tag:blogger.com,1999:blog-17232051.post1521228646825632543..comments2024-03-18T22:32:52.802-04:00Comments on Noahpinion: Reinhart-Rogoff vs. Bordo-Haubrich (with grandstanding by John Taylor)Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger66125tag:blogger.com,1999:blog-17232051.post-84853014043727119982012-10-29T16:47:47.355-04:002012-10-29T16:47:47.355-04:00I was a little grumpy with my wording, sorry
1. I...I was a little grumpy with my wording, sorry<br /><br />1. In the meanwhile I have read Fujita, Krugman, Venables, and I am less than impressed. I do not find a single plot where they compare their extremely simplified models to real world data. And I see this as extremely typical for the “pattern Krugman” PK. <br /><br />2. I am actually interested in discussing some more papers, either of Krugman, but also some, Krugman gave glowing references, e.g. some 1992 Singapore vs Hong Kong, and Cobb-Douglas, Solow 1957, which , to my understanding have grave mechanical flaws, rendering the results invalid. Are you interested or do you know by chance people / blogs, where people read, analyze, understand , and then discuss economic papers? I may be just some old engineer, but I have about 90 papers and patents, close to 1000 citations, and a recent GMAT in the upper 3% of my age bracket : - ) Could be interesting for folks, who spend their whole live so far in academia. Curious.<br />genauerhttps://www.blogger.com/profile/13492377118433913487noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-14073220187896479652012-10-25T18:38:58.972-04:002012-10-25T18:38:58.972-04:00Here are 8 of the past 10 posts or columns by Paul...<i>Here are 8 of the past 10 posts or columns by Paul Krugman. I don't see how anyone can claim that Krugman is less partisan than John Taylor.</i><br /><br />This is nonsense. What Krugman relies on are facts and data - you know that reality which, as it turns out, has a liberal bias.<br /><br />Krugman and I have walked very similar paths. In the 90's we were both almost 100% apolitical. What got him politicized was the outright economic stupidity of the Bush administration, which, unfortunately, some famous former economists signed on with (or, rather, sold out to.) Similarly, the Bush admin. radicalized me, although it started with the ridiculous Clinton impeachment. <br /><br />What you are proposing, anon, is a blatantly false equivalence.<br /><br />JzBJazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-49469335896082351502012-10-25T07:54:00.455-04:002012-10-25T07:54:00.455-04:00@noah
1. Your “Actually, it gets more interesting...@noah<br /><br />1. Your “Actually, it gets more interesting.” <br />Very Good !<br /><br />2. With regard to the Simon Paper:<br />Adding to the reference given above Volume and page numbers<br />“SIMON, H. (1955), On a class of skew distribution functions, Biometrika.”<br />42, 425 – 440<br />Ill got it from my library server, some 500 km away.. It was easy to find without volume and page numbers. You shouldn’t have any difficulties to find that on yours. BTW, do you have free access to NBER papers?<br /><br />3. “and in a regime 33 - 100 % price adder”<br />“Only tau of manufactured goods arrive”, a somewhat weird way to describe transport costs. In my Germany goods don’t “fall of the lorry” and transportation is billed. A tau of 0.5 means 1/(1-tau) = 100 % transportation costs on top of the price of the manufactured. Understandable ?<br /><br />In general, transportation costs are low nowadays (3- 10%, and weakly dependent on distance), my milk and butter come typically from 500 km away, tomatoes, bananas from 1000 – 10000 km, and manufactured goods from (smartphones, coffee machines at 13 Euro, etc) all over the world, with practically zero difference between the heart of cities like Berlin, Paris, London, and any other tiny village in this land. Food and similar stuff cost exactly the same at any discounter like ALDI and LIDL in ANY place. And so do most service I use, medical, lawyer, hair cutter.<br /><br />One could even make the case that agriculture transport is more expensive, since it requires cooling, has some time constraints, in contrast to manufactured goods. And I consume a lot more food in volume and weight than manufactured stuff. And the boundaries between them are very blurred today.<br /><br />Even the biggest cities today and back in 1991 don’t produce a significant number of manufactured goods locally.<br />In stark contrast to the hyper simplified assumption of Krugman: Zero transport cost for agriculture, and transport for manufactured goods the governing factor.<br /><br />4. Fujita, M<br />I got his 1999 book “The spatial economy” together with his 1989 “Urban Economic Theory” from my local 5 km university library. I assume that is good enough reference for you and most people here. Please tell me otherwise.<br /><br />Starting to work through them. At the very first glance, not so exciting. The 2001 edition page 220, Simon as “extremely nihilistic and simplistic”?<br /><br />Huugh, its an accurate description, Krugman just copied, and is at least admitting to have problems with to accept (something I like in people)<br /><br />Fujita’s assessment of basic theory (Chapter one of 1999 edition) looks pretty similar to my spreadsheet for choosing my present location, except mine was more detailed and quantitative. Transport costs a minor role, transport time way more important, environment and access too. At a very first glance.<br /><br />5. second one of Krugman’s Nobel papers.<br />Maybe you start calling and defending it as well ? Would be very interesting for me. How about we play a little game here, like Feyerabend and Lakatos, I am the aggressor/ advocatus diaboli, and you the defender of present day anglo macroeconomics, in contrast to our beloved Ordnungspolitik : - ). But lets stick with krugmans papers here. I ll might get to understand where my blind spots may be, and you can be the young hero, defending the economist establishment, against some old shop floor engineer? If you can that : - ) You could score lots of points with future employers ! <br /><br />genauerhttps://www.blogger.com/profile/13492377118433913487noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-17351915571434631092012-10-24T19:08:51.956-04:002012-10-24T19:08:51.956-04:00Krugman 1991 talks about transport costs as a driv...<i>Krugman 1991 talks about transport costs as a driving factor</i><br /><br />Actually, it gets more interesting. Using Krugman's setup, Fujita proves that as transport costs fall, there is a U-shaped pattern in overall agglomeration. Meaning that for low enough transport costs, urbanization actually reverses!<br /><br /><i>and in a regime 33 - 100 % price adder, which is way to high, further as a discriminator between core and periphery, whereas in reality it does not matter where it goes, because the loading / unloading is most of it. </i><br /><br />I'm sorry, I don't understand what this means. Can you explain a little more clearly?<br /><br /><i>The mechanism leading to the agglomeration is completely different, independent of any costs, was found by Simon first, and merely repeated by Krugman 1996, works completely independent of the 1991 paper. The empirical fact was long known before any theory, so theory is not useful here.</i><br /><br />I'm not sure this is true...I'll have to check out the Simon paper. Do you have a link or title for that paper?<br /><br /><i>Do you really have nothing better than this for why some economists admire that Krugman so much ?</i><br /><br />This is one of the two theories that won him a Nobel prize. The other is "new trade theory".Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-10725678739472596422012-10-24T19:06:40.918-04:002012-10-24T19:06:40.918-04:00"Here are 8 of the past 10 posts or columns b..."Here are 8 of the past 10 posts or columns by Paul Krugman. I don't see how anyone can claim that Krugman is less partisan than John Taylor."<br /><br />Simple - is Krugman or Taylor more correct?<br />Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-62327796127767875512012-10-24T19:04:19.046-04:002012-10-24T19:04:19.046-04:00"...isn't Krugman an active player for Te..."...isn't Krugman an active player for Team Democrat? While he's not working for a specific candidate, a significant portion of his writing is politically colored? Why the distinction?"<br /><br />Because he's right. I understand that in partisan politics, that doesn't matter, but I'd hope that it would in economics, as a science.Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24356359414792128682012-10-24T18:38:22.368-04:002012-10-24T18:38:22.368-04:00"Very amusing to see Krugman (or all people) ..."Very amusing to see Krugman (or all people) complain about politics hurting economics."<br /><br />Who's been more right for the past few years than Krugman?<br /><br />Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67318655868330105682012-10-24T18:05:45.553-04:002012-10-24T18:05:45.553-04:00Krugman 1991 talks about transport costs as a driv...Krugman 1991 talks about transport costs as a driving factor, and in a regime 33 - 100 % price adder, which is way to high, further as a discriminator between core and periphery, whereas in reality it does not matter where it goes, because the loading / unloading is most of it. <br /><br />The mechanism leading to the agglomeration is completely different, independent of any costs, was found by Simon first, and merely repeated by Krugman 1996, works completely independent of the 1991 paper. The empirical fact was long known before any theory, so theory is not useful here.<br /><br />But apparently the 1991 paper was very successful with other economists.<br /><br />Do you really have nothing better than this for why some economists admire that Krugman so much ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33223817125789228012012-10-24T17:04:11.710-04:002012-10-24T17:04:11.710-04:00Krugman (1991) lays down the basic idea. More adva...Krugman (1991) lays down the basic idea. More advanced versions of the theory - which incorporate things like random processes for founding new cities - all rely, fundamentally, on the agglomeration process detailed in Krugman (1991). The paper contains a deep theoretical insight that ends up being empirically useful. I'd say that that is a highly successful paper.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-39886524982655938002012-10-24T15:23:34.067-04:002012-10-24T15:23:34.067-04:00Come on,
