tag:blogger.com,1999:blog-17232051.post8544451860806653239..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: The perils of PhlogistonomicsNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger69125tag:blogger.com,1999:blog-17232051.post-7122276698842498382012-10-02T17:32:55.638-04:002012-10-02T17:32:55.638-04:00I think it's simply a fact that the Japanese a...I think it's simply a fact that the Japanese are preternaturally gifted in their aesthetic sense.<br /><br />And no, I'm not Japanese.Saturoshttps://www.blogger.com/profile/01914831276101897944noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19686466447196964542012-09-26T15:14:40.171-04:002012-09-26T15:14:40.171-04:00If you read Griliches or anything that Hulten has ...If you read Griliches or anything that Hulten has recently done, you'll realize that the residual quandary is nothing new...<br /><br />And insofar as capital and depreciation, consider Huang and Diewert.<br /><br />Either way you try to go about measuring technology and its impact on the economy, it's a tough road. You either measure everything else, figure out their impacts, and assume the rest is due to tech (residual method). This only works when prices are directly representative of the marginal products or utility.<br /><br />Or, you try to measure "technology" directly and assign a market value to it... and then figure out its impact on the economy.<br /><br />Both measures assume that GDP is well-measured, as it is the outcome in both scenarios.<br /><br />Basically, this is a super duper measurement problem. And if anyone has a solution, I would more than love to hear it.<br /><br />Now, back to my patent/publication and citation data...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-40089915636697049932012-08-15T04:06:25.855-04:002012-08-15T04:06:25.855-04:00Having strange units does not imply to be useless,...Having strange units does not imply to be useless, take the Boltzmann constant as an example:<br />1.3806503 × 10-23 m^2 kg s^-2 K^-1<br /><br />what is strange here is that, if I understood well, TFP isn't just a constant introduced to bridge the variables in the equation, but it is a variable in its own, and it changes according to time, but I wasn't able to understand how it is the path of decline (I looked also here for that: http://en.wikipedia.org/wiki/Solow_residual but it didn't help).<br /><br />I mean I didn't understand if TFP goes up and down following some random (at least as far as we know now) pattern or, given a certain "country", TFP tends to decrease during time inexorably?Anonymoushttps://www.blogger.com/profile/14377623855540455028noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-35155467940861229042012-08-12T13:13:06.827-04:002012-08-12T13:13:06.827-04:00Good point! And no, they don't.Good point! And no, they don't.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23960075534604805062012-08-12T12:27:08.414-04:002012-08-12T12:27:08.414-04:00"I argue that calling TFP "technology&qu..."I argue that calling TFP "technology" biases us toward thinking that e_t is truly random."<br /><br /><br />Do economists really view technology as "random"? What about Moore's law? Is predictable innovation not labeled technology but rather "Kapital" precisely because it is predictable?Stevehttps://www.blogger.com/profile/11574596367875858439noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-30075711285542762402012-08-12T08:29:51.055-04:002012-08-12T08:29:51.055-04:00Sorry to be pedantic Nemi, but the correct term fo...Sorry to be pedantic Nemi, but the correct term for the profession of that field would be "historians of economic thought", not "economic historians".Blue Aurorahttps://www.blogger.com/profile/02044362251868221897noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-12107614086860627722012-08-10T11:33:39.232-04:002012-08-10T11:33:39.232-04:00Technically, it truly just is the difference betwe...Technically, it truly just is the difference between our predicted value of GDP and the actual measured value, so "ignorance" is about as good a term as any, and arguably better than "technology."<br /><br />I recall a talk where a speaker was making a big deal about how large TFP was during the Great Depression and making a big deal about how this showed that the Great Depression wasn't such a bad period after all, but one with unprecedented amounts of technological growth. I was in a pissy mood, so just to be a smart alec I said, "Well, since TFP is just the error term in a regression of GDP on the factors of production, couldn't you just as easily say that our model to predict GDP just especially sucks when used over the period of the Great Depression? That, whatever it is you're leaving out of your equation, just happened to be very very important during that time period?<br /><br />But hey, if you're an economist, which would you rather say, "Society was filled with innovation during these years!" or, "Our model is especially inaccurate during this time period!"Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85741916007737881772012-08-10T11:16:53.618-04:002012-08-10T11:16:53.618-04:00I don't think calling it "unitless" ...I don't think calling it "unitless" is quite right. Technically, you can write out it's "units" as some combination of other things, like capital, labor, and whatever else you include in your production function (which need not be limited to K, L, etc). I think the more correct answer would be "it's units are a nonsensical mix of the other things in the equation and dollars that depends on what exactly you included in your equation." ie, it varies and can't be described in a way that makes sense to any normal person.<br /><br />Rather than saying "it's unitless," I think the better answer is, "it's units are inconsistent, nonsensical, and not very meaningful so we've never bothered to name them and don't ever talk about them."<br /><br />But, if we wanted to, I'm sure we could name them, just like we did with the "Util" for the units of utility. Heck, in keeping with the theme of this post, I say you name it a "phlog."<br /><br />I think that would actually help you reach your end-goal. If Every paper had a sentence like, "in our simulation, we add shocks with a magnitude of 1 phlog," it would become even clearer just how silly the whole thing can be at times...or maybe you'd have to use log-phlogs to make the math work out.<br /><br />I like that...log-phlogs. Of course, in my head, I hear it being said in the same duck-voice as "Aflac."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-15794851299628135702012-08-10T10:49:12.957-04:002012-08-10T10:49:12.957-04:00I was going to write something about what's be...I was going to write something about what's being lost in the translation from econ-speak to layman explanations via the whole natural log / exponent thing. Glad someone else mentioned it. That being said, I think Noah was right to skip over it. Introducing that math probably adds more confusion than clarity for many readers...and it doesn't even necessarily fix all the problems anyway. It's better, but still not terribly satisfying.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-11683483377810066162012-08-10T09:14:52.450-04:002012-08-10T09:14:52.450-04:00--To say phlogiston is reducing potential is to re...--To say phlogiston is reducing potential is to redefine it so far from its original meaning as make it meaningless.--<br /><br />I have trouble expressing myself. I was spending so much time thinking about that final thought, that i finally just posted it, before the topic thread died. I guess it didn't come out the way I meant.<br /><br />My point in my reply was two-fold - That the phlogiston theory was based on superficial observations and was refuted by analytic work. Secondly, that the proponents of the theory stubbornly held on to it, even in the face of mounting contrary evidence. The theory had falsifiable predictions that were, well, falsified. But some scientists couldn't let it go.<br /><br />Like I said, I don't know anything about economics. I'm not saying that current economic theories are based on superficial observations that often are refuted by more careful analytic work, or that some economists are holding on to their theories far too long in the face of contrary data. I was just pointing out, the pholgiston theory was like that; interesting that an economist would refer to it... Maybe I was being more snarky/sarcastic/trying to be funny/ than I have a right to be.<br /><br />As to the quote. I was just parenthetically thinking that it's ironic that you should say <br /><br />'"phlogiston" was more like a residual - it was just "whatever makes stuff burn" (the error was in thinking it had mass)'. <br /><br />Because one of the contortions scientists went through trying to save the theory was to say that phlogiston had no mass. <br /><br />One might say that with that tweak to the theory, they came oh so close to getting to the truth- but, the fact is, they stubbornly refused to take the next step of thinking of phlogiston as a residual. They always thought of it as an element that was given off; never as the potential to combine with an element in the air.<br /><br />It occured to me that your definition was sort of like the contortions those scientists might have done, trying to save the theory, taken to an illogical extreme (You have defined phlogiston as the opposite of its original meaning). Now, I know that you are not a proponent of the theory and weren't trying to save it. <br /><br />But, I had the thought that if someone were trying to save some legitimacy to the theory by redefining its terms the opposite of their original meaning, that would make defining things pretty meaningless. Does that make sense? <br /><br />Again I think of economics. If it turns out that austerity does not help an economy expand out of a recession (I don't know, just a hypothetical) Anyway if careful analytic work were to show that austerity does not help an economy expand out of a recession, and then someone came along and said "I wasn't wrong. 