tag:blogger.com,1999:blog-17232051.post6272218321819753549..comments2024-03-18T22:32:52.802-04:00Comments on Noahpinion: New Quartz article: A battle for the soul of macroeconomicsNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-17232051.post-30920405736742060222013-12-03T17:20:46.207-05:002013-12-03T17:20:46.207-05:00B.S. ...Really??? You get paid by one president an...B.S. ...Really??? You get paid by one president and you criticize the other...even suggest that he has an ulterior motive behind his change of views! So, explain to us how others have ulterior motives and you don't ... and please save the DSGE model to explain this for another top-tier academic journal publication.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-81466460661530777342013-11-28T00:22:01.608-05:002013-11-28T00:22:01.608-05:00FYI
From Stephen Williamson:
Miles Kimball may h...FYI<br /><br />From Stephen Williamson:<br /><br />Miles Kimball may have been the first New Monetarist (actually, if you read the paper, he may have been the first New-Keynesian; he's basically outlining the basic NK model in 1995). Fortunately for us, Miles wants to blog, which is guaranteed to increase the average quality of discourse in the medium.<br /><br />at: http://newmonetarism.blogspot.com/2012/06/more-on-unconventional-open-market.html <br /><br />I like seeing this, because one of the things Stephen and others will say or imply is that Krugman, and other critics, just don't know the models and literature of their macro (which is thee macro). They don't know what they're talking about. And I often wonder myself, could there be a there there in their literature that I don't know (and no one seems to be able to make clear to non-specialists in blogs and articles). It's what drove me to go through Walace's 1981 AER with a fine tooth comb thinking about each equation. Unfortunately, while that helped a lot, it was just the beginning for this stuff.<br /><br />In any case, it's great to see critiques from people who really do know this literature like specialists, and this may include Simon Wren Lewis. Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-71004848509854658032013-11-27T23:01:00.166-05:002013-11-27T23:01:00.166-05:00"Scientifically, Freshwater macroeconomics pl..."Scientifically, Freshwater macroeconomics plays an important role in laying out how the world should be if everyone thought like an economist."<br /><br />I know the article is already long, and there's a desire to not make it too detailed and unflowing for laypeople, but it's so much more than this. More like, thinks like an economist-superman-cyborg from the future – 100% of all public knowledge in their brains, 100% expertise in every area and sub area known to man, and the ability and willingness to do any analysis, no matter how extensive and difficult, perfectly with zero time and effort.<br /><br />Here's Paul Krugman, from his 1994 book, Peddling Prosperity, page 208:<br /><br />Does this argument sound convincing? It did (and still does) to many economists. Akerloff pointed out, however, that it depends critically on the assumption that people do something that they are unlikely to do in real life: take account of the implications of current government spending for their future tax liabilities. That is, the claim that deficits don't matter implicitly assumes that ordinary families sit around the dinner table and say, "I read in the paper that President Clinton plans to spend $150 billion on infrastructure over the next five years; he's going to have to raise taxes to pay for that, even though he says he won't, so we're going to have to reduce our monthly budget by $12.36."<br /><br />...the truth is that even families of brilliant economists don't have conversations like this. No, the point is that the effort isn't worth it. If a family has arrived at a sensible rule of thumb for deciding how much to spend, trying to improve on that rule by making sophisticated predictions about the future implications of government spending will improve the families decisions so little that it isn't worth the investment of time and attention.Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-48235203996528290582013-11-27T18:32:48.536-05:002013-11-27T18:32:48.536-05:00"K fired these economists because they were t..."K fired these economists because they were two-timing the Fed with other gigs in the UK."<br /><br />I don't think that's correct. Ellen is not two-timing anyone, and with Pat I don't think his job with UCL was an issue for the Bank.<br /><br />"The reason why Andolfatto and Williamson take up their case is no surprise either. They are doing their bit for their employer JBullard."<br /><br />I can't speak for David, but in my case that's B.S.