Krugman 1991 talks transport costs, pro...Come on, <br /><br />Krugman 1991 talks transport costs, production functions and wages, and city sizes or any random process for founding a new city is not mentioned.<br /><br />Krugman 1996 just reproduces the Simon 1955 derivation for zipfs law from this random process only, no costs of any kind, there is zero additional, original thought. <br /><br />What are you reading? It cant be your Krugman 1991 reference.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-76555053070760805532012-10-24T14:49:11.350-04:002012-10-24T14:49:11.350-04:00Are we reading the same paper? It does not mention...<i>Are we reading the same paper? It does not mention any Zipf law, it contains no city size, nor a distribution of it.</i><br /><br />No, but the model is capable of reproducing the Zipf distribution. For a demonstration of that and an explanation of why it works, see this book:<br />http://books.google.com/books/about/The_Spatial_Economy.html?id=07Mzawou-8EC<br /><br />I was not aware of the quote you cite, but apparently later Fujita figured it out (in fact I know Fujita, and he mentioned this once). It does work.<br /><br /><i>Maybe you give it another try with my question?</i><br /><br />Nope, won't be necessary...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-64670068459363138892012-10-24T13:23:11.000-04:002012-10-24T13:23:11.000-04:00Are we reading the same paper? It does not mention...Are we reading the same paper? It does not mention any Zipf law, it contains no city size, nor a distribution of it.<br /><br />Furthermore Krugman admits in Journal of Japanese and International Economies 10,399 (1996)<br />"In large part this is a report of failure— that is, while there must be a compelling explanation of the astonishing<br />empirical regularity in question, I have not found it."<br /><br />That he essentially doesnt get beyond <br />SIMON, H. (1955), On a class of skew distribution functions, Biometrika. <br /><br />Maybe you give it another try with my question?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23506538189746023952012-10-22T09:11:14.044-04:002012-10-22T09:11:14.044-04:00In what sense is Krugman an economist with politic...In what sense is Krugman an economist with political leanings? He has been heavily critical of the Obama administration. My interpretation is that his 'political' statements are driven by his economic beliefs, whereas with people like Taylor and Mankiw it's the other way round. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-83841004771569298652012-10-22T05:36:38.107-04:002012-10-22T05:36:38.107-04:00Paul Krugman is right; this is an example of how p...<i>Paul Krugman is right; this is an example of how politics hurts the academic discipline of economics.</i><br /><br />Is this a joke? Projection? Who is more partisan and politicised that Paul effing Krugman?yeahnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-43224832766040355622012-10-20T23:07:02.323-04:002012-10-20T23:07:02.323-04:00Thought from a non-economist: I will use the curre...Thought from a non-economist: I will use the currency as my parameter for recovery. If I devalue it enough I should be able to show a strong recovery in per capita gdp. The fact they can't buy coffee will be irrelevant. It seems arrogant to me to be defining this current recovery when we have no idea what the effects will be on the $ five years from now. If it only is devalued 8% in five years we can say it wasn't to bad. If it's 80%....am I missing something?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-77525927280415679532012-10-20T21:56:41.507-04:002012-10-20T21:56:41.507-04:00If the tide was beginning to drop unexpectedly, I&...If the tide was beginning to drop unexpectedly, I'd be at least somewhat concerned about a incoming tsunami. A wall of water ten feet tall or higher does not discriminate between those wearing pants and those not wearing pants. Also, just to strain the metaphor even further, carrying gold around in one's pants is not a survival strategy in the event of a tsunami.<br /><br />@anon2, to bring this back to the real world, the factories that Solyndra sold off at bankruptcy, were designed to produce Copper-Indium-Gallium-Selenium (CIGS) solar panels. I doubt that once Solyndra's assets were sold at auction as lots that (a)$500M was generated, (b)anyone actually manufactured solar panels with their newly acquired equipment, and (c)that all of Solyndra's manufacturing equipment was of some value to others.