The basic things Dalio misses are:
He lacks a theory of real vs nominal quantities, that is, a theory of the Phillips curve / SRAS. At times he sounds like an old Keynesian, where prices are essentially fixed; at other times he sounds like an RBCer with output fixed. This is the kind of thing that's easy to mess up with words, but becomes easier to handle when you have a mathematical model.
He commits multiple fallacies of composition throughout, and at key points in his story.
The long-run cycle he describes fits the zeitgeist, but there's not nearly enough data to support the strength of his claims.
He emphasizes repeatedly that the economy is "like a machine" and is mechanically predictable. But we know that business cycles are not mechanically predictable; if we could predict them with that kind of precision, we'd be able to eliminate them. Recessions are mistakes.
He makes various claims about g>r that could be right or wrong, but certainly need more unpacking.
These are important, substantive points and you aren't allowed to get them wrong, even in a YouTube video. I'm not cheap; I'm not going to go after him for "not having a DSGE mathematical model" or whatever. It is perfectly acceptable to tell simple stories, as long as those stories are broadly correct. I'm going to go after him for things that you aren't allowed to get wrong when formulating a theory of macroeconomics.
On the bright side,
He gets the productivity -> growth story basically right, which imposes enough constraints that he's not a vulgar Keynesian. He doesn't commit the "Keynesian cross is a growth model" fallacy that we see so often and that u/wumbotarian loves to hate.
He gets spending=income basically right (aside from the aforementioned fallacies of composition), which imposes enough constraints that he doesn't go off the Austrian deep end.
He has a shining, crystal-clear, beautiful explanation of New Keynesian business cycle theory from 14:30 to 19:00.
He has a cleaner explanation of the FTPL and fiscal-monetary coordination than most graduate economics textbooks around 25:00.
Created: 2023-09-28 Tags: #fleeting Link:
