Aleš Praprotnik

Frances Coppola je na svojem blogu objavila zanimiv govor, ki ga je imela na Univerzi v Manchestru (znani po gibanju za prenovo ekonomske vede Post-Crash Economics Society), v katerem razgrinja razloge, ki so po njenem mnenju ključni za neuspeh makroekonomije. Po eni strani izpostavi linearnost modelov, ki nerealno temeljijo na racionalnih posameznikih, stalnem ravnovesju in eksogenih šokih, po drugi pa ignoriranje pomembnosti finančnega sektorja (in dolga), ki do sedaj v ekonomskih modelih sploh ni bil zajet:

»...a blanket condemnation of “economics” as having failed is I think too wide. I therefore wish to narrow the framing. There are many economists out there doing important work, both in industry and in academia, on labour markets, on the behaviour of firms and households, on trade dynamics, on market functioning. I do not by any means wish to suggest that these have failed. Microeconomics, as a discipline, is going from strength to strength. My beef is with macroeconomics.

…

The models that macroeconomic practitioners developed reflected this essentially linear view. Blanchard went on to observe that although macroeconomists did not ignore the possibility of extreme tail risk events, they regarded them as a thing of the past in developed countries. Western governments had inflation licked because of inflation-targeting central banks. Bank runs had been solved by deposit insurance and central bank lender of last resort functions. Sudden disastrous reversal of capital flows and balance of payments crises were problems for emerging market economies, not for developed European economies. And anyway, central banks could prevent or stop market “panics” by flooding the place with liquidity. If you get the policy settings right, linear models will work.

Except that they won’t. And that is because these models are not realistic views of how the economy actually works. Representative agents aren’t actually representative of anyone. Rational expectations are driven as much by emotion as logic. Behavioural economics is still in its infancy, but we are now beginning to understand just how much humans are driven by instincts such as herding. And nowhere is this more apparent than in the finance industry.

The financial crisis drew to our attention – once again – the crucial role of the finance industry. No industry that can cause such havoc when it goes wrong should ever be regarded as irrelevant or superficial. On the contrary: financial institutions perform the functions of capital allocation and money transmission which are so vital to our economy. Disruption or interruption of these functions, even if only for a brief time, has terrible consequences.

Yet macroeconomists regarded the behaviour of financial institutions and the motivations of those who work in the finance industry as so unimportant that they could safely be ignored. Representative agent models, flawed though they are, at least attempt to explain the behaviour of households and firms: but the behaviour of banks, and things that don’t call themselves banks but do bank-like things, stayed under the radar until far too late. Macroeconomists described the finance industry as a “veil”, rather than as the beating heart and circulatory system of the modern monetary economy: linear models, if they included banks at all, portrayed them as passive intermediaries, rather than active agents whose rational expectations are not necessarily aligned with those of their customers or, indeed, with the best interests of the economy as a whole.

The failure of most macroeconomists to foresee the financial crisis grew out of their incorrect understanding of how money is created, and perhaps more importantly, how leverage builds up. “Loanable funds” models, which portray the role of the financial sector as intermediating existing funds, are not only wrong, they are dangerous. They do not show how exuberance in credit creation arising from the irrational belief that asset values can keep rising forever carries the seeds of its own destruction. And they encourage belief in exogenous factors as the cause of financial crises – the “Asian savings glut” springs to mind. The huge increase in broad money prior to the financial crisis did not come from Asia, or from Mars. It was created by American and European banks.

Leaving banks out of economic models, or – worse – modelling their money-creating function incorrectly, made it impossible for mainstream economists to understand the significance of the build-up of credit that led to the financial crisis. The warnings came principally from people outside mainstream economics, particularly the followers of Hyman Minsky. After the crisis, Minsky’s “financial instability hypothesis”, long consigned to a dusty shelf in a dark cupboard, suddenly became hot news. Unsurprisingly, since we had just lived through something that looked very like a “Minsky moment”.

Clearly, the exclusion of the financial industry from models of the macroeconomy was a major omission. Equally clearly, the fact that most macroeconomists did not, and to a large extent still do not, understand the mechanisms by which money is created and circulated in the modern monetary economy, is a big, big problem. Central banks are now “adding” the financial sector to existing DSGE models: but this does not begin to address the essential non-linearity of a monetary economy whose heart is a financial system that is not occasionally but NORMALLY far from equilibrium. Until macroeconomists understand this, their models will remain inadequate.

Vir: Frances Coppola