Monday, August 03, 2015

Translating Paul Romer


I love what Paul Romer is doing on his blog. It's great to see someone recounting the old 80s/90s macro debates, and criticizing the "freshwater" folks, who is not a "Keynesian". I mean, Romer was in the thick of it all. He got his PhD from Chicago in 1983, and Lucas was his advisor! Plus he's been working in macro for decades. If Romer doesn't know what was up with the Macro Wars of the 80s and 90s, nobody does. And he's telling it like he sees it and pulling no punches. As The Dude would say, that's far out.

The problem is that Romer's writing style is not exactly ideal for what he's doing. He's writing blog posts like academic papers - very careful to specify definitions, cover all bases, and speak in a dry, neutral tone. That makes sense when you're writing a paper, because you're writing to a highly selective audience - i.e., the tiny handful of people in the world who are specialized enough to care about your research topic, and experienced enough to know all the background. It also makes sense because of the way papers get published - it's a long process, and you can't easily go back and change things, write addenda, write quick follow-ups, respond to arguments point-by-point, etc. Blogging is a whole different animal. Romer could get his message across more effectively, I think, if he would just take greater advantage of the format.

For example, let me attempt to translate a Paul Romer post into blog-ese. The post is called "Freshwater Feedback Part 1: “Everybody does it”". That's an OK title, though I would have gone with "justification" instead of "feedback" ("excuse" being a little too antagonistic). Anyway, I love this post. But it could still use some translating. Here, let's begin.

