Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher...
Transcript of Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher...
![Page 1: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/1.jpg)
Heterogeneity, Macroeconomics, and Reality
Christopher Carroll1
1Johns Hopkins University and [email protected]
Sloan-BoE-OFR Conference onHeterogeneous Agent Macroeconomics
U.S. Department of the Treasury
September 22, 2017
![Page 2: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/2.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 3: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/3.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 4: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/4.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 5: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/5.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 6: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/6.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 7: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/7.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 8: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/8.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 9: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/9.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 10: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/10.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 11: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/11.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 12: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/12.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 13: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/13.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
How Are Macroeconomists Doing on ‘Reality’?
Larry SummersFT interview in 2011
In the crisis, standard macro models were useless
Recent Brookings Panel Discussion
Little progress since 2008 in modeling events like the crisis
Contagion from Lehmann Bros to Israel???“Network analysis” : No connections Lehmann � Israel
Looking forward right now:Would failed debt ceiling brinksmanship trigger another panic?
My best guess: probably not
But in 2008, many economists thought letting Lehmann failwould be a non-eventWe still do not have a handle on how to model expectations
Carroll Behavioral-Macro
![Page 14: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/14.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 15: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/15.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 16: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/16.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 17: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/17.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 18: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/18.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 19: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/19.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 20: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/20.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 21: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/21.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 22: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/22.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 23: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/23.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Behavioral Macro Workshop
At root, every paper this year was about “expectations” (‘E’)
At center of macroeconomics since Keynes ...
“Identical Model-Consistent Expectations” (‘IMCE’)
(Better description than “Rational”)For some model of the economy m:(... (Everybody believes (Everybody believes m)))Usually: Identical circumstances (wealth, income, uncertainty)
⇒ Representative Agent (RA)
IMCE has the great virtue that it can be rejected
Defect: Every paper does reject it
Carroll Behavioral-Macro
![Page 24: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/24.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 25: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/25.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 26: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/26.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 27: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/27.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 28: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/28.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 29: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/29.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 30: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/30.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 31: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/31.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 32: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/32.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
2017 NBER Macro Annual
Chuck Manski (2017) survey paper:
E can be measured(!)People behave in ways consistent with measured EIdea: Test models of E by comparison to data!
Discussion
No need for more papers that just reject IMCE; a dead horseBut: Every new paper has its own unique new model of ENeed to whittle down to small set of canonical models . . .. . . with some reliable wisdom about when each works
Carroll Behavioral-Macro
![Page 33: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/33.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 34: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/34.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 35: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/35.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 36: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/36.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 37: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/37.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 38: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/38.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 39: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/39.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 40: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/40.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Akerlof and Shiller: “Animal Spirits” (2009)
Most macro fluctuations reflect changes in “narratives”
1990-91 recession?
1992 AEA session: “autonomous sharp decline in C”
(big negative error term in C equation in VAR)
A&S: Huge oil price spike invoked bad memories of 1970s
Support: Survey answers to “What do you think theunemployment rate will be in a year?” spiked upward rightwhen C dropped
Investment
Finance
Carroll Behavioral-Macro
