4 ms·
The problem with macro-economic composites is that at that level, everything is unfolding on different timescales. So around transitional moments, your end resu
by ethbr0 5y ago
The problem with macro-economic composites is that at that level, everything is unfolding on different timescales. So around transitional moments, your end result is going to go wonky.
GDP plummets -> interest rates are dropped -> GDP recovers -> interest rates are raised
You're balancing between responsiveness, accuracy, and reliability: pick two.
I'd have thought the last few crises would have taught us that we should be thinking about the system more in terms of stability, or lack thereof.
The housing crisis could have not exploded, if key institutions and/or investors had acted differently. But it was objectively true that the entire system was in a very unstable state.
- bumby 5y ago>You're balancing between responsiveness, accuracy, and reliability: pick two. Can you explain the difference between accuracy and reliability in this context?
- planet-and-halo 5y agoNot OP, but I imagine it's something like "precision" vs. "how often correct." So you can be extremely precise quickly, but not all the time. Or you can be extremely precise all the time, but not in time to make good decisions. Et al.
- jbay808 5y agoI'm increasingly of the opinion that control theory is the right framework to apply here. The very existence of business cycles suggests that the economy has "underdamped poles", and perhaps a more forward-looking central bank policy could add enough phase margin to damp them and prevent recessions altogether. But it would require always taking one's foot off the gas pedal before conditions really seem good enough.
- bildung 5y agoYou may like Keynes :) Some of his main points were about countercyclical fiscal policy.