Romer says:
You can boil my claim about mathiness down to two assertions: 
1. Economist N did X.
2. X is wrong because it undermines the scientific method. 
#1 is a positive assertion, a statement about “what is …”#2 is a normative assertion, a statement about “what ought …” 
And now, in blog-ese:
Basically, my "mathiness" claim comes in two parts. First, I'm trying to expose some things I see some economists doing. Second, I'm trying to explain why I think those things are wrong, because they undermine the scientific method. 
Romer:
As you would expect from an economist, the normative assertion in #2 is based on what I thought would be a shared premise: that the scientific method is a better way to determine what is true about economic activity than any alternative method, and that knowing what is true is valuable. 
In conversations with economists who are sympathetic to the freshwater economists I singled out for criticism in my AEA paper on mathiness, it has become clear that freshwater economists do not share this premise. What I did not anticipate was their assertion that economists do not follow the scientific method, so it is not realistic or relevant to make normative statements of the form “we ought to behave like scientists.” 
In a series of three posts that summarize what I have learned since publishing that paper, I will try to stick to positive assertions, that is assertions about the facts, concerning this difference between the premises that freshwater economists take for granted and the premises that I and other economists take for granted.
Blog-ese:
I personally believe very strongly in the scientific method. I thought that pretty much all economists believed in it. But in my conversations with economists who are sympathetic to the freshwater folks I criticized in my "mathiness" paper, I realized that a lot of them don't actually believe in the scientific method at all. Or at least, they don't believe economists ought to follow it! 
As you might expect, I was pretty surprised to find this out. Surprised, and dismayed. So I'm going to write three posts about my conversations with these people. I'll try my best to stick to the facts. I just want to explain how these people think differently from the way I do.
Romer:
In my conversations, the freshwater sympathizers generally have not disagreed with my characterization of the facts in assertion #1–that specific freshwater economists did X. In their response, two themes recur: 
a) Yes, but everybody does X; that is how the adversarial method works. 
b) By selectively expressing disapproval of this behavior by the freshwater economists that you name, you, Paul, are doing something wrong because you are helping “those guys.” 
In the rest of this post, I’ll address response a). In a subsequent post, I’ll address response b). Then in a third post, I’ll observe that in my AEA paper, I also criticized a paper by Piketty and Zucman, who are not freshwater economists. The response I heard back from them was very different from the response from the freshwater economists. In short, Piketty and Zucman disagreed with my statement that they did X, but they did not dispute my assertion that X would be wrong because it would be a violation of the scientific method.
Blog-ese:
The freshwater sympathizers generally don't deny that the freshwater people do the things I accused them of doing. Instead, their response was basically "Everybody's doing it." Also, they told me that by calling them out on it, I was giving aid and comfort to the forces of darkness.
For right now, let's talk about the defense that "Everybody's doing it."
Romer:
Together, the evidence I summarize in these three posts suggests that freshwater economists differ sharply from other economists. This evidence strengthens my belief that the fundamental divide here is between the norms of political discourse and the norms of scientific discourse. Lawyers and politicians both engage in a version of the adversarial method, but they differ in another crucial way. In the suggestive terminology introduced by Jon Haidt in his book The Righteous Mind, lawyers are selfish, but politicians are groupish. What is distinctive about the freshwater economists is that their groupishness depends on a narrow definition of group that sharply separates them from all other economists. One unfortunate result of this narrow groupishness may be that the freshwater economists do not know the facts about how most economists actually behave.
Blog-ese:
First, a pessimistic note. I've come to realize that freshwater economists are just...different. I'm more and more convinced that the freshwater people are used to playing politics instead of doing science. I'm talking about academic politics, of course, not national politics - you know, where "the battles are vicious because the stakes are so low."  
The sad thing is that the freshwater folks think they're no more political than everyone else. They really do believe that "everybody's doing it." They're wrong, but that's what they think.
Romer:
In my informal conversations, no one from the freshwater camp has articulated exactly what they mean by the adversarial method, so I’ll try to fill in the blanks here. (It would be helpful if someone who supports this view indicated whether I have characterized it accurately.) 
In an equilibrium where everyone follows the adversarial method, each side tries to make the best possible case for its position. What we might call the rules of evidence are that an advocate cannot make statements that are false, but it is to be expected that an advocate will withhold information that does not support the advocate’s position.
Blog-ese:
So if the freshwater camp doesn't follow the scientific method, what do they follow? I call it the "adversarial method". The adversarial method is where each side tries to make the best possible case for its position - not lying, not saying anything false, but omitting any evidence that might support an alternative point of view.
Romer:
As always, it helps to be specific. One of the issues that I raised in a conversation concerned the support (in the mathematical sense) of the distribution of productivity in the Lucas-Moll model. Their assumption 1 states that at time 0, the support for this distribution is an unbounded interval of the form [x,infinity). In response to objections of the general form “this assumption is unacceptable because it means that everything that people will ever know is already known by some person at time 0,” Lucas and Moll present a “bounded” model in which the support for the distribution of productivity at time zero is [x,B]. Using words, they claim that this bounded model leads to essentially the same conclusions as the model based on assumption 1. (I disagree, but let’s stipulate for now that this verbal claim is correct.) I observed that Lucas and Moll do not give the reader any verbal warning that because of other assumptions that they make, the support for the distribution of productivity jumps discontinuously back to [x,infinity) at all dates t>0 so it is a bounded model in only the most tenuous sense. 
When I suggested that this omission concerning the behavior of the support of the distribution was a sign of something wrong, the response I got was that in presentations of the paper, members of the audience and/or discussants pointed out that this is how the support behaves. This implied that it was evident to someone who digs into the math that the support for the distribution is bounded only at date 0 and not at any other date. Because this result could be inferred from a careful examination of the math, the authors met their obligations to the reader. Because the support is bounded at date 0, they did not, technically, make a false statement when they use the word “bounded” to describe the model’s behavior. Beyond this, they should not be expected to say in words anything that would weaken their argument. 
