tag:blogger.com,1999:blog-17232051.post7383492382050221856..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: That which is not dead doth sleeping lie (RBC edition)Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-17232051.post-76820680921548109042014-11-07T13:16:13.943-05:002014-11-07T13:16:13.943-05:00Why do you assume that trend growth originates on ...Why do you assume that trend growth originates on the supply side? <br /><br />See Japan, the euro zone, etc..Patrickhttps://www.blogger.com/profile/06658507365116962150noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58331928521155048532014-11-07T13:14:30.703-05:002014-11-07T13:14:30.703-05:00Pissarides's first edition of Equilibrium Unem...Pissarides's first edition of Equilibrium Unemployment Theory (circal 1990), has some Keynesian-flavored experiments with consumption and saving in the basic Mortensen-Pissarides framework. And his 1970 book and 1970s and early 1980s articles also have a lot of neo-Keynesian ingredients. Also, while Phelps got the Nobel for something else, his structural slump book is basically Mortensen-Pissarides with effort (what the Stiglitz generation called efficiency wages). But both the first edition of Pissarides and the only edition of Structural Slumps are a little messy, the second edition of Pissarides, without the old-style Keynesian stuff and with the technology shocks thrown in, is a lot easier to read. The second edition is the edition that people read. <br /><br />I think we're still waiting for an NK model that's as easy to read as a Prescott tract.Patrickhttps://www.blogger.com/profile/06658507365116962150noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-62752065389860804792014-11-01T00:45:13.187-04:002014-11-01T00:45:13.187-04:00Why do you assume trend growth is smooth?Why do you assume trend growth is smooth?Jim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31283036929399589342014-10-31T11:31:47.030-04:002014-10-31T11:31:47.030-04:00Not really because nobody knows what 'technolo...Not really because nobody knows what 'technology' is in this context. Look up total factor productivity for some idea.Unknownhttps://www.blogger.com/profile/13305124836711242805noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-40568351076202175632014-10-31T10:41:18.785-04:002014-10-31T10:41:18.785-04:00Could somebody give me a source (for a layman) on ...Could somebody give me a source (for a layman) on what a 'technology shock' is?Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-45824572755291518482014-10-31T10:34:41.159-04:002014-10-31T10:34:41.159-04:00Which do they reject more, and when? A large N le...Which do they reject more, and when? A large N leads to statistical significance for even tiny differences.Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-14956246120341457832014-10-30T20:03:12.596-04:002014-10-30T20:03:12.596-04:00Yeah, the post is at:
http://richardhserlin.blogs...Yeah, the post is at:<br /><br />http://richardhserlin.blogspot.com/2014/02/what-else-advances-one-funeral-at-time.htmlRichard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-62596593439038145652014-10-30T20:01:42.534-04:002014-10-30T20:01:42.534-04:00“What's more, it seems unlikely that it will d...“What's more, it seems unlikely that it will die for a good long while. Why? At least two reasons - A) ease of use, and B) familiarity.”<br /><br />And I think it’s also the interesting (in a profoundly harmful way) and widespread phenomena of “Science advances one funeral at a time”. I wrote about this recently:<br /><br />I've been very interested in this quote for a long time, especially with regard to economics. But recently I've come upon and thought about some other important relevant areas.<br /><br />I'm currently reading "The Second Machine Age", by MIT business economist Erik Brynjolfsson and MIT computer scientist Andrew McAfee…<br /><br />…something recently really startled me on page 102. The authors talk about how electrification so profoundly increased productivity. It was the second great GPT (General Purpose Technology) after the steam engine. Yet, initially it did little for productivity, not until factory managers started to design factories for electrical rather than steam power. Electricity had the advantage that machines could be spread out and arranged in a horizontal, assembly line, pattern, as opposed to steam, where machines had to be placed close to the large central engine, both horizontally and vertically (on floors above and below the engine). The difference was profound, and revolutionized industrial productivity.<br /><br />The quote that struck me was this:<br /><br />“Only after thirty years -- long enough for the original managers to retire and be replaced by a new generation -- did factory layouts change.”Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-83816733033718948792014-10-30T16:58:05.693-04:002014-10-30T16:58:05.693-04:00I laughed, but I can actually see an evolutionary ...I laughed, but I can actually see an evolutionary logic to droppping seed-containers on the ground. They could have evolved to bear fruit in places with vertical support (like pollen on a flower). But the more obvious explanation is that fruit loves to be eaten and have its seeds expelled by animals.TGGPhttps://www.blogger.com/profile/11017651009634767649noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-81509429071949388622014-10-30T16:36:36.740-04:002014-10-30T16:36:36.740-04:00I propose that none of your opinions matter in the...I propose that none of your opinions matter in the least.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-44716938512028969772014-10-30T16:07:11.343-04:002014-10-30T16:07:11.343-04:00Please, consult the Greek wage statistics. Nominal...Please, consult the Greek wage statistics. Nominal wages are down 20/25%. Only aggravated unemployment, of course, as it disrupted the circular flow of spending.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-81326495257304851272014-10-30T14:09:16.686-04:002014-10-30T14:09:16.686-04:00It's not dead. It's just resting.It's not dead. It's just resting. PJhttps://www.blogger.com/profile/00967605419485856741noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20174993201325204512014-10-30T13:43:49.077-04:002014-10-30T13:43:49.077-04:00I propose that apples fall to the ground because t...I propose that apples fall to the ground because they love to be covered in dirt. It's genetics.Alexander Sebastian Schulzhttps://www.blogger.com/profile/15135338616598357444noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58958597800398138002014-10-30T13:11:29.041-04:002014-10-30T13:11:29.041-04:00What's more interesting is that the micro-foun...What's more interesting is that the micro-foundations based DSGE framework was and has remained the leading framework in macro. The only issue is, do you have technology shocks as the primary driver or 19 other shocks also playing a role a-la Christiano-Eichenbaum, Smets-Wouters. The former is the RBC model and the later is the NK model.<br /><br />Many claimed that the DSGE approach should be replaced after the great recession. Clearly that is not happening!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28763900544702154012014-10-30T12:25:08.920-04:002014-10-30T12:25:08.920-04:00I wouldn't say that RBC is dead. It would be m...I wouldn't say that RBC is dead. It would be more accurate to say that we've simply moved on. The NK model is probably the closest thing to a "baseline" now, but in reality there are many baseline models that people know and think capture important features of the economy, and many shocks that people work with. <br /><br />TFP shocks are standard, but mainly by convention. Most people would probably agree that TFP shocks are not the main driver of the business cycle, but they still use them in models because they're an accepted way to shock a model and examine the response. So if you're not setting out to take a stand on what exogenous shock drives recessions, TFP shocks are a nice place to start.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63966046169780668752014-10-30T10:48:08.910-04:002014-10-30T10:48:08.910-04:00Milton Friedman's methodological dictum isn...Milton Friedman's methodological dictum isn't dubious; it's out and out deranged.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23864593845101086602014-10-30T10:15:43.015-04:002014-10-30T10:15:43.015-04:00I wonder if this is just Occam aesthetics, for bet...I wonder if this is just Occam aesthetics, for better or worse. Every model needs technology; some have sticky prices and demand shocks and other New Keynesian features as well. If you are trying to tell a clear story about job search, tradition urges you to use the simplest possible economic setting, and if you need shocks and dynamic plans that's RBC. Adding the NK features leaves it less clear what is driving results.<br /><br />I think this is a good tradition for fundamental theory, but maybe not for calibrated models. However, I can't figure out how to learn from most calibrated models in any case.Michael Margolishttps://www.blogger.com/profile/00454854828001494319noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36104804651562378582014-10-30T09:53:50.785-04:002014-10-30T09:53:50.785-04:00A shock can be permanent. "Shock" just m...A shock can be permanent. "Shock" just means "surprise". Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-34225159972428182962014-10-30T09:52:37.023-04:002014-10-30T09:52:37.023-04:00Yes, many do. But the TFP shock doesn't end up...Yes, many do. But the TFP shock doesn't end up accounting for much of the action. It's included either as a nice gesture to the RBC people, or as a robustness check to show that including TFP shocks doesn't change the results. Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72710313308572993502014-10-30T09:52:11.915-04:002014-10-30T09:52:11.915-04:00Noah
