tag:blogger.com,1999:blog-17232051.post1423589938013267883..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: A world without macroeconomists?Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger88125tag:blogger.com,1999:blog-17232051.post-47783533041732841462013-05-04T00:19:12.793-04:002013-05-04T00:19:12.793-04:00From Wikipedia: "I wouldn't exactly go ba...From Wikipedia: "I wouldn't exactly go back on the gold standard but I would legalize the constitution where gold and silver should and could be legal tender" - Ron Paul<br /><br />--------------<br /><br />What is the empirical content of "gold and silver should and could be legal tender"?<br />If legal tender consists of dollar bills, along with gold coins how does ANYTHING change?<br />Normal people will use dollar bills like they do today. Nutcases will hoard their precious gold coins and fob off their dollar bills onto suckers (Gresham's law and all that). How is this world any different from today's world, except that the gold coins being hoarded are stamped "US Min" rather than "Franklin Mint"?<br />name99https://www.blogger.com/profile/13655602051960088825noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-57175627736805730752013-04-14T00:47:56.335-04:002013-04-14T00:47:56.335-04:00It's a good quote. I agree.It's a good quote. I agree.Graham Petersonhttps://www.blogger.com/profile/01026808626031607339noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-71993695606884954932013-04-12T17:57:21.775-04:002013-04-12T17:57:21.775-04:00Oh, come one Graham, it's a metaphor! Anyway, ...Oh, come one Graham, it's a metaphor! Anyway, here is Keyne's whole quote:<br /><br />"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back."CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-1107918676120671732013-04-12T17:50:21.189-04:002013-04-12T17:50:21.189-04:00Ha ha, maybe you are of a more critical nature tha...Ha ha, maybe you are of a more critical nature than I am. CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-34831558614903966802013-04-11T13:54:21.765-04:002013-04-11T13:54:21.765-04:00I am not an economist, and I haven’t commented on ...I am not an economist, and I haven’t commented on your blog before, but I like this post. You are asking good questions.<br /><br />My professional background involved helping businesses and government departments solve a variety of problems. As a result, I see the macro-economics profession in the same way that I’d view a failing organisation full of good people who have nevertheless lost sight of their main purpose.<br /><br />People in failing organisations often focus on “insider” questions. These are questions which are of interest only to insiders and which can be answered only by insiders. They act as a comfort blanket. In macroeconomics, you see this when, for example, economists debate with each other whether one sort of macroeconomic model is better than another type of model. Insider questions rarely get at the root causes of failure and mostly just create factionalism.<br /><br />One of the reasons that people like me can help failing organisations is that we ask “outsider” questions. For example, what services do you provide; who are your customers; are your services useful to your customers; how do you measure the effectiveness of your services; how could you improve your services; what would constitute progress? Outsider questions are more effective questions because they are more fundamental and more challenging.<br /><br />"What would happen if there were no economists" and “what is the purpose/benefit of the academic macro-economics profession” are outsider questions so it’s refreshing to see you ask them. I have three comments though.<br /><br />Firstly, if you ask most non-economists about the purpose of the academic macro-economics profession, they are likely to say something about educating the rest of us effectively in how the macro-economy works. I notice that is missing from your answer. Why is this? Why do you think the general state of public economic literacy is so low? Why do academic economists show such little interest in helping to do anything about this?<br /><br />Secondly, I doubt that many non-economists would agree that macro-economists constitute “an anchor that keeps policy away from the dangerous extremes urged on us by various politically-motivated fringe groups”. Indeed, part of the problem is the inability of the economics profession to present a single face to the rest of us. It is difficult for non-economists to tell the difference between empirical economists and ideologically motivated economists. Pretty much every macro-economist says “I am an empirical economist. My friends who agree with me are empirical economists. All of the people who disagree with me are ideologically motivated extremists”. <br /><br />Thirdly, I don’t know what something like “the creation of spinoffs like sVARs” means. You are answering an outsider question with an insider answer. That’s not allowed. Your answers will be useful only if they are meaningful to outsiders and expressed in plain language. <br /><br />Nevertheless, you should continue to ask provocative questions. You mention chemists in your post. Chemists became useful only when they stopped pretending they were superheroes who could turn lead into gold and instead just tried to understand and explain how stuff works.