<br /><br />I can also be nearly certain Solyndra, or a contractor programmed computer code to operate the machinery in their factory. I doubt very much any of this code has any sort of use or value outside Solyndra. Money certainly went into writing the code, but if no one can use the code for anything, of what value is it? I suppose one could try to learn more about how to manufacture CIGS panels, and really only CIGS panels, but CIGS panels remain uneconomical to produce, so what is the value of this code?Ryannoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58616526590741281212012-10-20T20:48:42.652-04:002012-10-20T20:48:42.652-04:00I would like to know how somone can be respectable...I would like to know how somone can be respectable, the sort of person who you wouldn't be embarassed to be seen with, and still rape students with overcharged text books (mankiw, krugman....)<br />their is something obscene about these multimillionaire "academics" who make poor students pay so muc for textbooksAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-561936889366336202012-10-20T14:02:29.095-04:002012-10-20T14:02:29.095-04:00Is this actually true? Are there economists that h...<i>Is this actually true? Are there economists that have been hurt by shilling for Republicans? Or do most of their colleagues agree or excuse them as Noah does above.</i><br /><br />This is very difficult to know...as I always say, most people who disapprove of something do so silently.<br /><br />I will say that nobody I have ever met seems to take John Taylor seriously as a research scientist. But that was true before he went to work for Romney.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-4262572650375130182012-10-20T13:53:39.126-04:002012-10-20T13:53:39.126-04:00Maybe they'll get legions of GOP voters to lov...<i>Maybe they'll get legions of GOP voters to love them, but people in economics notice these mistakes and it does damage to their academic reputations.</i><br />Is this actually true? Are there economists that have been hurt by shilling for Republicans? Or do most of their colleagues agree or excuse them as Noah does above.Larshttp://none.comnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-86164855596636883502012-10-20T09:57:07.601-04:002012-10-20T09:57:07.601-04:00Morality has nothing to do with it. "Positiv...Morality has nothing to do with it. "Positive cash flow" is not virtue, it's just economic viability. The "pantless" are those sustained by credit alone.<br /><br />Solyndra created a $500M crater. Would it have been better that it get more credit and later blow a $1B crater? $100B? $10T? Even when you say a country is a "closed world", its bankruptcy released $500M of credit and assets to those who can put it to more efficient use, maybe a better solar panel maker.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-4413243945041365832012-10-20T09:30:44.571-04:002012-10-20T09:30:44.571-04:00Good thing that Krugman never plays politics then....Good thing that Krugman never plays politics then... so say the SocialistsJJ Hunsickernoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52433077746366627612012-10-20T00:27:27.254-04:002012-10-20T00:27:27.254-04:00Krugman does not cherry pick numbers in his models...Krugman does not cherry pick numbers in his models to make his side look good. Krugman grew up as somebody wanting to understand how things work, relatively free of any swinging axes. What makes him look ideological is the near total infestation of politics in a large swath of modern policy makers. Krugman is a reaction to Taylorism, not the thing itself. <br /><br />Last week we had economic shills explaining the reasonablness of Romney tax proposals. Turns out all you have to do is something very different from what was proposed and it`s like falling off a log. Now we suddenly have a deep interest in only the recovery and can`t imagine why anybody would be interested in the size of the fall. The hackery isn`t quite as breathtaking as the obviousness of it. True hacks don`t work that hard because the point is only to confuse the majority with a reasonable sounding story. I don`t think Krugman is a hack because he tries too hard to be plausible in his arguments.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-35901269968840024512012-10-20T00:18:48.387-04:002012-10-20T00:18:48.387-04:00Probably because Krugman routinely criticizes the ...Probably because Krugman routinely criticizes the Democrats and calls them out when they say things that are incorrect. From the beginning he has complained endlessly about the size of the stimulus and Obama's premature pivot to focusing on the deficit. <br /><br />On the other hand, Taylor is supporting a nonexistent plan by Romney and pretending that Fed induced recessions were actually financial crises.Patrickhttps://www.blogger.com/profile/02319410210040870618noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-11358326979172281362012-10-19T22:42:22.360-04:002012-10-19T22:42:22.360-04:004) So, what about this latest tiff?