How long a shock must last to be considered ...Noah<br /><br />How long a shock must last to be considered as such ? How economist do differentiate between an evolution (Internet) and a 'revolution' (70's Oil shocks ?) Sorry if questions are trivial for trained economists.<br /><br />Ludovic CovalAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-29545166012485741112014-10-30T09:35:16.943-04:002014-10-30T09:35:16.943-04:00Noah,
Don't NK models also use shocks to tfp...Noah, <br /><br />Don't NK models also use shocks to tfp growth as a source of shocks? It's just not the only source...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-43849829125715252942014-10-30T05:59:28.174-04:002014-10-30T05:59:28.174-04:00- I think we've moved way beyond TFP shocks? R...- I think we've moved way beyond TFP shocks? RBC model is any model in which nominal prices and wages are flexible, and you can study real quantities and price ratios independent of nominal variables. This includes the models with sunspot shocks by people like Roger Farmer, models with sentiment shocks by people like Angeletos, models with financial shocks or uncertainty shocks like in some of Gertler and Kiyotaki's papers and many people in academia and the Fed. You can also have real wage rigidity for example in RBC models: the key is that in the RBC model you cannot fool workers into accepting lower real wages via a nominal devaluation, as some people were suggesting in the Greek depression case (the unions would simply extract higher pay raises in the next negotiation round).<br />- There's lots of research that was done integration labour market search frictions into New Keynesian models (look up people like Carl Walsh, Thomas Lubik and many more).<br />- TFP shocks can be given aggregate demand interpretations as shocks to the efficiency of matching in product markets (once you recognise the pervasiveness of search and matching frictions in product markets). See for example papers by Rios Rull and co.<br />danielshttps://www.blogger.com/profile/01799942447501959179noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63216962499247443072014-10-30T05:42:52.550-04:002014-10-30T05:42:52.550-04:00But one thing is to use TFP to enter an exogenous ...But one thing is to use TFP to enter an exogenous shock into your stuff and a very different one is "the whole" RBC thing in motion. It include things like the magic Euler equation and all that. I agree with your two diners and expect that this "enormous respect still given to the original RBC guys" will fade away.Joshuahttps://www.blogger.com/profile/10314366773830224091noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-75505108054328769252014-10-30T05:31:40.724-04:002014-10-30T05:31:40.724-04:00I don't have the references to hand - I can re...I don't have the references to hand - I can remember Nick Bloom writing something like this - but in an RBC setting, the distinction between a technology shock and a demand shock is not a great as might first appear, both effectively make it harder for firms to produce (if we mean produce and sell) although now I type that I worry I may have go that wrong. Anyway, perhaps the choice of TFP shock isn't so crucial. Luis Enriquehttps://www.blogger.com/profile/09373244720653497312noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19039219209136975752014-10-30T05:03:33.062-04:002014-10-30T05:03:33.062-04:00I've never been able to understand how RBC is ...I've never been able to understand how RBC is something that professional people who've spent their lives studying a field can do anything but sit there and laugh at. Nobel Prizes were actually given for that idea?<br /><br />I think economics needs to be burned down and started over again, frankly. Its predictive value is basically null at this point, and ideas like TFP shocks having any real importance at all are contributing to that. We're almost at the point where the people quoting Aristotelian dogma in the 1400s had a better real world track record: even if you accepted the dubious Milton Friedman philosophy that "as long as the model works, the legitimacy of the assumptions don't matter", there's still the small matter of the model not actually working. At least the epicycles in geocentrism made the skies reasonably predictable.Anonymousnoreply@blogger.com