<br />Jamienoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-41487586487372161702013-04-11T12:21:36.388-04:002013-04-11T12:21:36.388-04:00Of course, I don't want to do too much of that...Of course, I don't want to do too much of that, because I'd critique people's methodologies (like in a seminar), and then they'd think I was a jerk and I'd get a very bad reputation... ;-)<br /><br />Look what happened when I critiqued that Acemoglu paper on entrepreneurship and risk!Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-29140591622878652222013-04-11T12:17:23.755-04:002013-04-11T12:17:23.755-04:00Now you are talking baby! Criticism is necessary, ...Now you are talking baby! Criticism is necessary, but there is a lot of exciting research going on also. Let's talk about some of that once in a while.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-22299927756405505522013-04-11T11:40:30.221-04:002013-04-11T11:40:30.221-04:00Tracy,
I think the 'batted 1,000' was a r...Tracy,<br /><br />I think the 'batted 1,000' was a rhetorical flourish, and Ben wasn't claiming that anybody has predicted key variables as accurately as you infer.<br /><br />Anyway, if you discount correct predictions on the basis of luck, how does the science move forward?Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80981733906088075032013-04-11T11:38:51.685-04:002013-04-11T11:38:51.685-04:00Claudia,
"Economists focus in on central ten...Claudia,<br /><br />"Economists focus in on central tendencies and average behavior ... the typical storyline ... and psychologists are often checking out all the perturbations ... the malleability of the story."<br /><br />You seem to be suggesting that economic behaviour is, for the most part, on average approximately that of models, and psychologists only model 'deviations' from this. But there is good reason to doubt this narrative: basic psychological concepts like copying, social norms etc. may drive behaviour as whole, not just be 'deivations' from rationality.<br /><br />Tracey,<br /><br />(2) I say value judgments are hidden because economists do not draw attention to them. See, for example, Tyler Cowen:<br /><br />"Economic analysis is itself value-free"<br /><br />http://www.nytimes.com/2013/03/17/business/the-egalitarian-tradition-of-economics.html?pagewanted=all<br /><br />(2) I'm not sure why you'd say something like "GDP is only what it was in 2004" when it's obvious that growth is necessary to sustain employment. Aggregate GDP figures don't tell us how most people are doing, and in, for example, the UK, unemployment is at its highest since the 1980s, while median incomes have declined in real terms:<br /><br />http://www.guardian.co.uk/money/2011/nov/23/uk-household-earnings-fall<br /><br />And I was actually primarily referring to the financial crisis' impact on the very poorest in the world:<br /><br />http://www.guardian.co.uk/politics/2009/mar/27/global-crisis-impact-poor<br /><br />(3) Yes, that index link was completely the wrong one. Here is the one on Heritage:<br /><br />http://www.dollarsandsense.org/archives/2005/0305miller.html<br /><br />Among the errors are: looking at changes in spending rather than levels; discounting industrial policy; looking at headline rather than effective tax rates; concluding that black markets lower economic freedom (wouldn't these be the epitome of a 'free market'?)<br /><br />(4) As for that comparison between SSA and SEA notes, there are large political differences between the two areas: to put it glibly, much of Africa has far less political and social cohesion. Even so - and, again as that article notes - their period with industrial policy outperformed the previous 'Washington Consensus' period. The recent growth can probably attributed to improved political circumstances and a commodity boom. The fact is that Africa has not really industrialised so it's difficult to say that their growth will be sustained:<br /><br />http://www.foreignpolicy.com/articles/2013/01/04/the_myth_of_africa_s_rise?page=0,0<br /><br />It might also be something Noah noted recently: basically, countries have to take it in turns to use export driven growth.