Brad please check your e-mail at delong@econ.berkeley.edu. Please please ignore tojbd.pdf which I wrote overnight on a bet (with you although you may not have noticed the bet in comments on your blog). I currently think tojbd2.pdf is fine.
Others. This is the only way I can get his attention. Sorry to bother you, but I was really really embarrassed by this.
tojbd2.pdf looks good and interesting. (However, being a pdf, I cannot edit it.)
ReplyDeleteI haven't been answering my email because I have to participate on a panel tomorrow at noon at U.C. Davis on weblogging and scholarship--and I am not certain what I am going to say.
I do think that it would be a substantial mitzvah if we were to provide aircover to Dan Gross (and also to Joseph A. Schumpeter: did you see Solow on him? Waiting 60 years to tell us just how lazy a lecturer Schumpeter was). The questions are (a) who would publish it? And (b) what line to take:
--the average equity premium is too high, hence bubbles and their irrational exuberance diminish a dangerous and destructive behavioral market failure.
--monopolistic competition.
--external benefits to investment, especially equipment investment.
--
(And you are, of course, perfectly correct in your comments on my weblog: DSSW is not Gross (2007): the utility gains to the rational in steady-state are (a) taken from the period-0 rational when noise traders enter the market and so corrupt it, and (b) the uninteresting fact that noise traders make mistakes, so you can profit by trading against them. Gross argues that volatility of opinions is good. DSSW argue implicitly that irrational exuberance can be good when such exuberance is not very volatile.)
Robert, you are really wonderful
ReplyDeleteActually, I thought you were both rather clever and a fine lesson in how to play at mathematical relationships which is precisely what I try to do.
ReplyDeleteanne
Thanks Anne.
ReplyDeleteBrad the bit about e-mail was a joke.
tojbd.pdf was full of math booboos, but it was an overnight draft for old time's sake. jbd2.pdf is clearly working the monopolistic competition angle as the benefit is from the triangle between the marginal product of an intermediate good at the profit maximizing production level and the infinite marginal product of the first little bit.
I'd say no huge problem convincing people innovation is good and thus convincing open minded people that the IPO anomaly is a good thing. I mean I really believe that basically for reasons that have something to do with the model.
The more sophisticated model will include fluctuations of A^e so booms and busts.
Also an original Romer '90 model with varieties of capital might be nice as the innovating firm produces too much before noticing that it's market is small thus getting more benefit as price closer to marginal cost.
I was planning to also do a model in which people think there has been a structural break and forecast an increase in growth rates (this makes for messy math).
I would really like a model in which there is an innovator and then too many innovators as they all overestimate their chances of surviving the shakeout. If the shakeout phase of very low (predatory) prices is needed for the next generation of innovators, well that would be cool.
I think tojbd2.pdf might benefit from a storage technology with a return higher than the r for a rational model but lower than the irrational r (A^e/A higher). This would make irrationality necessary for growth.
Some Keynes quotes (the one with quinquenium) and trying to sell it to Kevin Drum might be cool.
What can you edit ? Do you latex ?
Cross posted to delong@econ.berkeley.edu.
Notice then the graciousness of Paul Samuelson to Joseph Schumpeter....
ReplyDeleteNow, what opposite tacks in mathing that DeLong and Waldmann describe are just where significant gains in analysis can be hoped for.
Israel Scheffler was forever arguing us to such tacks, which was part of the reason I turned in a philosophy paper imagining Scheffler was a bumblebee who could not learn to fly a field properly. Always zigging and zagging. Scheffler was not amused. The phone range and there was Scheffler not being amused. I wrote another paper on perception or mis=erception in science.
anne