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-49654650817416236812013-11-27T12:40:16.173-05:002013-11-27T12:40:16.173-05:00Cutting wages really doesn't solve the busines...Cutting wages really doesn't solve the business man's problem of lower demand. What is he going to say: "Here, we've cut your wages 50%, do a half assed job." Now he's got the same staff sitting around half idle. <br /><br />Lowering wages makes things a lot worse for the worker too. They are still stuck at work full time and can't look for a side job to try and make enough money so they can eat, sleep indoors and other fantastic luxuries.<br /><br />When an economist starts going on about sticky wages being a thing, it makes the Kepler exoplanet mission look worthwhile. Think of it as our search for the economists home world.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-75305938253528209622013-11-27T01:42:01.275-05:002013-11-27T01:42:01.275-05:00hehhehNoah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-55805439479095014302013-11-27T00:34:06.145-05:002013-11-27T00:34:06.145-05:00Great Moments in Academic History:
5th century BC...Great Moments in Academic History:<br /><br />5th century BC: Greek mathematician Hippasus is drowned at sea by fellow Pythagoreans for proving that the square root of 2 is an irrational number, thus averting a theoretical crisis<br /><br />2013: The failure of Fed policy to reduce unemployment according to academic macro models was solved by firing the Minnie Fed researchers who pointed this outEcomediannoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-42195575123138454702013-11-26T21:42:13.969-05:002013-11-26T21:42:13.969-05:00Given Minnesota Macro is such a hotbed of Hallucin...Given Minnesota Macro is such a hotbed of Hallucinogenic Business Cycle Theory (HBC) I thought this might be a good time to review the Wikipedia entry on HBC:<br /> <br />“Hallucinogenic Business Cycle Theory (or HBC Theory) is a class of psychedelic macroeconomic models in which business cycle fluctuations to a large extent can be accounted for by imaginary (in contrast to reality based) shocks. (The four primary economic fluctuations are the gold rush, the bubble (deviation from trend), the counterintuitive movement, and mass hysteria (also known as “the panic” in classic terminology).) Unlike other leading theories of the business cycle, it sees recessions and periods of economic growth as an artificial response to illusory changes in the hallucinatory economic environment. That is, the level of national output necessarily minimizes the irrationally expected utility, and government should therefore concentrate on pretending to make short-run policy changes and intervene through random statements of make-believe fiscal or monetary policy designed to actively and whimsically whip the general public into a false sense of security. <br /><br />According to HBC theory, business cycles are therefore “hallucinogenic” in that they are based on complete fantasy, and are the most inefficient possible operation of the economy, even given its seemingly perpetually unviable nature. It differs in this way from other theories of the business cycle, like Keynesian economics and Monetarism, which see asset bubbles as being untenable, and recessions as having tangible causes, which lead to what are known as “real-world repercussions.”<br /> <br />An important principle underlying HBC Theory is the principle of irrational expectations. Irrational expectations theory defines this kind of expectations as being identical to a wild guess about the future (a preposterous forecast) that systematically ignores, or thoroughly misinterprets, all of the available information. However, even with an unlimited number of additional assumptions, this theory of expectations indetermination still makes the prediction that human behavior will still be completely capricious and herd like. Thus, it is assumed that outcomes that are being forecast differ arbitrarily or unpredictably from the market disequilibrium results. As a result, irrational expectations differ substantially from disequilibrium results. That is, it assumes that people systematically make errors when predicting the future, and deviations from common sense happen consistently. In an economic model, this is typically modeled by assuming that the expected value of a variable is equal to a spontaneous error term representing the role of ignorance and mistakes plus the value of some completely irrelevant piece of information (such as the price of tea in China).” Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23555249453546105142013-11-26T21:34:49.013-05:002013-11-26T21:34:49.013-05:00Here's how this shit went down: K fired these ...Here's how this shit went down: K fired these economists because they were two-timing the Fed with other gigs in the UK. Normally such stuff is overlooked or politely turned down but K chose to fire there ass because of personal reasons. The reason why Andolfatto and Williamson take up their case is no surprise either. They are doing their bit for their employer JBullard. You see, sooner or later some DSGE honcho is going to take up the mantle of the Fed chair. A & W are just making sure that Bullard and not Kocherlakota is the most eligible bachelor. Someone please call it for what it is...