3min chapter

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Housing Bubble Week Epilogue: Not All Bubbles Are Created Equal - Vernon Smith

The Joe Walker Podcast

CHAPTER

The Problem With Macroeconomic Models

In a balance sheet recession, people have gone from being profit maximizes to debt minimizes. And so you see, that's the problem. Our models don't really have capital in them in the way in which they're operating. The macroeconomic models are flow models. You see, capital is in there as a service. We're good at forecasting if they don't change very much. It's like the weather, if it doesn't changevery much, it's much easier to forecast.

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