<br /><br />(5) I just didn't see the part about the 'really difficult questions.' What I meant was asking questions about capitalism itself. Economic analysis tends to take capitalism as a given and, aside from some vague references to how the USSR failed, does not look far beyond that.<br /><br />Luis,<br /><br />I agree that a perfectly competitive market would, in reality, be absurd. However, I'm not just throwing that statement around for no reason. Here is a quote from a textbook:<br /><br />"First we show how a perfect market economy could under certain conditions lead to ‘social efficiency.’ … [we then] show how markets in practice fail to meet social goals. These failures provide the major arguments in favour of government intervention in a market economy."<br /><br />in other words: because, in practice, markets <i>fail</i> to adhere to perfectly competitive assumptions, there is a role for government. Theoretically, at least, perfect competition is the best possible outcome and the need for intervention only arises because the real world fails to meet that. This doesn't mean economists envisage a perfectly competitive world, but within economic theory, there is a judgement that, because it maximise efficiency, perfect competition would be desirable.<br /><br /><br />Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-82711751414303513132013-04-11T04:30:14.160-04:002013-04-11T04:30:14.160-04:00How do you account for heterodox models which have...<i>How do you account for heterodox models which have batted 1.000 over the last five years on interest rates, inflation, austerity, bond yields and deficits?</i><br /><br />About the same way I account for stage magicians who strap their assistant to a wheel, set the wheel spinning, and throw knives at the wheel and never hit the assistant. No one is *that* good at either knife throwing or modelling. <br /><br />The measurement error in measuring historic inflation and historic deficits alone is so large that I find it deeply implausible that anyone could get 1.000. You'd have to not only have perfectly modelled the underlying economy, but also perfectly modelled the error process of statistics departments in measuring the underlying economy, and the error process of accountants in measuring government spending and revenue. <br />See http://mgiakoumis.com/2012/10/22/revision-of-historical-general-government-deficit-and-debt-data/<br />And http://www.philadelphiafed.org/research-and-data/publications/research-rap/2011/inflation-targeting-and-revisions-to-inflation-data.pdfTracy Whttps://www.blogger.com/profile/08999246551652981965noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-30726063508627113242013-04-10T17:45:53.763-04:002013-04-10T17:45:53.763-04:00OK I'll look over these papers and write a pos...OK I'll look over these papers and write a post on SBTC...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19257991144388213602013-04-10T14:41:18.075-04:002013-04-10T14:41:18.075-04:00In broad strokes you're correct -- largely peo...In broad strokes you're correct -- largely people's beliefs always take their roots from ideas that have been espoused before them. New ideas are merely recombinations of old ideas. I don't think I'm reinventing the wheel, and I'm not sure how my point about a bad track-record of macroeconomic engineering turned into a debate about whether I'm original, or whether Chinese farmers took their inspiration for a system of property rights from books or not.<br /><br />I'm certainly not anyone's slave just because I rely on a network of ideas in history in order to create my own. Graham Petersonhttps://www.blogger.com/profile/01026808626031607339noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-86849038183498837092013-04-10T13:49:59.804-04:002013-04-10T13:49:59.804-04:00By the way, I am not sure how Autor would describe...By the way, I am not sure how Autor would describe himself but Katz and Krueger (currently advising Obama) are not macroeconomists, but rather labor economists. So I suppose your criticism of macroeconomics extends to the entire discipline. CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84210059974821054582013-04-10T13:35:02.575-04:002013-04-10T13:35:02.575-04:00Well, I just wonder where these practical men got ...Well, I just wonder where these practical men got their ideas from. I have a feeling they are not re-inventing the wheel. And neither are you, regardless of whether you are an academic or not. In fact, being an academic makes it all the more likely that you are the slave of some defunct economist of the past.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-50871301550702189812013-04-10T13:29:51.461-04:002013-04-10T13:29:51.461-04:00"But SBTC is a hypothesis to explain that fac..."But SBTC is a hypothesis to explain that fact. Education premia might have risen because of free trade, and increased supply of uneducated workers living in other countries."