One thought on “Narayana Kocherlakota: Some Thoughts on Modern Macro”

dr2chase

"Friction", or "delay"? Those are different things, especially in control systems ("the invisible hand"). One results in damping, the other results (sometimes) in oscillation.And I see bounded rationality, but not bounded information. When working with large sums of money I am as rational as I know how to be, but my problem is that my information is not just randomly noisy, it is often bounded in a Byzantine way (is it really an AAA bond? Would Moody’s lie to me?).I worry also that when I must rely upon other people’s behavior to infer a large fraction of my information, that it begins to construct what is essentially a dependent utility function — which, as I understand it, is a bad thing, for the mathematics of microeconomics.

dr2chase"Friction", or "delay"? Those are different things, especially in control systems ("the invisible hand"). One results in damping, the other results (sometimes) in oscillation.And I see bounded rationality, but not bounded information. When working with large sums of money I am as rational as I know how to be, but my problem is that my information is not just randomly noisy, it is often bounded in a Byzantine way (is it really an AAA bond? Would Moody’s lie to me?).I worry also that when I must rely upon other people’s behavior to infer a large fraction of my information, that it begins to construct what is essentially a dependent utility function — which, as I understand it, is a bad thing, for the mathematics of microeconomics.