'Expansionary austerity' is just a phrase for 'whatever makes the economy expand'" - wouldn't you say that makes defining austerity pretty meaningless? The indirect point of my statement was to ask - Do economists ever do that? Scientists in my field (chemistry) do.<br /><br />I agree with the point that Phlogiston as an explanation for the residual (combustibility) was wrong-headed. Proponents focused too much on the Thing (that the capacity to burn was some Physical Entity within materials) and not enough on the concept. Just like in economics, some might concentrate too much on some made up entity that they don't even know has any affect on TFP (like culture?) (think I'll shut up here)<br /><br />Thus I also think that phlogistonomics is a good term. Forgive my rant. Its just that this blog was recently on the topic of analytic work, the nature of scientific thought, etc and I could not help myself.Zaerhttps://www.blogger.com/profile/04144652173329932870noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-27674690549780797742012-08-10T01:33:35.802-04:002012-08-10T01:33:35.802-04:00To say phlogiston is reducing potential is to rede...<i>To say phlogiston is reducing potential is to redefine it so far from its original meaning as make it meaningless.</i><br /><br />Why? You can just say "Phlogiston is the word for whatever is used up in combustion." You can easily establish experimentally that <i>something</i> gets used up in combustion. Then you just look for what the phlogiston is. We still have a word for "lightning" even though we subsequently discovered that it's a manifestation of the more general phenomenon of static electricity. So if people want to use the word "phlogiston" to mean "reducing potential in combustion reactions", I say let em.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74606123014138713562012-08-10T01:28:19.247-04:002012-08-10T01:28:19.247-04:00Julian, do you ever write comments that do not con...Julian, do you ever write comments that do not consist entirely of links to your own blog posts? I'm just asking out of curiosity.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52634459845313108782012-08-10T01:25:26.115-04:002012-08-10T01:25:26.115-04:00I never said residuals were bogus! The problem is ...I never said residuals were bogus! The problem is when the labels we assign the residuals cause us to assume behavioral properties of the residuals for which we really have no evidence...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-90932010677178717782012-08-10T00:29:15.391-04:002012-08-10T00:29:15.391-04:00I put together a little piece on my view on the Le...I put together a little piece on my view on the Lesser Depression:<br /><br />http://socialmacro.blogspot.com/2012/08/the-balance-sheet-recession-hypothesis.htmlAnonymoushttps://www.blogger.com/profile/14235846531323511190noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-449360503156696232012-08-10T00:10:20.522-04:002012-08-10T00:10:20.522-04:00Just be careful, not every residual is bogus. Ferm...Just be careful, not every residual is bogus. Fermi postulated the neutrino as a residual and every physicist knows about the curve of binding energy: all of nuclear physics was based on residuals. Modern epigenetics is built on the residuals after one subtracts genetics.<br /><br />Granted, no one labeled neutrinos "culture" or "technology".Kaleberghttps://www.blogger.com/profile/05283840743310507878noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-53389053355125764062012-08-09T22:25:45.042-04:002012-08-09T22:25:45.042-04:00Did I just offend you, Noah, or were you just kidd...Did I just offend you, Noah, or were you just kidding? I'm confused...Blue Aurorahttps://www.blogger.com/profile/02044362251868221897noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-45550186897816008902012-08-09T21:30:43.567-04:002012-08-09T21:30:43.567-04:00Impassive calm...Impassive calm...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-56122714730131905462012-08-09T21:25:39.105-04:002012-08-09T21:25:39.105-04:00I have wondered whether I can find two other thing...<i>I have wondered whether I can find two other things and label them "factors of production"- let's say toilet paper and oranges - and by plugging these amounts into the Solow Model you can actually create a similarly predictive residual?</i><br /><br />You need to find two things that, together, receive 100% of GDP in the form of income. Try "people over 40" and "people under 40".Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-57091034461358312222012-08-09T21:21:56.159-04:002012-08-09T21:21:56.159-04:00Isn't this story consistent with a scenario wh...<i>Isn't this story consistent with a scenario where higher than average rates of innovation are followed by lower than average rates until the next technology shock?</i><br /><br />I don't think so, no. Each improvement should still be permanent in this scenario. I think what you're envisioning is a unit-root process with serially correlated errors (and drift). Think carefully about the "trend", or "drift" in the time-series, and what that represents, and how it happens.<br /><br /><i>Finally, to be fair, Kydland and Prescott's definition of technology is much broader.</i><br /><br />Well, this is kind of what I was talking about in the original post...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85218811174678319982012-08-09T19:37:57.079-04:002012-08-09T19:37:57.079-04:00No, the model tells you a whole bunch of things:
...No, the model tells you a whole bunch of things:<br /><br />a) That contrary to Harrod and Domar's prediction, a market economy will not drift to ever-increasing unemployment or capital underutilization unless it is "fine tuned". <br />b) that politicians are (semi) lying to you when they say that cutting taxes will lead to faster growth (it won't in the long-run, and depending on what they do with spending it may reduce the level of income). <br />c) that technology is the only engine of long-run growth, and that any growth miracles (Asian or otherwise) should come to an end.<br />d) that, in the long-run, the size of population is irrelevant (an argument that rebuts the anti-immigration hysteria and the notion that immigrants are depriving Americans of jobs). What matters is population growth.<br />e) that increasing saving today will generate higher consumption for future generations if the marginal product of capital exceeds the sum of the rates of depreciation, TFP, and population growth, and lower it otherwise. Countries can therefore check to see where they fall.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-60387670182362613562012-08-09T19:14:09.802-04:002012-08-09T19:14:09.802-04:00I don't think that anyone is trying to force a...I don't think that anyone is trying to force anybody else to change. If people like to tax-evade, park on the side-walk or double-park because it is convenient, bribe officials (or, if they are politically connected, threaten that they will send them to some remote village) to expedite their case, and ban private universities because the private sector is the big bad wolf and education should not be commercialized (examples pertinent to Greece), then they should have every right to do so. However, they should also accept the consequences of their decisions, and not demand from those who have made different choices to subsidize their income.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80685010084221021592012-08-09T19:02:48.768-04:002012-08-09T19:02:48.768-04:00An excellent explanation indeed! (lol)
I did some...An excellent explanation indeed! (lol)<br /><br />I did some quick math and I believe you are right, obsolecense does not make a difference if it is conditional on new innovation. However, I want to give this anothe shot. I am thinking of Helpman's "General Purpose Technologies" (e.g., the transistor) and Brian Arthur's description of how technology advances in "The Nature of Technology". The idea is that major discoveries that occur at random intervals create a new set of technological opportunities, and generate a wave of inventions that use it as a building block. Arthur describes this phase as a deepening process, but argues that this process has diminishing returns. As more opportunities are exploited, fewer remain to be discovered. That is, until the next GPT comes along. Isn't this story consistent with a scenario where higher than average rates of innovation are followed by lower than average rates until the next technology shock?<br /><br />Finally, to be fair, Kydland and Prescott's definition of technology is much broader. It includes the entire economic environment. Specifically, in the paper they mention investment tax credits and accelerated depreciation rates. Such policies, and therefore their effect, are usually temporary.CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72974583638292374422012-08-09T17:56:13.424-04:002012-08-09T17:56:13.424-04:00Really, Noah? I don't think that's true, N...Really, Noah? I don't think that's true, Noah. :DJolly Greenhttps://www.blogger.com/profile/09631364433925344569noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-87971249077559903032012-08-09T17:39:41.575-04:002012-08-09T17:39:41.575-04:00Good post Noah! I've been thinking about this ...Good post Noah! I've been thinking about this ever since I was presented with the Solow Residual in school. I have wondered whether I can find two other things and label them "factors of production"- let's say toilet paper and oranges - and by plugging these amounts into the Solow Model you can actually create a similarly predictive residual? Essentially concluding that capital and labor move around the same way other basic commodities do and there's nothing this model tells us about economic growth, except maybe we should invest in more oranges and toilet paper.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74292227185103558902012-08-09T14:47:42.520-04:002012-08-09T14:47:42.520-04:00"economics is a system of differential equati..."economics is a system of differential equations"<br /><br />Economics is a system of first order differential equations where everything interesting is in the imaginary parts of the eigenvalues of the Jacobian.Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.com