Well, R&R...4) So, what about this latest tiff?<br /><br />Well, R&R's definition of financial crisis mostly deals with things that aren't relevant to the US Great Recession. They identify five kinds of financial crisis: 1) external sovereign default, 2) domestic sovereign default, 3) exchange rate crisis, 4) inflation crisis and 5) banking crisis. Thus their definition of financial crisis is primarily focused on issues involving public debt (exchange rate crisis and inflation crises can be a form of sovereign default), and the most serious crises nearly always involve current account reversals. The US Great Recession may have boosted public debt levels, but even R&R classify it only as a banking crisis, and if anything the global financial crisis has led to an inflow of foreign capital seeking safety. Furthermore, only a small fraction of the cases examined by R&R are banking crisis involving high income countries under high capital mobility. Thus it's not clear to me how relevant most of R&R's research is to the US Great Recession.<br /> <br />Bordo doesn't waste much breath on explaining how he classified the episodes he studies as financial crises. Most people don't think of the 1974 and 1982 recession as financial crisis so this came as a surprise to me as well. Bordo cites a paper by David Lopez-Salido and Edward Nelson:<br /><br />http://conference.nber.org/confer/2010/SI2010/ME/Lopez-Salido_Nelson.pdf<br /><br />On first glance Lopez-Salido and Nelson's evidence seems weak but it had me going back to R&R and I realized that R&R’s evidence actually seems even thinner. R&R define a bank crisis as the “closure, merging, takeover or large scale government assistance of an important financial institution”, which quite frankly is vague, and depending on one’s criteria threshold, could easily be true of the 1974 and 1982 recessions (see Lopez-Salido and Nelson for more information). <br /><br />This morning I noticed Krugman referring to credit spreads in his blog in the context of this debate:<br /><br />http://krugman.blogs.nytimes.com/2012/10/19/1933-and-all-that/<br /><br />And that had me thinking, what a great idea, let’s see what the credit spreads looked like in 1974 and 1982:<br /><br />https://research.stlouisfed.org/fred2/graph/?graph_id=93435&category_id=0<br /><br />By that criterion the 1974 and 1982 recessions are only slightly behind the Great Recession and well ahead of the Savings and Loan Crisis, which is classified as a financial crisis by R&R, as “financial crises” go. And for what it’s worth, in terms of actual bank closings, while there were 157 in 2010, at 119, there were almost as many in 1982. <br /><br />5) The bottom line is, I’m not sure R&R’s research is all that relevant to the US Great Recession. So if you restrict yourself to US financial crises, even limiting yourself to R&R’s list, the current recovery is weak even correcting for trend (I’ve looked at this in terms of both NGDP and RGDP). And if you include the 1974 and 1982 recession, which is not as an outrageous idea as I initially thought, it looks even worse. More importantly, I’m not even sure what the direction of causality from recession to financial crises is, provided one can even agree on an appropriate definition of “financial crisis” with respect to the US.<br /><br />I’ve always felt that what has made the current recession so bad are the poor monetary, fiscal and regulatory policies that led to it, and the poor policy responses to it. In my opinion the evocation of R&R’s “This Time is Different” has almost always been simply an excuse to do nothing. In the final analysis the Taylor exploitation of this debate is an election year distraction from an honest discussion of what constitutes better macroeconomic policy.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-78186060663374643652012-10-19T22:40:57.921-04:002012-10-19T22:40:57.921-04:00Some reflections...
1) I haven't taken anythi...Some reflections...<br /><br />1) I haven't taken anything John Taylor has written or said seriously in a very long time. This is mostly because I have long since reached the conclusion that he's much more interested in winning arguments (and elections) than in seeking the truth. <br /><br />2) I have major doubts about Reinhart and Rogoff's work. Take their paper on public debt overhangs from April for example:<br /><br />http://www.economics.harvard.edu/faculty/rogoff/files/Debt_Overhangs.pdf<br /><br />I came away thinking (counter to R&R's conclusion) that the primary cause of public debt leverage in advanced economies, and the associated slow economic growth, is war (the Napoleonic Wars, the Belgian-Dutch War, the Third Carlist Wars, the Franco-Prussian War, WW I, WW II, the Greek Civil War, etc.) War tends to raise the debt numerator and reduce the GDP denominator. And in my opinion slow economic growth naturally follows as a result of postwar devastation and/or disarmament. <br /><br />3) I also have major doubts about Michael Bordo's work. Take his paper on inequality and financial crises from March for example:<br /><br />http://www.econ.ucdavis.edu/faculty/cmm/inequality_crises.pdf<br /><br />Granted there are flaws with his major argument, but in my opinion his most glaring elementary error is his claim that nominal interest rates are a good measure of monetary policy stance. After all nominal interest rates were very low in the contractionary part of the Great Depression and were very high in the inflationary 1970s, and yet no one is seriously making the claim that monetary policy was loose in the Depression and tight under Arthur Burns. <br /><br />(Ironically Bordo uses a credit variable developed by Moritz Schularick and Alan Taylor (the "good" Taylor) but in his most recent paper reaches starkly different conclusions from them.) Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.com