I defined mathiness as a combination of words and symbols in which the meaning of the words diverges from the meaning implied by the symbols. One of the ways they can diverge is if the words selectively disclose only some of the formal results. Calling their model “bounded” is an example of this type of divergence.
The freshwater sympathizers agreed, for example, that Lucas and Moll strategically refrained from verbal disclosures about some of the properties of the underlying mathematical formalism. Where we disagreed was whether this was a sign of behavior by the authors that is wrong. In effect, their response was caveat emptor; this is what all economists do.
Blog-ese:
For example, I was talking to someone about the Lucas-Moll model that I complained about earlier. Lucas and Moll assume that at time 0, the distribution of productivity has support over the interval [x, infinity) - in other words, that everything that can possibly be known is already known by someone out there. That's totally unrealistic. In the real world, there are a bunch of things that nobody knows yet. 
So then Lucas and Moll claim that they have a "bounded" version of the model, where at the beginning, only a finite number of things are known - the productivity distribution starts out with support [x,B] at time 0. They say this model leads to the same conclusions as the earlier one (I disagree, but that's a story for another day). But here's the trick that Lucas and Moll pull...as soon as time starts, the distribution of productivity instantly goes back to [x, infinity)! In other words, in the microsecond after time begins, humanity discovers an infinite number of new things! 
If that isn't mathiness, I don't know what is. 
The thing is, Lucas and Moll stick this assumption in there with zero warning to the reader. If you don't look incredibly closely and dig through the math, you never even notice that this is what they're doing. To take a crazy-sounding assumption like this and just bury it in the math and hope no one notices it - well, that's mathiness, right there. 
So I complained about this to a freshwater sympathizer. (S)he told me that, well, this issue came up in seminars, so people definitely noticed it. And if people noticed it, (s)he said, I shouldn't be worrying. Did I expect Lucas and Moll to go out of their way to point out this flaw to readers? 
Well...yeah, I kind of did. 
Science shouldn't be a caveat emptor situation. If you're a scientist, you have a duty to point out the weak points in your arguments instead of forcing people to go hunting around for them.
Romer:
For me, the most interesting thing to emerge out of these conversations was the realization that the difference between us, which seems like an intractable difference in values or beliefs about right and wrong, may simply reflect different inferences the facts. We agreed about what about what Lucas and Moll did but we disagreed about what other economists do. 
One way to characterize the underlying disagreement about what is wrong is to say that we are both commenting on strategic interaction between economists that takes the form of a repeated, multi-player prisoner’s dilemma. In this game, following the scientific method corresponds to cooperation; following the adversarial method corresponds to defection. My claim is that economics is characterized by a trigger strategy/reputational equilibrium that sustains the scientific method. In calling attention to defection by the freshwater economists, I am following a strategy that is equilibrium play in this reputational equilibrium. 
In contrast, the freshwater economists believe that we are already in the noncooperative adversarial equilibrium, so it is wrong to express disapproval of economists who are simply engaging in the type of behavior that is rational in that equilibrium. The freshwater economists might agree that in some first-best sense, an equilibrium based on the scientific method would be preferable, but they apparently believe that we are not in such an equilibrium; that it is not possible to get back to such an equilibrium; and that even if we did, it would not be possible to sustain it. 
If so, what looks superficially like a deep and intractable disagreement about values or morality may simply reflect disagreement over the facts about what most economists do. When the freshwater types say “everybody is following the adversarial method,” what they may honestly be saying is that “everybody I know is following the adversarial method and they all believe that everyone else is doing this too.” But because freshwater economists have so sharply isolated themselves from the rest of the profession, they may be generalizing from an unrepresentative set of observations. 
To me, the facts seem to be that freshwater economists are following a coordinated strategy based on the adversarial method yet that many other economists are still committed to the scientific method.
Blog-ese:
So what explains the difference between my approach - which I think is the mainstream approach in econ - and this adversarial freshwater strategy? I have a little pet theory as to why they do what they do. 
Basically, scientific dialogue is like a repeated, multi-player prisoner's dilemma. Following the scientific method is "cooperation"; following the adversarial method is "defection". If you know about repeated multi-player prisoner's dilemmas, you know about trigger strategies and reputational equilibria
I've always followed the scientific method because I thought I was in a cooperative reputational equilibrium. I pointed out the weaknesses of my theories without being prompted, because I thought everyone else would do the same for me. But the freshwater folks didn't share my beliefs. They think they're in a noncooperative adversarial equilibrium, where everyone will always defect, defect, defect. They might wish that everyone followed the scientific method, but they think no one does, so they better not follow it either. They're simply carrying out their rational best responses, given their cynical, pessimistic beliefs about the world. 
So these freshwater folks aren't bad guys. They're just cynical. We don't disagree about values, we just disagree about the facts. They've isolated themselves from the rest of the profession - walled themselves off inside their little freshwater bubble - so they don't realize that in the outside world, people are playing a much friendlier, more cooperative game. 
Romer:
If I could persuade the thoughtful freshwater types of just one point, it would be that they owe it to themselves to assess the factual basis for their belief that all economists follow the adversarial method instead of the scientific method. Everyone they talk to may honestly believe this, but a bit of empirical inquiry may reveal that this is a fact about whom they talk to, not a fact about the behavior of most economists.
Blog-ese:
If I could tell the freshwater economists just  one thing, it would be that the rest of economics is doing things differently. Really. We're out here being honest with each other, trying to get to the truth together, not politicking for our own pet theories. We're being scientists. You can too. If you get outside your bubble, you'll see I'm telling the truth.
Anyway, so that's my translation of a Paul Romer post. The cool thing is that, due to the magic of blogs, if I've translated anything incorrectly or incompletely, I can just go back and correct it!