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-60146430051249986832013-11-26T21:15:56.477-05:002013-11-26T21:15:56.477-05:00Some people predicted high inflation, some predict...Some people predicted high inflation, some predicted low inflation. The people who predicted low inflation were predicted correct. Those who predicted high inflation pretend like they were never wrong. That's very dishonest. <br /><br />Kocherlakota was one of the few who changed his mind in the face of new evidence, so good for him.Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52850796181754788252013-11-26T18:39:16.230-05:002013-11-26T18:39:16.230-05:00From a distance this all sounds like it comes down...From a distance this all sounds like it comes down to something pretty simple. Some economists had models that forecast huge inflation would result from the FED policy following the financial crisis. The huge inflation didn't happen. Some other economists think those economists haven't properly examined their models to see why they were wrong.<br /><br />I say this resolves itself. it takes time to work out the kinks in a model. There's no way these smart people won't make some changes to their models in good time. And they will make changes they think make sense, not those proposed by their critics. Therefore the underlying problem will happen again - someone's models will be wrong and blah blah blah...<br /><br />It all seems a little too inside baseball and hard to see how its more than much to-do about nothin'.<br /><br />They were wrong - happens all the time. It's not like there's a great alternative. No one has the perfect model yet. The one thing we know for sure is that all the models are far short of complete.<br /><br />Danhttps://www.blogger.com/profile/15136541075745913165noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58177269197206143842013-11-26T15:30:15.980-05:002013-11-26T15:30:15.980-05:00Hey Noah
You should write a column on the traditio...Hey Noah<br />You should write a column on the tradition of tenure in colleges and universities. As I see it, its somewhat unnecessary, and leads to adverse selection. The good ones do not need it - especially today, when a bright researcher is recognized without being shackled by the chin-strokers, looking to maintain status quo-. Kocherlakota has started a trend I think. Som Dasguptahttps://www.blogger.com/profile/11848089230329819807noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21508523623632679632013-11-26T14:10:17.418-05:002013-11-26T14:10:17.418-05:00I read the paper that Professor Krugman linked to ...I read the paper that Professor Krugman linked to on his post. My god. What a naïve and silly interpretation of cataclysmic events in 2008. Can you imagine Chari/Kehoe running the Fed instead of Bernanke in 2008. Makes me thankful for having Bernanke. And trust me, I am no Bernanke fan. I think he helped created the bubbles to start with. But at least he has learned. These people should not be in policy circles. They deserve to be fired from the Fed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20003709563867430262013-11-26T13:55:44.653-05:002013-11-26T13:55:44.653-05:00Well, they are very smart and not useless *people*...Well, they are very smart and not useless *people* (or even useless *economists*), but they are useless *as advisers to NK*, if they can't spot his mistakes.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-55534796745415322062013-11-26T12:05:40.746-05:002013-11-26T12:05:40.746-05:00Nick ... really. Nick ... really. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58869184192092325002013-11-26T11:56:19.515-05:002013-11-26T11:56:19.515-05:00"Proof please"
Res ipsa loquitur "Proof please"<br /><br /><i>Res ipsa loquitur</i>Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-60421344977261747482013-11-26T11:41:36.746-05:002013-11-26T11:41:36.746-05:00that's why he is firing his useless advisers
...<i>that's why he is firing his useless advisers</i><br /><br />Dear lord, that's by far the strongest language I've ever heard you use!!Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31727017399775650042013-11-26T11:34:09.287-05:002013-11-26T11:34:09.287-05:00That kind of thing happens a lot, but which specif...That kind of thing happens a lot, but which specific arguments are you referring to?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20625921566305292152013-11-26T11:33:09.724-05:002013-11-26T11:33:09.724-05:00I agree...I love real analysis. It's probably ...I agree...I love real analysis. It's probably the most fun math out there (or maybe differential geometry).Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-25300678453196082032013-11-26T11:09:39.056-05:002013-11-26T11:09:39.056-05:00While I agree that Real Analysis is probably not s...While I agree that Real Analysis is probably not so critical as to be a prerequisite for certain graduate economics study, it is certainly useful in its own way and should at least be a strong suggestion.<br /><br />In any event, it was the first math course that challenged me to any degree at all. It was really useful to finally be challenged, as it got me to think more deeply about mathematics and proofs and *how to think*.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31837114567172708072013-11-26T11:05:13.920-05:002013-11-26T11:05:13.920-05:00-1
