I think we can all agree that things will go better if all currently working monetary economists stop teaching their models to undergraduates and instead adopt my modelling approach:
- A bank is a box, with "BANK" written on it
- A central bank is a box with a pitched roof and lines on the front representing the fascia of the Bank of England
- The household sector is a stick man
- The industrial sector is a box with a sawtooth roof
- Long term savings are a stick figure with a top hat
With these basic concepts, plus sufficient scribbled arrows, more or less any problem in monetary economics can be solved, up to the level of accuracy of any other model. You can even do international monetary economics by drawing circles round one monetary system and scribbling somewhat larger arrows in and out of the circle.
Update! Lots and lots of consensus building on this one and I may yet win that Nobel Prize after all. Two big points of controversy - 1) does the box representing a bank really need "BANK" written on it? and 2) shouldn't the industrial sector also have a chimney? I think that's enough of a debate to keep the journal publishers in business.
Update! Brad DeLong shows us how it's done. Note that in this version of the model, bonds are a perfect substitute for money, hence the absence of a stick figure with a top hat.
Update! Eric Rauchway provides historical context, in a sectoral model which has three types of industry (chimney + sawtooth roof, chimney but no sawtooth roof, stylised steel mill) and an extractive sector. That's clearly Sraffian.
Update A more substantial objection in BdeL comments - we haven't got a government sector or fiscal policy in this model. I tend to draw the government as a big bag of money, but frankly this isn't satisfactory as it is tends to result in people pointing and saying "what's that? it looks like a balloon with a pound sign on it". If anyone has a bright graduate student and some crayons, I think this could make a good dissertation topic.
Advanced texts can have more than one stick man and for some economies a saw tooth roof on the bank box.
ReplyDeleteThe CD in the back cover/e-learning microsite for the 43rd edition of Mr. Mankiw's favourite textbook can provide a special Simulink template with corresponding icons. Most of the time this just runs the obvious model according to the arrows you add but occasionally a Gruffalo like monster labelled "The Bond Market" comes along and eats something.
Expectations? Dotted arrows. If you really need them.
ReplyDeleteYou can take the symbols off a Monopoly board if you want. The "Go Directly To Jail" card might also come in handy.
ReplyDeleteThis new modelling paradigm has already revealed to me the fundamental problem in the construction of the ECB: Not enough pillars. At best you can say it has three pillars but they are virtual and borrowed from the regulators next door. Clearly central banks with at least four real pillars are best. Of course the Federal Reserve doesn't exactly have pillars but it is made of stone which is almost as good and there may be some lurking in Minneapolis.
ReplyDeleteI now understand how the Australian financial sector managed to weather the global financial crisis.
ReplyDeleteAnd Canada
ReplyDeleteAnd if the factories have chimneys, should there be a curly line coming out of the top?
ReplyDeleteThe presence or absence of smoke coming out the chimney is how you represent excess capacity, but that's more getting into general equilibrium modelling.
ReplyDeleteFor Chicago economics books you don't need a central bank, for Austrian books you don't need any banks at all, Keynsians don't need factories and introductory courses would go more smoothly without the stick man.
ReplyDeleteFor Marxist economics, the stick man should actually (where relevant) wield a stick
ReplyDeleteWhat about furriners?
ReplyDelete...and randomly placed buckets of buckets of money, in case of fire.
ReplyDeleteBrilliant! For advanced courses:
ReplyDelete1.Maybe the household stick figure should have shoes with leather soles that can be worn down to varying degrees.
2. A cone should enclose the whole thing, with the label COMPLETE MARKETS
3. Sunspots in the sky
4. In Crayon at the top: DYNAMIC! STOCHASTIC!
There should be another stick man at the right-hand edge, pleasuring himself, to represent the Wall Street Journal.
ReplyDeleteCan we get the Mansion House in there? I understand the name of the pediment is The City Of London Trampling Down Envy and I reckon that'd look great in block capitals.
ReplyDeleteThe government can easily be identified in models of the US economy by a box with vertical lines on the front and a sort of tit on top, representing the Capitol. In a UK context it's trickier - little stick man holding up a dispatch box, maybe? And I don't know what you'd have to represent 'government' without loss of generality.
ReplyDeleteBig Ben perhaps?
ReplyDeleteI'm actually finding it tricky to think of a non-culturally specfic/ideologically biased doodle for the government.
A big bag of money - we don't need to portray the full complexity of the state here, just the fisc. The problem is that a bag of money is surprisingly hard to draw.
ReplyDeleteIn Libertarian models, the general icon for Government surely would be a much larger stickfigure than the others pointing a gun at them with one hand while holding out his other. (Maybe a pirate eyepatch or other Adam Ant style iconography could be added for completeness.)
ReplyDeleteAlso, the Government stickfigure's foot is trampling on innovators, who could be represented as stickfigures with an lightbulb over their heads.
Randian completists could have a stickfigure with a bit of hair holding a cigarette in one hand and leading the population to true freedom using some type of torch a la statue of liberty held in the other; the vanguard of the followers of this towering (and perhaps haloed) god-like figure would be represented by stick figures carrying a rather large book under one arm and an angry exclamation mark speech bubble which they direct at the hapless fools of the unconverted.
The problem is that a bag of money is surprisingly hard to draw.
ReplyDeleteIt might be time to face the fact that you're just not good enough at drawing to be a real macroeconomist.
Cliff's idea, while splendid, is moving away from the original simplicity of the concept towards something that sounds like a Victorian "story picture", Millais or someone.
The tax toolkit is blessedly much smaller. A triangle for transparent entities and a square for all others[1]. The cunning trick is to use pointed arrows both to represent loans/equity investments and also cash flows such that nobody has a clue what's going on.
ReplyDelete[1] D^2, if nobody else, might well ask about hybrid entities here.
Yes, without rigorous graphical expression you're just telling stories with numbers. You need to be able to see the brushwork in order to have real micro-foundations. The problem is all these people who just will not take Fine Arts 101, and insist on behaving as if the visually literate should take their lazy, ill-defined intuitive prejudices seriously.
ReplyDeleteI mean, a really incredibly smart guy like D^2 or Joseph Beuys could just look at that bag of money and derive the entire Keynesian consensus, but if you're relying on equations, you're just not really understanding it.
I Disagree. The bank is a pig with a slot in its back.
ReplyDeleteYou could lose the last six words there.
ReplyDeleteOh, there's various bags of money here (at 8:47 for instance). A couple of banks, too.
ReplyDeleteThe cunning trick is to use pointed arrows both to represent loans/equity investments and also cash flows
ReplyDeleteRichard is making Wynne Godley cry in heaven.
(I really must do the WG obituary, perhaps I'll wait until four or five of the other obits have dropped off the CT front page).
FREDBOX?!
ReplyDeletedoes the box representing a bank really need "BANK" written on it?
ReplyDeletePeut-etre "ceci n'est pas un banque (c'est une oubliette)"
It might be time to face the fact that you're just not good enough at drawing to be a real macroeconomist.
ReplyDeleteThis is a particularly hurtful prospect for me to have to consider, because I only turned to economics after failing my geography exams for paying insufficient attention to colouring inside the lines.
Ah well, I only gave up on the law because I didn't have the Latin.
ReplyDelete