Also, remember that I'm just the translator. I don't necessarily endorse the things Romer says here. Personally, I think his theory about the freshwater folks sounds a bit far-fetched - it relies on some pretty persistent heterogeneous beliefs. Surely the freshwater folks wouldn't take too long to realize that they were doing things very differently than others...


Update: Romer's more recent posts are adopting a more bloggy tone, and - in my opinion - are much more fun and readable!

62 comments:

  1. So if the Freshwater guys follow the adversarial method, and Romer and presumably Smith and most economists follow the scientific method, then what method do the Austrians follow? Is it just a subset of the adversarial method? I haven't noticed much empiricism out of them. Some, but not much.

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    1. Anonymous6:13 AM

      they follow the deny reality entirely method.

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    2. Well they have not produced a lot of empiricism because their are almost non. If you look at what Austrians do at George Mason they do use lots of data, including surveys and things like that.

      The Hayekian position that in a complex system, the sientific method, very hard and it takes a long time and lots of data and argument to convince anybody.

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  2. I would love to sit and say that macro uses the scientific method. But this is clearly false for any macro modeler. This may bc of limited data, but macro economists have written down models and then tried to convince others that they were useful. There was and is no Popper falsification going on. Look at the most prominent model out there variants of the DSGE model. What is the methodology? Assume the models is true and given that assumption and the observed data back out the shocks of the model. You start by assuming the models is true, not by trying to prove it is false.
    I don't remember who said it, but the following observation is true. Data alone will never defeat a model, it is always data coupled with a better model that will defeat a model. This all sounds like the adversarial method.

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    1. Anonymous9:54 PM

      It takes a model to beat a model. I think Rogoff said it. But I dont think this is an unscientific stance. It is just saying we need a logically consistent way of explaining stuff -- an explanation. If you dont like mine, give me a better one. Is that too much to aski?

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    2. I agree 100% with the statement that it takes a model to beat a model. I was making the point that macro does not follow the scientific method which I take to be Popper falsification. That was not a criticism. Cosmology like macro doesn't use it bc theory is running faster than the data. I think macro has to use the "adverserial method." The adverseral method is useful and frankly has always been part of science.

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    3. I think models should be strongly grounded in empirics, and only bolstered by theory/praxeology. Only empirics can tell how much unemployment a $20 per hour minimum wage in Mississippi will cause, but praxeology/theory can easily tell us why this unemployment will occur.

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    4. Anonymous6:30 AM

      ha ha, praxeology. That's funny. Good one.

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    5. Anonymous6:53 PM

      A true scientist would formulate an hypothesis. He would then design and perform an experiment to test the hypothesis. The predictions of the hypothesis would be tested against the results of the experiment. If the hypothesis failed the test it would be junked or modified. An honest scientist would publish the results irrespective of whether the hypothesis passed or failed the test.

