Saturday, February 28, 2015

Lucas Critique upside down

I think this is even more Noah Smith bait than Mark Thoma bait.

First the twitter version of the Lucas critique. Lucas argued that if one wishes to control some variables (say inflation and unemployment) it is a mistake to look for an equation which predicts them as a function of variables which you can control then assume that the function will stay the same if you manipulate the variables. The reason is that estimated coefficients are typically not discoveries of natural laws which always hold. Typically, the effort to use the estimated function to manipulate the system will cause the coefficients to change.

A very simple example is the statement that correlation is not causation.

In particular to the extent that people's behavior depends on expectations about the future and that policy affects the probabilities of future outcomes as a function of past data, relations which depend on expectations as a function of past data will change when policy makers attempt to exploit them.

Lucas stressed that he wasn't the first to worry about this problem. The critique is sometimes called the Marshack critique.

One proposed solution is to write down models in which agents' objectives and knowledge are modelled explicitly and add the assumption that they know the joint distribution of all variables (have rational expectations). I find this proposal totally unconvincing. In particular, it is not argued that the assumptions about objectives have to be accurate. I believe that the argument is that, while the model is not reality, it is important that, if the model were reality, statistics would be consistent estimates of deep structural parameters which are policy invarint. I am totally 100% unconvinced.

People who accept this argument will often make a concession to the other approach (reduced form modelling, atheoretic empiricism, in macroeconomics vector autoregressions (VARs)). The concession is that such models are useful for forecasting. If one is just trying to predict what will happen and don't have the power to change it, then the Lucas critique doesn't matter. The parameters are invariant to what you do as you have no power.

So the view which I don't accept is structural models with optimizing agents are required for valid policy evaluation by the strong who do what they will, but other models may be just as good or better for forecasting by the weak who suffer what they must.

In fact, I partially disagree with the Lucas critiquers' concession too. It is just not true that it is best to be completely open minded if one only wants to forecast. Imposing assumptions on the data is required for forecasting too. The imposition of false assumptions may produce lower expected squared forecast errors.

I think if one is attempting to forecast using very little data to estimate parameters of the forecasting rule (or in other words if one is a macroeconomist attempting to forecast) then one must impose a lot of assumptions (to estimate at all) and it is better to impose a lot more than are needed to come up with an estimate and a forecast.

So, I think that if one is attempting to forecast using aggregate time series, it is best to impose assumptions. first if you think they are more likely to be roughly close to true than alternative equally assumptions and second it is often better to impose more. I mention the Akaike information criterion in passing.

I might sometimes accept an argument along the following lines: actual behavior is more like the behavior of this type of rational agent with simple objectives than anything else I can think of, so I will assume that we are all rational agents of that type when using the few data I have to develop a forecasting rule.

I might sometimes accept the same argument when the aim is to evaluate policy and advise policy makers. I find it about roughly equally convincing in each case. Stories about how expectations matter, and will change in a predictable way, might convince me that some assumptions are better than others (including weaker assumptions) but I don't see anything especially special about them.

In contrast, arguments about how stronger assumptions should be made when one has fewer data make a whole lot of sense to me. There are mathematical examples in which the argument is entirely valid. I find it very plausible that it is generally valid.

Old Keynesian Financial Frictions

I had forgotten this passage from The General Theory which may be Brad DeLong's favorite.

Brad made very good use of

Finally it is the long-term investor, he who most promotes the public interest, who will in practice come in for most criticism, wherever investment funds are managed by committees or boards or banks.[4] For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion. If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy.
But I am interested in a paragraph which I forgot entirely until I just read it. I now suddenly find it interesting because it is Keynes on risk premia (and so financial frictions) and Keynes's view is notably different from that of the New Keynesians I discussed in my last post.

The only radical cure for the crises of confidence which afflict the economic life of the modern world would be to allow the individual no choice between consuming his income and ordering the production of the specific capital-asset which, even though it be on precarious evidence, impresses him as the most promising investment available to him. It might be that, at times when he was more than usually assailed by doubts concerning the future, he would turn in his perplexity towards more consumption and less new investment.
After long consideration I have decided to be honest (as I would have been caught anyway) and admit that Keynes is discussing the strange country in which financial intermediation is absolutely banned so individual income must be divided between consumption and investment. However note that he assumes that, in this strange case, risky returns cause high consumption. This doesn't have to be true (it is easy to come up with a model in which risky returns on capital cause more precautionary saving or in Keynestopia precautionary investment). But it is completely unlike the disturbance term which is called epsilon superscript b in Smets Wouter 2007 and "b" in Del Negro, Giannoni, and Schorfheide (2013 last revised 2014). This is justified as a risk premium but appears in the Consumer's problem as an increase in a totally safe interest rate.