![Page 41: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/41.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
‘The End of Alchemy’
Mervyn King (2016); 2017 Feldstein Lecture at NBER
Views similar to Summers about benchmark models
Views similar to A&S on centrality of “narratives”
Among bankers and central bankers:Many more financial markets are “bank-like” than we thought
Useful refinement:
Your narrative ⇒ your behavior (decision rule/heuristic)
Carroll Behavioral-Macro
![Page 42: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/42.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
‘The End of Alchemy’
Mervyn King (2016); 2017 Feldstein Lecture at NBER
Views similar to Summers about benchmark models
Views similar to A&S on centrality of “narratives”
Among bankers and central bankers:Many more financial markets are “bank-like” than we thought
Useful refinement:
Your narrative ⇒ your behavior (decision rule/heuristic)
Carroll Behavioral-Macro
![Page 43: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/43.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
‘The End of Alchemy’
Mervyn King (2016); 2017 Feldstein Lecture at NBER
Views similar to Summers about benchmark models
Views similar to A&S on centrality of “narratives”
Among bankers and central bankers:Many more financial markets are “bank-like” than we thought
Useful refinement:
Your narrative ⇒ your behavior (decision rule/heuristic)
Carroll Behavioral-Macro
![Page 44: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/44.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
‘The End of Alchemy’
Mervyn King (2016); 2017 Feldstein Lecture at NBER
Views similar to Summers about benchmark models
Views similar to A&S on centrality of “narratives”
Among bankers and central bankers:Many more financial markets are “bank-like” than we thought
Useful refinement:
Your narrative ⇒ your behavior (decision rule/heuristic)
Carroll Behavioral-Macro
![Page 45: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/45.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
‘The End of Alchemy’
Mervyn King (2016); 2017 Feldstein Lecture at NBER
Views similar to Summers about benchmark models
Views similar to A&S on centrality of “narratives”
Among bankers and central bankers:Many more financial markets are “bank-like” than we thought
Useful refinement:
Your narrative ⇒ your behavior (decision rule/heuristic)
Carroll Behavioral-Macro
![Page 46: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/46.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
‘The End of Alchemy’
Mervyn King (2016); 2017 Feldstein Lecture at NBER
Views similar to Summers about benchmark models
Views similar to A&S on centrality of “narratives”
Among bankers and central bankers:Many more financial markets are “bank-like” than we thought
Useful refinement:
Your narrative ⇒ your behavior (decision rule/heuristic)
Carroll Behavioral-Macro
![Page 47: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/47.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Why Hasn’t “Narrative Approach” (NA) Caught On?
Why don’t all those papers rejecting IMCE test whether “NarrativeApproach” does better?
Unclear how to translate NA into practice. Needed:
Explicit, quantitative models . . .. . . that can be tested against the same data that reject IMCEHow to represent “narratives” quantitatively?Nowhere to download “American Economic Narratives Survey”
Carroll Behavioral-Macro
![Page 48: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/48.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Why Hasn’t “Narrative Approach” (NA) Caught On?
Why don’t all those papers rejecting IMCE test whether “NarrativeApproach” does better?
Unclear how to translate NA into practice. Needed:
Explicit, quantitative models . . .. . . that can be tested against the same data that reject IMCEHow to represent “narratives” quantitatively?Nowhere to download “American Economic Narratives Survey”
Carroll Behavioral-Macro
![Page 49: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/49.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Why Hasn’t “Narrative Approach” (NA) Caught On?
Why don’t all those papers rejecting IMCE test whether “NarrativeApproach” does better?
Unclear how to translate NA into practice. Needed:
Explicit, quantitative models . . .. . . that can be tested against the same data that reject IMCEHow to represent “narratives” quantitatively?Nowhere to download “American Economic Narratives Survey”
Carroll Behavioral-Macro
![Page 50: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/50.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Why Hasn’t “Narrative Approach” (NA) Caught On?
Why don’t all those papers rejecting IMCE test whether “NarrativeApproach” does better?
Unclear how to translate NA into practice. Needed:
Explicit, quantitative models . . .. . . that can be tested against the same data that reject IMCEHow to represent “narratives” quantitatively?Nowhere to download “American Economic Narratives Survey”
Carroll Behavioral-Macro
![Page 51: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/51.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Why Hasn’t “Narrative Approach” (NA) Caught On?
Why don’t all those papers rejecting IMCE test whether “NarrativeApproach” does better?
Unclear how to translate NA into practice. Needed:
Explicit, quantitative models . . .. . . that can be tested against the same data that reject IMCEHow to represent “narratives” quantitatively?Nowhere to download “American Economic Narratives Survey”
Carroll Behavioral-Macro
![Page 52: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/52.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Why Hasn’t “Narrative Approach” (NA) Caught On?
Why don’t all those papers rejecting IMCE test whether “NarrativeApproach” does better?
Unclear how to translate NA into practice. Needed:
Explicit, quantitative models . . .. . . that can be tested against the same data that reject IMCEHow to represent “narratives” quantitatively?Nowhere to download “American Economic Narratives Survey”
Carroll Behavioral-Macro
![Page 53: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/53.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 54: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/54.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 55: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/55.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 56: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/56.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 57: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/57.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 58: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/58.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 59: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/59.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Quantitative Representation of A ‘Narrative’?