      How many economists publish the results of failed "experiments"?

      In any event, freshwater economics is better named muddy water economics.

      Henry

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    6. Anonymous7:20 PM

      "freshwater economics is better named muddy water economics."

      Some might even say dirty water economics or even foul water economics.

      Others of course would prefer epithets such as "fragrant as cherry blossom" or "glistening in the sun" or even "holy".

      To each his own.


      Henry

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    7. "It takes a model to beat a model."
      But freshwater models have been licked by other models for about 30 years!
      As far as I can tell, that has done precisely nothing to freshwater views of the business cycle.

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    8. Anonymous3:15 PM

      Right. When I go to macro theory seminars, I work hard to follow a bunch of math and walk out an hour or 80 minutes later feeling that I have learned absolutely nothing about the world. When I go to public or labor seminars, which often but not always require less effort (depending on the complexity of estimation methods being used and my prior familiarity with the particular nook in the literature), I almost always walk out feeling that I know more about the world than when I went in. Mostly because the latter actually involves testing and testable hypotheses.

      I am fundamentally unconvinced that we learn anything about the world from most macro models with calibration. (Occasionally I have seen a model that leaves me feeling like I've learned something, but there's a very small set of people doing that work--though I will say that those people are getting wide recognition in the profession.) I generally start from the premise that there are N ways to model any particular phenomenon, and no particular reason to believe that the model being given is correct, especially when most of them have M patently impossible assumptions.

      Macro theory seminars are often good if you're trying to find six impossible things to believe before breakfast, but otherwise I remain unconvinced. It's a pity, because often the they cover fundamentally interesting questions (why I keep attending). But theoretical macro as a field is derided by many non-macro economists for very good reasons, imo.

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  3. As long as the mainstream adheres to the loanable funds model, they are no better than the Chicago school.

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    1. What's wrong with Loanable Funds?

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    2. As the bank of England's Research Unit recently pointed out, it's not how banking really works.

      See...

      http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp529.pdf

      ...for more details.

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    3. First, I'd like to point out that loanable funds is, as Scott Sumner has long pointed out, basically irrelevant to monetary policy. This is because central banks can always manipulate the monetary base to reach their nominal targets.

      The statement
      "The bank therefore creates its own funding, deposits, in the act of lending, in a transaction that involves no intermediation whatsoever."
      is basically untrue for any individual bank. It's true that a bank can borrow from other banks; it does not have to wait for deposits to arrive before it can lend. But banking is still a form of intermediation, whether from central bank (as a lender) to borrower, from other bank (as a lender) to borrower, from borrower (as a lender) to borrower, or from foreigner (as a lender) to borrower. Banks don't create their own funds; they borrow them from others. The banking system, however, does create its own funds from a miniscule stock of reserves in a self-perpetuating manner. The money multiplier is theoretically infinite. In practice, it is limited because banks don't lend infinite amounts to everyone.

      Also, there's nothing special about banks v. other financial intermediaries. Hedge funds can create money just as well as banks can. New deposits don't lead to reserve creation; the quantity of reserves is determined by central banks alone.

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    4. Anonymous6:22 AM

      bank deposits are bank debts, not bank funds. They represent what the bank owes to the depositor (the owner of the deposit). When a bank 'creates a deposit out of thin air' it is simply going into debt to the depositor, i.e. borrowing from the depositor.

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    5. Exactly, Anon after me.

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    6. banks don't 'multiply' reserves into deposits though, so 'money multiplier' is a misleading term. It simply refers to a ratio, which could more accurately be called the 'credit divisor'.

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    7. "banks don't 'multiply' reserves into deposits though"
      -So what do you suggest they do?

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    8. they create deposits by typing numbers into a computer.

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    9. Only in the very short-term. Banks always have to borrow deposits from somewhere outside the very short-term.

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    10. Bank deposits are bank debts. Banks don't borrow deposits. Yes they borrow money from the central bank. And yes they borrow money from customers and from each other. But there is no 'multiplying' of reserves into deposits, no line of causation from reserves to deposits. If anything causation goes the other way, with deposit creation leading to an increase in base money over time.

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    11. "And yes they borrow money from customers and from each other."
      -So they borrow deposits.
      "But there is no 'multiplying' of reserves into deposits, no line of causation from reserves to deposits."
      -So if the Fed sells off all its assets and leaves $1 of reserves left, that wouldn't have any "direct line of causation" to deposits? :-)
      "If anything causation goes the other way, with deposit creation leading to an increase in base money over time."
      -If the central bank desires this increase in base money over time in order to maintain some other target. Back during the gold standard days, deposit creation certainly didn't lead to an increase in the gold stock. :-)

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    12. no, a 'deposit' is a bank liability, or debt. You don't borrow your own debt.

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    13. "no, a 'deposit' is a bank liability, or debt."
      -True.
      "You don't borrow your own debt."
      -Sure you do. When you borrow money, that becomes your debt. Unless I'm reading you wrong.

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    14. no, the money you borrow itself is not your debt. A dollar note is not your debt, for example. It doesn't say "I, pithom, owe the bearer $1" on it.

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    15. "If the central bank desires this increase in base money over time"

      The cb can try to influence broad money growth by changing interest rates, but what people call "velocity" can and does also change in response to interest rate changes.

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  4. Anonymous11:36 PM

    The problem with his theory is also the problem with your critique of it. They aren't starting with an attempt at unbiased observation, drawing conclusions / forming beliefs, & then deciding on a strategy of "defect, defect, defect". The borderline dishonesty comes first; the 'beliefs' are just self-serving, post-hoc rationalizations.

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    1. I doubt "they" are borderline dishonest. There are many ways to have self-serving, post-hoc rationalizations, and the freshwater people generally use few of them. And you can't have dishonesty without some prior beliefs, in any case.

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  5. (1) Romer's posts are fine as they are. Precision matters to him. And his audience is somewhere in between a broad, blogger audience and an an academic audience. It's an appropriate voice and not in need of translation.
    (2) "Surely the freshwater folks wouldn't take too long to realize that they were doing things very differently than others": sometimes the history of science is a better indicator than intuition. Just as the markets can remain irrational far longer than you can remain solvent, markets in ideas can remain irrational far longer than your own lifetime. Given that history, it makes sense to call out the presumed excessive attachment to ideas (even if it is likely doomed to failure).

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    1. Or, alternatively, "Markets can remain solvent longer than you can remain irrational.".
      http://econlog.econlib.org/archives/2015/04/its_not_a_beaut.html

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    2. Anonymous3:54 AM

      Nothing can remain anything longer than pithom can remain irrational.

      Delete
  6. Actually I loved this tranlaton. I had already these posts and more or less understood. But writing and thus blogging, is an art. I'm not an economist , I studied Romance languages. But I am addicted to econ blogs bc they make me a better informed citizen. Love Brad Delong but a bit difficult. I think the most artful blogs are Krugman, Wren Lewis, this one. Then there's link lord Thoma and the funny curmudgeon Dean Baker. And the amusing cat fights that traverse the blogs. I root for saltwater as they more empathy it seems.

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    1. Never liked Krugman, Delong, or Wren Lewis due to their well-documented dishonesty (by Ferguson, Sumner, and Murphy). Dean Baker's sometimes okay. My favorite econoblogger is Sumner, as he's by far the most perceptive of any I've encountered.

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    2. Anonymous8:32 AM

      "Well-documented dishonesty?" And then you have the gall (or stupidity) to cite Ferguson? You are truly out to lunch.

      Where's Rosser when you need him?

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  7. The fundamental problem in bridging this gap, it seems to me, is to have a forum that provides a mechanism for the community to enforce consistency while also providing an easy reading experience for the casually interested people and the somewhat seriously interested people.

    I have that forum. It is the only way to make it work effectively in my current view. I hope it works.

    It is very close to being released. Software development is all about unexpected delays, so I apologize but it is expected. I work for the people.

