A Nobel Prize for Not Much

Moral da história: como sempre os economistas exultam cada vez que alguém se lembra de construir um modelo matemático que não explica nada, apenas descreve e se calhar nem isso, porque para isso temos os matemáticos e estatísticos.

Frank Shostak

"(...)In this regard, what our Nobel laureates have introduced is not a novel way of understanding the phenomenon of the business cycle but a different method of curve fitting. By means of calibration, various types of imaginary models can now be introduced and assessed against real data. If a particular functional form doesn’t fit the data closely enough, then the function can be modified by the introduction of another heavy dosage of mathematics until the proper fit is established. In short, what we have here is a heavy emphasis on developing sophisticated methods of curve fitting rather than trying to identify the essence of what gives rise to the fluctuations of the data.

Since the KP had adopted apriori the view that what matters as far as boom-bust cycles are concerned is technology shocks, they have selected an appropriate model for their story. Therefore, it is not surprising that the KP model has not been able to identify the importance of monetary pumping in setting boom-bust cycles in motion.

Thus they write: "There is no evidence that either the monetary base or M1 leads the cycle, although some economists still believe this monetary myth. Both the monetary base and M1 series are generally procyclical and, if anything, the monetary base lags the cycle slightly."[4]
Conclusion

It seems that rather than advancing our understanding of the causes behind boom-bust cycles, this year Nobel laureates have contributed to a further retrogression of the economic discipline. Rather than probing the essence of the economic phenomena, this year’s laureates have further obscured our understanding through the introduction of more complex mathematical tools. Once, however, the veil of mathematics is removed, one finds very little of substance that modern mathematical economists including KP have made in advancing our understanding of the world of economics. Careful scrutiny of the KP model shows that it is just another sophisticated toy for fitting curves, which has very little to do with the explanation of boom-bust cycles.