Michael D. Goldberg
Associate Professor of Economics
Whittemore School of Business and Economics
"Frydman and Goldberg open new doors... by recognizing that universal rules are intrinsically impossible."
The journey from a traditional economy to a modern high-speed technological one has been dizzying, and economic theory has had a hard time keeping up.
But now mavericks, Associate Professor Michael Goldberg and Roman Frydman, professor of economics at New York University, have coauthored a new book, Imperfect Knowledge Economics. In it they present an innovative, theoretical approach to gauging the modern economy.
Rejecting exact quantitative predictions of individual decisions and market outcomes, Imperfect Knowledge Economics (IKE) employs mathematical models that generate qualitative predictions of economic changes. Using the foreign exchange market as a testing ground, IKE, while less precise, is able to account for the salient features of asset markets that have confounded extant approaches for decades.
"Economists mistakenly believe that they have found the way to specify how 'rational' individuals are supposed to behave," says Goldberg. "As a result, the failure of their models to explain fluctuations in asset markets leads them to conclude that participants in these markets are 'irrational' and that fundamentals such as interest rates and income growth do not matter." But, there is a much more plausible interpretation: conventional economic models are just the wrong theory of how rational individuals behave and how fundamentals matter.
Two Nobel Prize-winning economists, Edmund Phelps and Kenneth J. Arrow, have praised this new approach. Phelps calls the book "deeply original and important," while Arrow states that "Frydman and Goldberg open new doors... by recognizing that universal rules are intrinsically impossible."
Goldberg has presented papers on IKE in America and Europe; his Op-Ed pieces have been published in newspapers spanning five continents.
But his commitment to academic work has remained paramount. Goldberg was instrumental in creating the school's B.S. in economics and in revitalizing its doctoral program. His self-assessment: "My social worth stems mainly from working with students and pushing our academic programs forward."