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  8. I can tell that I have the attention of some, and I hope I don't disappoint them with the product. If people find an interest in it, it will serve as motivation for me to improve it given that money is not currently on the table. Money is a good motivator. Debt is not. Social approval is probably just as effective as a motivator as money as long as it is genuine.

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  9. Romer seems to have discovered that:

    Freshwater Macro is to Market Fundamentalist America

    as

    Dialectical Materialism was to the Soviet Union

    That is, not a genuine scientific discipline but a cadre of Dr. Panglosses employed to generate plausible-sounding rationalizations for whatever powerful people decided to do. Like Voltaire's original, they are probably mostly deluded rather than cynical about the function of their work. Were they more cynical, they would have become hedge fund managers rather than professors.

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    1. Well, yes. Holy moly, where are you hiding out?

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    2. The Soviet Union was quite legitimately based on Marxist principles and ideas, not just on "rationalizations for whatever powerful people decided to do". Powerful people wanted to re-establish the Church, return land to the landlords, and win the First World War. Of course, there was a sort of selection bias with ideology, but that doesn't mean dialectical materialism was nothing more than rationalization.

      "Market Fundamentalist America" is mostly a strawman.

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    3. Anonymous8:34 AM

      "The Soviet Union was quite legitimately based on Marxist principles and ideas, not just on "rationalizations for whatever powerful people decided to do"." You really might want to read a little more history. Marxism-Leninism did shift the ground of Marxism proper, and Stalinism (which was the real basis of Soviet political economy, and much else) would make anyone who takes Marx seriously (not as dogma) cringe.

      Thanks for playing, but it's time to let in another contestant.

      Delete
    4. I'd recommend reading Mankiw's "The Macroeconomist as Scientist and Engineer". When Republicans are in office, they generally don't bring in freshwater economists. They hire guys like John Taylor and Greg Mankiw. Freshwater economists are more focused on academia, which is why Romer brings up the small stakes.

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  10. "We agreed about what about what Lucas and Moll did but we disagreed about what other economists do. "

    I doubt that it's any coincidence that the "freshwaterians" tend strongly to the Republican Party side of politics (whether they call themselves "Libertarians" or not is largely immaterial; a distinction without a real difference, imo). With the modern GOP, rule #1 is "It's Always Projection". 'Our Enemies are doing X, so we must do X ourselves because they did it first.' It's an old, old tactic, with numerous real-world historical examples (cf Poland, Sept. 1, 1939). Who's on first? Godwin. Third base!

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    1. That doesn't mean their enemies aren't doing X, or that they mustn't do X.

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    2. Anonymous8:35 AM

      Sloppy rationalization. Try harder next time.

      Where's Rosser when you need him?

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    3. I don't know if the identification is that strong. Steve Williamson is the staunchest freshwater blogger I can think of, and he's a Democrat. So are the relatively recent nobelists Thomas Sargent & Chris Sims. All three are associated with the freshest-of-freshwater Minnesota school, which can claim Ed Prescott as a decidedly right-wing economist. Chicago economists are closely associated with conservative/libertarian politics, but a ranking of schools (I think Noah linked it once) showed them to be the saltiest of the freshwater cluster in terms of citation patterns.

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  11. Maybe you can also help Brad deLong?

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  12. The one thing that doesn't surprise me is you took no position. You can always be counted on to be Switzerland between the warring parties.

    I guess the charitable view is your polite-the less charitable view is your complacent.

    "Personally, I think his theory about the freshwater folks sounds a bit far-fetched - it relies on some pretty persistent heterogeneous beliefs. Surely the freshwater folks wouldn't take too long to realize that they were doing things very differently than others..."

    So you see it as impossible that an entire discipline can be wrong over an extended period of time? Isn't that the whole point of scholastiism?

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    1. I'm glad you found this article Mike: I was going to point it out to you.