"Both saltwater and freshwater utterly fa...-1<br /><br />"Both saltwater and freshwater utterly failed before the crisis" Proof please. Bias and preconceptions not accepted. <br /><br />The only thing more useless than economists, it seems, is you.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-35349621524315596782013-11-26T09:50:28.937-05:002013-11-26T09:50:28.937-05:00One criticism I would add is that many people you ...One criticism I would add is that many people you would call "saltwater" make policy arguments along lines which are not at all present in New Keynesian models. In particular, in the baseline NK model Inflation more or less only plays a role because it increases firms discount of future deviations from their optimal price and thus induces them to set prices that are better today. Most policy saltwater people make completely different arguments as to why inflation should be higher in a recession but refer to NK models as a justification.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-71294689192209039582013-11-26T08:21:28.372-05:002013-11-26T08:21:28.372-05:00I sense a creep - slow, but nevertheless encouragi...I sense a creep - slow, but nevertheless encouraging - in the thought process of our Minnesota-Chicago friends (including Steve Williamson at ustl). All this talk about DNA and genes are analogies (so disliked by Steve Williamson, by is own pronouncement!) crafted to slowly change an indefensible position. It good, since horseshit slowy finds its natural place.<br /><br />In listening to this debate from a 30k feet view, I am reminded of Paul Samuelson's comment on the usefulness of the latter-day-Chicago/strong form EMH for monetary policy. Here is what Samuelson said:<br /><br />"....But Milton Friedman had a big influence on the profession -- much greater than, say, the influence of Friedrich Hayek or Von Mises. Friedman really changed the environment. I don't know whether you read the newspapers, but there's almost an apology from Ben Bernanke that we didn't listen more to Milton Friedman.<br /><br />But anyway. The craze that really succeeded the Keynesian policy craze was not the monetarist, Friedman view, but the [Robert] Lucas and [Thomas] Sargent new-classical view. And this particular group just said, in effect, that the system will self regulate because the market is all a big rational system.<br /><br />Those guys were useless at Federal Reserve meetings. Each time stuff broke out, I would take an informal poll of them. If they had wisdom, they were silent. My profession was not well prepared to act."<br /><br />Read the whole interview here. Its a peek into the beautiful mind of the foremost mind in economics since Keynes.<br /><br />http://www.theatlantic.com/politics/archive/2009/06/an-interview-with-paul-samuelson-part-one/19572/<br />Som Dasguptahttps://www.blogger.com/profile/11848089230329819807noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-9325665042522887082013-11-26T07:23:28.034-05:002013-11-26T07:23:28.034-05:00OK. Maybe that was a little strong. I think he has...OK. Maybe that was a little strong. I think he has sort of seen the light, but as late as June 2013 he still wasn't getting it. But maybe he is starting to get it now, and that's why he is firing his useless advisers.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-47626275690366478142013-11-26T07:18:10.892-05:002013-11-26T07:18:10.892-05:00Noah: don't be too quick to assume that NY has...Noah: don't be too quick to assume that NY has seen the light. Because in June 2013 he presented a model in which "Excess labor supply pushes up nominal wage growth.", and so a decrease in AD, which causes unemployment in the short run when nominal wages are sticky (OK so far) causes ***higher*** inflation in the long run when nominal wages are flexible.<br /><br />His model is here: http://www.minneapolisfed.org/news_events/pres/speech_display.cfm?id=5103<br /><br />My critique of that model is here: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/06/the-usefulness-of-as-ad-an-example.html<br /><br />On the other hand, he might have fired his advisers for letting him say something so totally and obviously daft in public.<br /><br />"I thank participants in a FRB-Minneapolis bag lunch for comments."<br /><br />He shouldn't be thanking them. He should be cursing them, for not pointing out the massive and obvious flaw in his model, and letting him make a fool of himself in public (again).<br /><br />This whole thing is really sad. Because he's clearly a really bright guy, who is really trying to do the right thing. But nobody ever taught him basic macro, and his advisers have been totally useless.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com