One Idea
Generate narratives from alternative IMCE models:
Experts have sharply different forecasts of pty growth γGenerate forecasts that would arise for γ ∈ [0.0, 2.5]
Given a person’s measured expectations, impute to them thenarrative that most closely fits those expectations
So, in 1990-91, A&S story would be that C dropped becausedominant ‘narrative’ changed to low pty scenario
Begs the question: Why do narratives change?
Carroll Behavioral-Macro
![Page 60: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/60.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 61: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/61.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 62: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/62.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 63: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/63.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 64: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/64.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 65: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/65.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 66: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/66.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 67: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/67.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Assume “Narratives” spread like diseases (“contagion”)
Infection from “common sources”: News media
Communicable via “direct contact”: Facebook
Friends may have had personal experiencesLayoffs announced; employer profits declined ...Friends also might read news sources
Call this proposal ‘Epidemiological Expectations’ (EE)
Carroll Behavioral-Macro
![Page 68: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/68.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 69: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/69.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 70: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/70.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 71: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/71.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 72: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/72.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 73: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/73.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 74: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/74.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 75: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/75.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 76: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/76.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 77: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/77.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 78: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/78.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 79: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/79.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 80: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/80.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 81: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/81.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 82: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/82.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
Explicit, quantitative EE models? Agent Based Modeling
Many of the pioneers of ABM are at this conference
SuccessesActual contagion (of diseases)
Epstein (2009)
Asset prices modeled by direct spread of profitable behaviors
Survey: LeBaron (2006)
Contagion of ideas
Through terrorist networksTransmission of ‘fake news’
So far, not used much for explicit modeling of:Transmission of economic narratives
Say, via news media exposure, Facebook-Twitter forwards ...
Expectations data (a la Manski)
Except for Cars Hommes
Carroll Behavioral-Macro
![Page 83: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/83.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
We Need a Canonical Off-the-Shelf EE Model ...
One reason ABM’s are resisted:
Results depend sensitively on huge number of assumptions
Every paper makes a different set of assumptions
Carroll Behavioral-Macro
![Page 84: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/84.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References‘Animal Spirits’ King The Problem A Solution Epidemiology
We Need a Canonical Off-the-Shelf EE Model ...
One reason ABM’s are resisted:
Results depend sensitively on huge number of assumptions
Every paper makes a different set of assumptions
Carroll Behavioral-Macro
![Page 85: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/85.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 86: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/86.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 87: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/87.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 88: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/88.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 89: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/89.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 90: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/90.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 91: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/91.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 92: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/92.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 93: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/93.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 94: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/94.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 95: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/95.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
A Concrete Example: BDKS
Using Facebook data:
Persons A and B live in Des Moines in 2008-10
... and are identical on ‘observables’
... but person A has more friends in ‘busting’ markets
Then:
Person A is more pessimistic about Des Moines house prices
Is less likely to buy a house X
If they buy a house, it will be cheaper X
Carroll Behavioral-Macro
![Page 96: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/96.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 97: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/97.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 98: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/98.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 99: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/99.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 100: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/100.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 101: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/101.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 102: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/102.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 103: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/103.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 104: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/104.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Proposal
Use their data to construct:
A benchmark network structure for friends
A benchmark person-to-person infection rate
Use other data to construct:
Infection rate from ’common sources’: News media
Make that a plug-and-play module:
Don’t invent new model of expecations for every paper!
At most, recalibrate ‘infectiousness’
People gossip more about house prices than inflation rate
Carroll Behavioral-Macro
![Page 105: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/105.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 106: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/106.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 107: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/107.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 108: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/108.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 109: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/109.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 110: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/110.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 111: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/111.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 112: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/112.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 113: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/113.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 114: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/114.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 115: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/115.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Connection to Heterogeneous Agent (HA) macro models
HA model starting point: Microeconomic models
Constructed to match measured heterogeneity
For example, a consumption model that matches
Income dynamics, income inequality, wealth inequality
MPC
⇒ decision rules contingent on expectations (‘narrative’)
Macro outcomes:
Generated by simulating populations of micro agents
Taking account of feedbacks from macro back to micro
Expectations are standard IMCEHA do much better than RA models on important questions
How do fiscal and monetary policy work?
