I heard of “Central Saint Martins” two days back and discovered today that it is – to quote Wikipedia – “widely regarded as one of the world’s leading art and design institutions.”
*
Moments ago, my friend and I were discussing about outsourcing and its demerits. Somehow it digressed to the topic of how Hong Kong would be like in twenty years’ time. Here‘s one view of the current situation in Hong Kong. As Hong Kong faces intense competiton from the other two big cities at the Pearl River Delta – Guang Dong and Shen Zhen – how would it cope? Will it evolve into a hip and happening place as it attempts to – as my friend put it – “define itself outside the economic arena”?
*
Not sure how I came across this, but the coolest term I learned today is “dynamic inconsistency”, a term used in game theory to refer to the inconsistency between a person’s preference at different points in time such that what is the preferred option now is altered as time passes. In behavioral economics, a similar concept is termed “time inconsistency”. I suppose the difference between the two terms lies in its focus? Dynamic inconsistency as used in game theory emphasizes the change in situation as the cause for inconsistent preferences whereas time inconsistency highlights the change in time and with that, a change in the “self” of a person, as the cause.
The Lucas Critique
August 3, 2008
I read on Wikipedia the Lucas Critique. The critique is named after Robert Lucas after he published a paper saying that it is simplistic to predict the effects of an economic policy based on the observed correlations between economic quantities from historical data.
Central to his critique is that macroeconomic models fail to take into account the structure of the economy. When policies change, the observed relationships change. Forecast made by economic models that built upon previous data may cease to hold true, and therefore the conclusions reached false. A classic example is the negative correlation between inflation and unemployment, as depicted by the Philips Curve. This inverse relationship has been attacked by economists – most prominently Milton Friedman – that the generalization made from empirical data could break down when authorities intervene in the economy to achieve the same effect. And it did.
Lucas argued that models need to take into account economic fundamentals known as “deep parameters” such as preferences because these parameters stay invariant when policies change. This has led to the development in contemporary economics of what is known as DGSE (dynamic stochastic general equilibrium) models.
I scanned through the wikipedia article on DGSE models briefly and read that they are macroeconomic models constructed out of microeconomic foundations (“microfounded”).
