Re: Letter form Bob Solow

[Matias Vernengo <vernengo@xxxxxxxx>]

Paul:
Let me first clarify that I believe that your point on non ergodicity and the
importance of true uncertainty are essential for a critique of neoclassical
economics, and the proper understanding of real economies.  However, it is not
altogether clear to me that this implies that time series techniques are
altogether irrelevant.  For example, the idea that growth is demand led as
explained by Thirlwall's Law, has been established with the use of those time
series techniques.  This indicates that despite non ergodicity certain
regularities do exist, in this particular case, the Keynesian idea of effective
demand.  Unit roots and cointegration are in this case useful techniques that give
weight to the argument that the rate of growth of one component of effective
demand (exports) determines the rate of growth of output.  In that respect, I
believe that time series techniques might be useful, despite their limitations, if
used with circumspection.
Best,
Matias

pdavidso wrote:

> Lonie Stevens wrote the following in response to my posting of the Bob Solow
> letter on my article on nonoergodic uncertainty
>
> This obviously transpired before the application of Granger's seminal work on
> cointegration.
>
> My response is:
>
> Granger's cointegration work is irrelevant -- for it also assumes that if the
> level is nonergorid, then one of the differences will turn out to be an
> ergodic process.
>
> Now I went thorough the fallacy of the cointegration argument on the pktnet
> about 5 years ago.
>
> The best sdource of a response is a book by a Russian Mathematican, A. Yaglom,
> on the theory of stochasitc processes.
>
> In the book (cited in my articles) Yaglom took a randon number generator and
> generated two columns of random numbers.  Not surprisingly he foud a unit root
> for these columns.  Yaglom, however,  also found that if he took the
> nth-difference, he could ALWAYS get an apparence of statistical significance
> (cointergration) between the nth-differences of the  two columns. [usually he
> did not have to go beyong a 2nd or third difference)
>
> His conclusion that tsking mindless difference to demonstate what Granger
> calls cointergration is a meaninglesws exercise.
>
> how would you or Granger explain this?
>
> Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 523
> Knoxville, Tennessee 37996-0550
> phone # (865)974-4221; fax #(561)737-8262;
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html