Carroll Behavioral-Macro
![Page 116: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/116.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 117: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/117.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 118: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/118.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 119: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/119.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 120: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/120.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 121: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/121.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 122: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/122.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 123: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/123.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
My Proposal: A Hybrid
What do expectations/narratives do? King (2016) is right:
Determine your decision rule
If Et [∆pt+1] > x , p(buy) is higherIf Et [∆pt+1] < x , p(sell) is higher
Start with HA macro model, and change only one thing:
Replace IMCE with EEKeep Rest of the HA Macro Structure
Including decision rules, contingent on E
Carroll Behavioral-Macro
![Page 124: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/124.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 125: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/125.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 126: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/126.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 127: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/127.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 128: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/128.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 129: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/129.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 130: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/130.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 131: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/131.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 132: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/132.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 133: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/133.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 134: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/134.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 135: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/135.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 136: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/136.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
This proposal
Gives a way to use many kinds of existing evidence
Narratives (say, from analysis of news stories)Expectations (say, from surveys)Behaviors (directly observed in micro data)Outcomes (micro: wealth distribution; macro: C )
and integrate them with each other
Suggests new kinds of data that should be collectedAsk people why they think what they do (e.g., about u)
Personal experience (“I remember the last oil price shock”)Conversations with friends and familyNews stories???Measure behaviors and expecations on the same survey
Builds bridge between macroeconomists and ABM community
Carroll Behavioral-Macro
![Page 137: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/137.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
BDKS Is Not Yet A Macroeconomic Model
No macro implications derived (say, about house price dynamics)Steps to get there:
Choose an existing HA macro model of house prices
For each observed belief about E[∆ph], find a scenario in theHA model that would produce that path (a narrative)
Construct EE model in which you can be ‘infected’ with newnarrative by talking to a friend or (say) from reading anarrative in a newspaper
Match the patterns of transmission of expectations in themodel and the data
Carroll Behavioral-Macro
![Page 138: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/138.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
BDKS Is Not Yet A Macroeconomic Model
No macro implications derived (say, about house price dynamics)Steps to get there:
Choose an existing HA macro model of house prices
For each observed belief about E[∆ph], find a scenario in theHA model that would produce that path (a narrative)
Construct EE model in which you can be ‘infected’ with newnarrative by talking to a friend or (say) from reading anarrative in a newspaper
Match the patterns of transmission of expectations in themodel and the data
Carroll Behavioral-Macro
![Page 139: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/139.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
BDKS Is Not Yet A Macroeconomic Model
No macro implications derived (say, about house price dynamics)Steps to get there:
Choose an existing HA macro model of house prices
For each observed belief about E[∆ph], find a scenario in theHA model that would produce that path (a narrative)
Construct EE model in which you can be ‘infected’ with newnarrative by talking to a friend or (say) from reading anarrative in a newspaper
Match the patterns of transmission of expectations in themodel and the data
Carroll Behavioral-Macro
![Page 140: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/140.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
BDKS Is Not Yet A Macroeconomic Model
No macro implications derived (say, about house price dynamics)Steps to get there:
Choose an existing HA macro model of house prices
For each observed belief about E[∆ph], find a scenario in theHA model that would produce that path (a narrative)
Construct EE model in which you can be ‘infected’ with newnarrative by talking to a friend or (say) from reading anarrative in a newspaper
Match the patterns of transmission of expectations in themodel and the data
Carroll Behavioral-Macro
![Page 141: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/141.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Conclusion
Confession:
Whole Talk Was a Pitch for Econ-ARK/HARK project
Already contains the HA Macro part
Need to add ABM tools to construct EEOn our near term agenda; part of what we promised Sloan
If there are listeners who want to help – please do!
Carroll Behavioral-Macro
![Page 142: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/142.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Conclusion
Confession:
Whole Talk Was a Pitch for Econ-ARK/HARK project
Already contains the HA Macro part
Need to add ABM tools to construct EEOn our near term agenda; part of what we promised Sloan
If there are listeners who want to help – please do!
