Disruptive Markets  

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Causal Capital ~ The Knowledge Capital Specialists

Traditional Economics is Failing

Tuesday, January 17, 2017

A new paper from the Bank for International Settlements on "Endogenous Wage Indexation and Aggregate Shocks" finds empirical evidence that there is considerable time variation in the degree of wage indexation and past inflation.

 More information on the BIS whitepaper can be found here [LINK].

 

There are a couple of things that are concerning here notwithstanding anyone who models time series, even the univariate variety, especially so it seems, will realise relatively quickly that prediction is intrinsically linked to timing.

 

We know the market will eventually move lower or higher, we just don't know how long it will remain irrational. You can't time these things, but you can measure the probability around them, there is a difference. One is fortune telling and the other is an assessment of risk.

 

Which inexorably brings us to the failure in Keynesian models new or old and the birth of New Economic thinking. One of the novel trends over the last few years and listed by the Global Economic Forum Risk Committee as the top concern for the next decade is Economic Growth and Reform. However, if the models aren't right and clearly they are very questionable, how are governments going to develop suitable social strategies for reform?

 

Evonomics - The Next Evolution of Economics is here it seems or at the very least, accepting traditional economists might not have it right. The need to look beyond the boundaries of a Keynesian framework is quite refreshing I must add and I recommend taking a look at this site LINK. There are some insightful articles worthy of a deep thought and many postings disrupt the traditional school of economics.

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