Friday, March 23, 2012

Thursday Roundup on Friday (3/21/2012)

Whoops! Forgot to post the weekly roundup yesterday. Here y'all go!

1. Paul Krugman notes that the stock market has been doing great under Obama, a fact that has (of course) been lost on Republican hackonomists like Larry Kudlow who tend to blame liberal politicians for every dip in stock prices.

2. Robin Hanson reports on an experiment that shows that people do not learn optimally. Learning is one of those areas where I feel that experimental economics may have a huge and game-changing impact (if people pay attention to the data).

3. Matt Yglesias really lets Ben Bernanke have it. I don't agree with this criticism, though, since I believe that the Fed chairman is not a dictator and must at least partially bow to the wishes of the board of governors (which includes Plosser, Lacker, Kocherlakota, etc.).

4. Simon Johnson is of the opinion that although "populism" is often a dirty word, American populism has often proven beneficial for the country's institutions...

5. Robert Waldmann makes an analogy between microfoundations and the spurious theories that used to be known as "organic chemistry." I disagree, as I've said, but I always love Waldmann's histories-of-bad-science.

6. Tyler Cowen utters the phrase "That is from Scott Sumner, Q.E.D.", thus egregiously violating my First Principle For Arguing With Economists. Bad Tyler! Bad! (smacks wrist)

7. Nick Rowe asks: What on Earth are SRAS shocks? I also have always had trouble explaining these in class. Greg Mankiw has one answer.

8. Mark Thoma has an excellent conjecture about why prices aren't moving as much as output gaps say they should be. Go read it. Incidentally, Thoma is not too worried about labor hysteresis. Greg Ip, however, is.

9. A homeless girl turns out to be a science genius. I see stuff like this all the time. My brother-in-law grew up in a trailer with a teenage single mom, and he's now completing his PhD. My friend grew up poor in rural Northern California with a drug-abusing single mom, and now she's a neurosurgeon. There is so much human capital hidden in the poverty-stricken backwaters of America, it's absurd. And yet I still read pronouncement after smug pronouncement from guys like Bryan Caplan, declaring that success is all about I.Q., and that it's no use trying to increase economic opportunity because everyone is already just where their I.Q. dictates they should be. What a load of poppcock, rubbish, stuff & nonsense. Okay, /rant.

10. Martin Wolf with a masterly article on interest rates and global capital flows. I love Martin Wolf. I also love the word "masterly." Luckily, the two often go together.

11. Bill McBride shows that stocks have been flat since 1999. However, I would like to point out that stocks did considerably better in 1982-2012 than in 1952-2012 (go check this yourself, I'm too lazy to make a graph).

12. Matt Yglesias is in his element when talking about land use.

13. Tyler Cowen links to a Bob Hall paper that shows that DSGE is not the only way to go when making microfounded models. Very important!

14. Cowen also links to some Mike Mandel research showing that much of the "productivity gains" in U.S. manufacturing over recent decades haven't been the type of gains we'd most like to see.

15. Cowen is on a roll, linking to a paper that shows that government transfers never seem to go down, meaning that government purchases (i.e. the actually useful stuff) have to fall more and more in order to balance the budget after each cyclical downturn. Conservatives to the rescue? Only if they can embrace Peter Thiel Conservatism, and make a mental distinction between govt. purchases and transfers!!

16. JW Mason has a great explanation of how trade balances adjust (or don't adjust). Basically, the nominal exchange rate can change, the real exchange rate can change, and/or the price level can change. And these have very different consequences. I think I would have liked to have been Mason's TA for intro macro...


  1. #3

    Alan Blinder, former Fed vice president, has said Greenspan ran the Fed like a dictatorship. The staff would get upset if out-of-bounds topics and ideas were brought up. My view is that we're getting the policies Bernanke wants.

  2. Anonymous11:24 AM

    please write an extended and much needed blog post on point 9....

  3. Noah: "I also have always had trouble explaining these in class."

    I'm pleased/relieved to hear I'm not alone, and that it's not just me!

  4. # 3 ties back to the Macro wars.

    While Krugman likes to make it -him-vs-them, there not 2 camps there are really 3.

    To Bernanke's credit, the "new framework" which democratizes the forecasts basically relegates the hawks to a minority. that way the market can look at the "median" forecast and see that the 3 stooges are well into the minority.

    That said, it should have been done 4 years ago. moreover, he has not been more forceful ... he has not even achieved a 7-3 vote, the last one was 9-1. If 3 people are not dissenting he is not easing enough.

    I think the main issue is his leadership style. quants/geeks often make poor managers and leaders because they assume eveyone will be persuaded with facts when in fact there are lot of side objectives at play, and some people are just born chest-beaters.

  5. I agree about #9, it is more important as an idea than it looks as it directly feeds into questions about class stratificaiton. If Caplan is correct then class stratification is a logical outcome of there being a "fair playing field".

    Of course, once you have a good set of counter-examples to the strong version of Caplan's claim then the situation is much less clear.

  6. Anonymous1:26 PM


    Right, Kocherlakota made Bernanke shrink the Fed's balance sheet in 2009 and raise the discount rate in 2010 against Bernanke's will -- (the so-called, Ben is a big wet pussy argument). Right. Sounds extremely farfetched to me.

    If you are right, then where are you castigating the Obama admin for not making those Fed appointments/making recess appointments?

  7. Yglesias is probably wrong about land use deregulation increasing tax revenues: as if that was the only thing worth valuing.

    Zoning: A Reply To The Critics
    Bradley C. Karkkainen's article from the Journal of Land Use and Environmental Law. A scholarly examination of the arguments for and against zoning. It provides strong rebuttals to libertarian positions, a plausible explanation for the value of zoning and why it is so prevalent (Houston is the ONLY major US city without zoning.)

  8. DavidN8:42 PM

    Of course Caplan is wrong. IQ isn't static over generations. If that was the case by right the aristocracy should still be ruling over us poor unintelligent peasants. (Or more generally humans would never have evolved from it's primitive state)

    Second Anon's motion. Would love to see a post on no. 9.

  9. Of course the stock market is up, it had fallen through the floor in early 2009.

    So does Obama get credit? Pleeaazzee.

  10. So does Obama get credit? Pleeaazzee.

    Of course not (thought maybe a little bit!). But the hackonomists are always saying that every stock market dip is due to Democrats, so by their (bad) logic we should attribute the stock boom to Obama.

  11. save_the_rustbelt said...

    " Of course the stock market is up, it had fallen through the floor in early 2009.

    So does Obama get credit? Pleeaazzee."

    I love how the world starts for right-wingers in 'early 2009'.