Economics beyond the Millennium

Economics beyond the Millennium

Economics beyond the Millennium

Economics beyond the Millennium

Synopsis

Economics: Beyond the Millennium contains articles by leading authorities in various fields of economic theory and econometrics, each of whom gives an account of the current state of the art in their own field and indicate the direction that they think it will take in the next ten years. The fields covered are grouped into three categories: the microfoundations of macroeconomics, where Malinvaud evaluates the theory of resource allocation and Hildenbrand examines the empirical content of economic thories; markets and and organizations, where both Gabszewicz and D'Aspremont et al. look at imperfect competition and general equilibrium, Scotchmer and Thiess consider spatial economics, Ponssard the future of managerial economics, while Van Damme looks at the next stage of game theory; and econometrics, where Gourieroux reviews econometric modelling in general, Maravall looks at time series, Lubrand and Bauwens examine Bayesian analysis, and Blundell looks at the rapidly expanding area of microeconometrics.

Excerpt

Economists are notoriously bad at predicting, and therefore one might suspect that they would not do a very good job of forecasting how their own discipline will evolve as it passes the next millenium. Nevertheless, this was the task set for the authors of this book, who met on the occasion of the tenth anniversary of the greqe (which has now become the greqam, Groupe de recherche en economie quantitative et econometrie d'Aix-Marseille). Whether the forecasts turn out to be accurate or not, the vision of the contributors sheds interesting light on the different areas covered. Furthermore, their different attitudes concerning the direction that economics will take reveal that, at least within the economics profession, there is no obvious convergence of expectations. Despite this, there are several common threads that can be picked out in the various chapters, and while the introductions to the three parts of the book give a clear picture of the contents of each section and how the various components fit together within each part, the purpose of this brief introduction is to try identify those points on which there is some common accord.

Perhaps the first of these common themes is the shift that many authors detect from the construction of rigorous and self-contained theoretical models towards models that are more descriptive and possibly, in consequence, more realistic. Van Damme and Ponsard, in rather different ways, both take this point of view. For the former, the road of endowing agents with super-rationality and concentrating on equilibrium refinements is not the one to take. Rather, he suggests that empirical relevance will occupy a greater place in the future. This should lead one away from the current frustrating situation in which 'anything can happen' in game-theoretical models into one in which outcomes are more specific. the position that Ponsard adopts is that the firm cannot be taken as the almost vacuous entity of standard theory: rather, one should consider the way in which the firm is organized and the resultant role of strategic analysis. Rationality in its strongest form is sacrificed in order to obtain more testable propositons.

At its peak, the period of 'high theory' in economics was preoccupied with internal consistency rather than with empirical relevance, as Malinvaud clearly explains. Indeed, as he says, a standard part of the intellectual game became the proving of the possibility of counterintuitive results without the need to worry about their empirical relevance. That this has changed is amply illustrated in the various chapters of this book. Even in those areas that adopt a traditional approach to economic theory, using, for example, the representative consumer, there is the . . .

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