world."
http://uneasymoney.com/2014/02/03/big-ideas-in-macroeconomics-a-review/
Glasner's description is accurate and very bracing. Whether this new world is for the better I guess is what the debate is over. I'm struck by the same things that strikes Glasner along with the shoddy way that Athreya views Keynes's General Theory. He is very much in the tradition of New Keynesianism-claiming to be all for Keynes and Keynesianism but having no use for his most important book-even Sumner praises pre GT Keynes.
I notice that while Athreya presents himself as a defender of orthodox econ-though one who certainly bends over backwards to be open minded and honest about it's failings and shortcomings, while Krugman is notorious among your Stephen Williamson or Tony Yates style economist for lambasting it for failing back in 2009 all NKers-whether Krugman, Athreya-I'm sort of imputing this label to him as I see him as fitting in very well to a NK framework though he certainly never calls himself NK and doesn't talk much about the term-or Simon Wren-Lewis, or Delong for that matter, all agree that it's a waste of time to spend lots of time debating 'what Keynes really meant.' It seems that even Keynes alleged friends and followers consider him too obscure.
Recall Krugman's missive 'Mistaking beauty for truth.'
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all&_r=0
This earned him an opprobrium from the orthodox world that certainly hasn't dissipated even now in some quarters.
http://faculty.chicagobooth.edu/john.cochrane/research/papers/ecaf_2077.pdf
So the fissure between orthodox and heterodox econ may still come down to the GT after all these years. Something about this book is just really unpalatable to 'modern macro.' If someone sometime could really trace out what this is in greater detail it would be a tremendous help.
It's felt for one thing to be just 'the thoughts of one man' rather than clearly drawn out models. GT runs on 'intution' this most damnable thing in the minds of orthodox econ.
http://diaryofarepublicanhater.blogspot.com/2013/12/tony-yates-inside-mind-of-your-average.html
http://diaryofarepublicanhater.blogspot.com/2013/12/economics-intuition-and-praising-with.html
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Noah Smith is doing a multi-post review of the book now (he's actually read it now).
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