Carroll Behavioral-Macro
![Page 143: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/143.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Conclusion
Confession:
Whole Talk Was a Pitch for Econ-ARK/HARK project
Already contains the HA Macro part
Need to add ABM tools to construct EEOn our near term agenda; part of what we promised Sloan
If there are listeners who want to help – please do!
Carroll Behavioral-Macro
![Page 144: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/144.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Conclusion
Confession:
Whole Talk Was a Pitch for Econ-ARK/HARK project
Already contains the HA Macro part
Need to add ABM tools to construct EEOn our near term agenda; part of what we promised Sloan
If there are listeners who want to help – please do!
Carroll Behavioral-Macro
![Page 145: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/145.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Conclusion
Confession:
Whole Talk Was a Pitch for Econ-ARK/HARK project
Already contains the HA Macro part
Need to add ABM tools to construct EEOn our near term agenda; part of what we promised Sloan
If there are listeners who want to help – please do!
Carroll Behavioral-Macro
![Page 146: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/146.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Conclusion
Confession:
Whole Talk Was a Pitch for Econ-ARK/HARK project
Already contains the HA Macro part
Need to add ABM tools to construct EEOn our near term agenda; part of what we promised Sloan
If there are listeners who want to help – please do!
Carroll Behavioral-Macro
![Page 147: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/147.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
Wealth Inequality
Figure: Distribution of Net Worth (Lorenz Curve)
Solid curve:Distribution of W in the 2004 SCF
Return
Carroll Behavioral-Macro
![Page 148: Heterogeneity, Macroeconomics, and Reality...Heterogeneity, Macroeconomics,and Reality Christopher Carroll1 1Johns Hopkins University and NBER ccarroll@jhu.edu Sloan-BoE-OFR Conference](https://reader035.fdocuments.in/reader035/viewer/2022071416/6112795619f66a20da04f116/html5/thumbnails/148.jpg)
Narratives Progress How to Make Progress HA Macro HABMacro References
References
Baptista, Rafa, J Doyne Farmer, Marc Hinterschweiger, Katie Low, Daniel Tang, and Arzu Uluc(2016): “Macroprudential policy in an agent-based model of the UK housing market,” Bank of England StaffWorking Paper No. 619: Macroprudential policy in an agent-based model of the UK housing market - RafaBaptista, J Doyne Farmer, Marc Hinterschweiger, Katie Low, Daniel Tang and Arzu Uluc.
Carroll, Christopher D., Jiri Slacalek, Kiichi Tokuoka, and Matthew N. White (2017, Forthcoming):“The Distribution of Wealth and the Marginal Propensity to Consume,” Quantitative Economics, Athttp://econ.jhu.edu/people/ccarroll/papers/cstwMPC.
Epstein, Joshua M (2009): “Modelling to contain pandemics,” Nature, 460(7256), 687–687.
Geanakoplos, John, Robert Axtell, Doyne J Farmer, Peter Howitt, Benjamin Conlee, JonathanGoldstein, Matthew Hendrey, Nathan M Palmer, and Chun-Yi Yang (2012): “Getting at systemicrisk via an agent-based model of the housing market,” The American Economic Review, 102(3), 53–58.
King, Mervyn A. (2016): The end of alchemy : money, banking and the future of the global economy. Little,Brown, London.
LeBaron, Blake (2006): “Agent-based computational finance,” Handbook of computational economics, 2,1187–1233.
Manski, Charles F. (2017): Survey Measurement of Probabilistic Macroeconomic Expectations: Progress andPromiseUniversity of Chicago Press.
Qiu, Xiaoyan, Diego FM Oliveira, Alireza Sahami Shirazi, Alessandro Flammini, and FilippoMenczer (2017): “Limited individual attention and online virality of low-quality information,” Nature HumanBehavior, 1, 0132.
Summers, Lawrence H. (2011): “Larry Summers and Martin Wolf on New Economic Thinking,” Financial Timesinterview, http://larrysummers.com/commentary/speeches/brenton-woods-speech/.
Carroll Behavioral-Macro