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    2. Romer has a post on "Feynman integrity" using the same quote I linked you too Mike... the same quote I first encountered here on Noah's blog.
      http://paulromer.net/feynman-integrity/

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    3. Yes Tom. I see now where you got the reference to Feynman integrity from.

      The other thing that doesn't surprise me is Noah didn't answer me. Whereas Sumner always has a hostile answer for me, Noah always has no answer.


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    4. Anonymous5:45 PM

      It is clear from Romer's piece you have linked that he is struggling with many issues, least of which is his personal relationships with his professional peers. The problem with quoting from Feynman is that Feynman is dealing with a pure science, like physics, which is largely devoid of normative issues. There are still personal issues to do with ego, peer acceptance etc. which are common to any intellectual endeavour, however for a discipline like economics there is a further complication and that is ideology. Feynman's account of integrity cannot be measured for ideology. It is for no obscure reason that economics was once known as political economy. As much as economists opine about the need to firmly found economics in science, ideology and value systems always intrude. Attempts to sanitize economics of its normative components will always be a source of struggle. And to me it is of no wonder that the muddy water economists make no bones about their ideological leanings. The mindset at the base of classical economics and its derivatives is steeped in individual enterprise and independence, with outside intervention seen as weakness.

      Henry

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  13. WHOA!! What is this?? Been away from econ a few months, come back and find none other than PAUL ROMER (PhD from Chicago; worked under Robert Lucas) thrashing freshwater econ theory like the best!! Awesome!!

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    1. It's been an exciting few months!

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  14. I like the translation. I hope Romer leaves a long comment here setting you straight on whatever it is you screwed up though (perhaps your concluding remarks?). (c:

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    1. And thanks for doing this post Noah, and for bringing more attention to this issue. It's a favorite subject of mine recently, and not just wrt economics. Even if you know next to nothing about a subject, IMO it's always a valid (and fun) question to ask an expert who makes a bold sounding claim "How would you know if you were wrong about that?" This sometimes leads to an interesting exchange. And generally, if the response is anything other than a matter of fact laundry list of conceivable (and previously well thought out) evidences that would demonstrate their claims are false, then beware: You may be dealing with someone who's "pre-contemplative," who's doesn't value "belief revision" or as Romer puts it, they're "epistemically closed." I'll translate into vulgate blog-ese: a cultist. ;^)

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  15. Having attended or spoke at seminars at Chicago and CMU, I can honestly believe that everyone there believes that the adversarial method is how economics is practiced. By the way, you see the same kind of grilling at law school seminars where the adversarial method is how legal scholarship is practiced. Of course, I am talking about 40 years ago, so maybe things have changed in both venues.

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  16. Anonymous3:32 PM

    "Personally, I think his theory about the freshwater folks sounds a bit far-fetched - it relies on some pretty persistent heterogeneous beliefs. Surely the freshwater folks wouldn't take too long to realize that they were doing things very differently than others..."

    I think you are strongly underestimating how insular the true-believer saltwater schools are. The saltwater schools ensure that their students are at least exposed to some freshwater thinking; I don't think anyone can escape having at least a quarter of macro out of Sargent and Ljinquist these days (which isn't a bad thing in terms of ensuring a common tool set; even if you think the models are junk they require some useful discipline to solve). But as Romer argues in his blog, there is a real asymmetry at play: freshwater schools aren't pushing their students to learn and use saltwater econ the way saltwater schools push their students to at least know (and often borrow from) freshwater econ. That is the crux of the problem.

    I recently learned that at least some students at freshwater schools are explicitly being told to omit all intuition from their seminar presentations. Intuition can be wrong (that's why we do solve models and test hypotheses), but ignoring intuition entirely seems closely related to mathiness, in that both provide excuses to avoid thinking carefully about assumptions and their implications.

    The freshwater and saltwater schools seem to be doing fundamentally different things, with fundamentally different values, and fundamentally different ideas about the goals of the profession. Your not wanting this to be true does not stop it from being so.

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    1. Anonymous3:33 AM

      Making up stuff about people you don't know and never will meet and posting it on the Internet does not make it true. It does, however, make you a dick.

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