Giles Keating, during 30 years at Credit Suisse, was Global Chief Economist for the Investment Bank, and Head of Global Research for Private Banking and Wealth Management. Educated at Oxford and LSE, his publications include “The Production and Use of Economic Forecasts” and “A Two-Good Model with Capital Accumulation and a Real Balance Effect”. He was a Founder of digital wealth manager Werthstein.com and is currently a Director at Bitcoin Suisse AG.
Modern economic theory is already over 600 years old, if we take Ibn Khaldun as its founder, and unsurprisingly the toolbox is pretty extensive already. So, though some useful stuff still gets added from time to time, the economist’s problem is usually less about inventing new theory, and more about deciding which existing bit is relevant to current circumstances, and how to apply it.
The digital economy has brought lots of slightly dusty bits of theory centre stage. Price/product discrimination is now absolutely central: everyone, but everyone, now does it all the time, whether it’s a manufacturer selling the identical product cheaper on eBay than on their own site or a hotel chain offering the same room on ten different cancellation plans. The economics of advertising, not always seen as crucial by many economists, is now so staggeringly important to understanding how Google and Facebook operate that I can’t find enough superlatives to describe it. And the economics of auctions is a pretty vital subject as well, given that the bidding system for keywords in online ads can be designed to snaffle all but the last morsel of profit from the advertisers. The dog that didn’t really bark, though, is network economics; much of the internet, so far at least, has turned out to all about good old-fashioned oligopoly or oligopsony, rather than trendy modern networks.
So the aim of this blog is to try and pick the right tools from the box, use them to analyse what’s going on in the world, and draw some (tentative) conclusions about what’s going on in macro-economics and in financial markets.
Tentative, because none of us ever really knows: in econometric terms, we could say that the model is permanently under-identified. We always have to make some assumptions in order to choose a model that gives us some conclusions. If we do it well, that will work for a while, and then something will show that the assumptions were wrong, and we have to start again. Have fun reading, and maybe try to play the game of guessing more quickly than the next person when the time has come to move to a new set of assumptions!
Giles Keating, London, 2020
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