<br /><br />But it is not either one or the other! Read the paper by Autor et al that you first cited. By looking at local labor market they decompose the two effects. This also answers you last question. But to add to it, the theoretical papers I cited, Caselli (1999), Acemoglu (1999), Krusell et al (2000) also present empirical evidence. Then you have the work by Autor on polarization, which also supports SBTC as a source of rising inequality. On the other hand, the questions that Card and Dinardo (C&D) raise can be answered quite easily. You fail to acknowledge that the paper by C&D was written in 2002, before a number of empirical studies by Autor and others (interestingly, C&D do not cite the papers by Caselli and Acemoglu). Even Krugman seems to think that the evidence is there:<br />http://krugman.blogs.nytimes.com/2011/03/06/autor-autor/<br />So yes, the load is there for anyone who is more interested in finding it than finding excuses to bitch and moan.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61233587238753752362013-04-10T06:02:44.331-04:002013-04-10T06:02:44.331-04:00Hi Noah,
I've been following your blog for a ...Hi Noah,<br /><br />I've been following your blog for a while now, I really enjoy it. I think you often ask the right questions about what economists can do and how to improve their work, and you often end up by saying that their work should be more empirically based (like here). <br /><br />I think this is very true. But I often feel an urge to tell you (so I'm doing it here at last!)that there is a type of researcher who focuses a lot on what really happened in the past: economic historians. Some of them have proper economic training, and even teach economics, but they also try to draw lessons from the past in the most balanced way possible (they are afraid of generalisations - which can be a problem in itself). <br /><br />The problem is that their work (like mine for example) can't provide one big macro model all at once, one that would explain everything. But I think a careful study of past economic policies and their results can help. There is a trade-off between the level of detail that can be reached in analysing one or two instances of an economic phenomenon and the amount of generalisation that can be done by undertaking a study of say 30 countries over 50 years (economic historians tend to do the former, while empirical economists tend to do the latter). <br /><br />However I think both types of researchers have a lot to learn from one other, and more cooperation between the two fields would be highly beneficial. In the past economists used to work a lot more on economic history (think about Keynes and Hayek who studied the Great Depression, or Friedman and Schwartz who wrote an entire monetary history of the US). Maybe the trend should be revived?<br /><br />Best,<br />NatachaNatacha Postel-Vinayhttps://www.blogger.com/profile/16375525009813871875noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19113029050785224602013-04-10T03:09:50.809-04:002013-04-10T03:09:50.809-04:00Question: When a blogging macroeconomist posts a ...Question: When a blogging macroeconomist posts a long defense of his professional commitments and collects everyone else who's ever commented on the macroeconomy into a bin of crazies, doesn't it kind of set up a dichotomy where anyone who opposes his view goes right into the crazy bin? <br /><br />I have to at least hand it to Noah for setting up such a slick dichotomy whereby he can argue chiefly from authority and swat away any criticism before it's even made. I played right into it.<br /><br />Regards from the Crazy BinGraham Petersonhttps://www.blogger.com/profile/01026808626031607339noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-71350162592730401992013-04-10T02:57:15.311-04:002013-04-10T02:57:15.311-04:00Noah:
On that logic, the theory of evolution is m...Noah:<br /><br />On that logic, the theory of evolution is merely a Just So story.Graham Petersonhttps://www.blogger.com/profile/01026808626031607339noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-88427141422484102872013-04-10T02:53:57.997-04:002013-04-10T02:53:57.997-04:00CA:
The Chinese story I referenced is well docum...CA: <br /><br />The Chinese story I referenced is well documented. See Victor Nee's recent book Capitalism From Below, and Coase's recent book on the same matter. It has also been well known and documented by a great deal of development economists for more than a decade. <br /><br />I'd agree that I were the slave of some defunct economist, and exempt from intellectual influence, if I weren't a transparently aspiring academic myself, and if the ideas I cited weren't empirically verified.Graham Petersonhttps://www.blogger.com/profile/01026808626031607339noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38916125632846399082013-04-09T22:06:49.535-04:002013-04-09T22:06:49.535-04:00Oh, labor market polarization is definitely real, ...Oh, labor market polarization is definitely real, as is the rising education premium (at least, during the 80s). But SBTC is a hypothesis to explain that fact. Education premia might have risen because of free trade, and increased supply of uneducated workers living in other countries.<br /><br /><i>A lot of theoretical papers are more pursuasive to the extent that the outcome is invariant to the framework (and therefore the assumptions) that the models makes...Obviously, this strengthens the hypothesis.</i><br /><br />I don't think it really does...<br /><br /><i>a much bigger volume of empirical examinations that use more detailed and disagreggate data...a much bigger load of empirical evidence</i><br /><br />Really? Where is this load? Do they cite it? Where can I find it?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2912255546398171942013-04-09T19:09:47.939-04:002013-04-09T19:09:47.939-04:00Darn, bad idea to comment in-between classes! Here...Darn, bad idea to comment in-between classes! Here is, I hope, the correct link.<br />http://economics.mit.edu/files/5554<br />It is on labor-market polarization, a theme that Autor also explores in the paper cited in marginal revolution.<br /><br />A lot of theoretical papers are more pursuasive to the extent that the outcome is invariant to the framework (and therefore the assumptions) that the models makes. In this case, the impact of SBTC is similar regardless of whether one starts with a typical neoclassical model (Walrasian auctioneer, workers get paid their marginal product) as in Krusell et al (2000) or a disaggregate model with costly search and monopoly power as in Acemoglu (1999). Obviously, this strengthens the hypothesis.<br /><br />"Translation: "providing evidence that contradicts my priors""<br />No, it means that statements like "gee whiz, but the wage of engineers relative to social scientists has not increased" or "gee whiz, but the rise in wage inequality slowed down in the 1990s despite the continuing progress in IT" do not stack up well against a much bigger volume of empirical examinations that use more detailed and disagreggate data. Card and Dinardo admit as much when they "acknowledge that these predictions may be oversimplistic." And they also admit that the versions of SBTC they examine (and there are more) in fact "are consistent with some of the changes that have occurred over the past 3 decades..." When priors are based on a much bigger load of empirical evidence, then yes, simply raising questions based on eyeballing a few charts simply will not do. CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-89420549282912472202013-04-09T17:16:48.004-04:002013-04-09T17:16:48.004-04:00ton of both theoretical and empirical papers
Why ...<i>ton of both theoretical and empirical papers</i><br /><br />Why are a lot of theoretical papers more persuasive than one? that's just the weight of a whole lot of respected people repeating the mantra that the story looks plausible.<br /><br /><i>simply raising a few questions</i><br /><br />Translation: "providing evidence that contradicts my priors"<br /><br /><i>read Autor's report for the Center for American Progress</i><br /><br />The proposal for modifying Disability Insurance?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-22192425130704192032013-04-09T16:21:09.207-04:002013-04-09T16:21:09.207-04:00Oops, Autor's paper for the center for progres...Oops, Autor's paper for the center for progress is of course not on your blog, but here:<br />http://www.americanprogress.org/wp-content/uploads/issues/2010/12/pdf/autordugganpaper.pdfCAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-10090999253840572722013-04-09T16:18:33.565-04:002013-04-09T16:18:33.565-04:00Well, when on one hand you have a ton of both theo...Well, when on one hand you have a ton of both theoretical and empirical papers documenting the transformation of the labor market during the SBTC and on one hand you have the Card&DiNaro (and maybe a few more) simply raising a few questions what do you expect people to believe? Read Acemoglou (1999), read Caselli (1999), read Autor's report for the Center for American Progress (hardly a conservative institution here: http://noahpinionblog.blogspot.com/2013/04/a-world-without-macroeconomists.html#comment-form<br />read even the first paper you cited by Autor, Dorn, and Hanson here: http://economics.mit.edu/files/8763<br />All of them are bursting with empirical evidence!CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-69759148473039274552013-04-09T16:06:13.541-04:002013-04-09T16:06:13.541-04:00Give us your call about Thatcher legacy.Give us your call about Thatcher legacy.Anonymousnoreply@blogger.com