Friday, February 27, 2015

New Keynesian Financial Frictions

Over a year ago, Noah Smith wrote a blog post with an excellent illustration of the first extremely unsuccessful attempted machine gun. The hint was that if at first you don't succeed plausibility might be right around the corner. The post mainly reported a working paper (which has since been revised) by Marco Del Negro, Marc P. Giannoni, and Frank Schorfheide of the New York Fed (pdf warning -- also not light reading). I didn't click the link. I had read a note on the web by Del Negro, Giannoni, and Schorfheide and come to the silly conclusion that they had done something silly. Now 20 months late I finally clicked the link and found the working paper very impressive. As Noah explains
The model they use is a combination of two existing models: 1) the famous and popular Smets-Wouters (2007) New Keynesian model that I discussed in my last post, and 2) the "financial accelerator" model of Bernanke, Gertler, and Gilchrist (1999). They find that this hybrid financial New Keynesian model is able to predict the recession pretty well as of 2008Q
4. Importantly, the forecasts (of the current version) are based on parameter estimates using data available December 2008, so not including 4th quarter 2008 GDP but including the differential between Baa corporate bonds and the Treasury 10 year rate. The model correctly forecasts a deep recession followed by a sluggish recovery. I want to raise a quibble mostly with Smets and Wouters (SW) . In Smets and Wouters (2007) (SW 2007) they assert that they have already considered financial frictions as in Bernanke, Gertler, and Gilchrist (1999)
Finally, the disturbance term [epsilon^b] represents a wedge between the interest rate controlled by the central bank and the return on assets held by the households. A positive shock to this wedge increases the required return on assets and reduces current consumption. At the same time, it also increases the cost of capital and reduces the value of capital and investment, as shown below.3 This shock has similar effects as so-called net-worth shocks in Ben S. Bernanke, Gertler, and Simon Gilchrist (1999) and Christiano, Roberto Motto, and Massimo Rostagno (2003), which explicitly model the external finance premium.
The paragraph explains a FOC for optimal consumption (an Euler equation). It it the real interest rate considered by consumers is the federal funds rate minus the expected inflation rate plus this disturbance term epsilon^b. That would be correct if this were a safe real interest rate. A risk premium which has something to do with risk would not appear in the Euler equation that way. IIRC the risk premium in Bernanke Gertler and Gilchrist doesn't affect consumption at all -- it is the difference between interest charged on loans to firms and interest paid to consumers (consumers get the risk free rate). In fact, consumers do not need to bear the risk of possible bankruptcy of firms. Optimization implies that the Euler equation holds for all assets including Treasury bills or, once they were introduced TIPS. It implies expected return differentials on all assets via the consumption CAPM. The SW 2007 risk premium is also paid by firms as in Bernanke, Gertler, and Gilchrist (1999). But if SW already consider a risk premium motivated by reference to Bernanke, Gertler, and Gilchirst (1999) what do Del Negro, Giannoni, and Schorfheide write about the epsilon^b disturbance in SW 2007 which also appears in their model relabeled simply "b"
The exogenous process [b_t] drives a wedge between the intertemporal ratio of the marginal utility of consumption and the riskless real return [R_t - 􀀀Et[ pi_(t+1)]], and follows an AR(1) process with parameters [rho_ b] and [ sigma_b].
This is in section "2.1.1 The SW Model" the term b_t is justified simply because it appears in SW 2007. No explanation for whey there is such a wedge is given (nor is it easy to imagine one when presenting a model with a non-liquidity constrained representative consumer). In contrast the interest rate paid by firms includes a term which really does correspond to the external finance premium in Bernanke Gertler and Gilchrist (1999). I can't manage the notation with plain ascci it is The expected nominal interest rate paid by firms minus the safe interest rate is equal to b_t plus a constant times the (debt+equity) to equity ratio plus the dispersion of ability across entrepreneurs. Or in other words the differential is equal to a log linear approximation of the external finance premium as modelled in Bernanke Gertler and Gilchrist (1999) plus the disturbance term which Del Negro, Giannoni, and Schorfheide call b and which SW call epsilon^b and which SW justify with a reference to Bernanke, Gertler and Ghilchrist (1999). There is still no explanation of why it appears in the Euler equation. OK I trust no one has read this far [text deleted] update: Mark Thoma did it again. I am no longer confident that no one will read this far. I deleted the rest of of this post because it wasn't polite.

Tuesday, February 24, 2015

Can Someone Help me Balance the Japanese National Income and Product Accounts ?

I was sincerely shocked to read that the Japanese household savings rate was negative. "The savings rate in the year through March was minus 1.3 percent, the first negative reading in data back to 1955" I had always thought of Japanese as high savers (as they used to be). But the reason I was shocked is I can't get the national income and products accounts to balance. By my calculations, total effective demand is about 7% higher than total supply (this is impossible). I get household savings of about -1% of GDP (correspondind to the -1.3% of personal disposable income plus pension distributions) government savings famously -7% of GDP and Japan must have positive net exports mustn't it ? Well actually no. Another shocking fact is that Japan has suddenly shifted from the usual trade surplus to a trade deficit. Why has nobody told me ? However, the deficit is only about 1.5% of GDP. The only remaining category I can think of is corporate saving, which I get at around 6.5% of GDP. How can that be ? I can't find Japanese corporate profits at FRED (the first time it has failed me so no link for you today FRED). In the USA corporate profits net of taxes and depreciation are roughly 7% of GDP. The ratio must be much higher in Japan. Corporate savings would be net profits minus the sum of net investment and dividends paid by corporations. It's almost as if Japanese corporates were investing only to replace depreciated capital and not paying dividends. Or very profitable. Can someone explain to me what is going on ?

Monday, February 23, 2015

Time for a Drum head trial

Uh oh the usually solid front of Political Animals is divided. Current animal Ed Kilgore appreciates the DNC's appreciation of narrative
The one nugget in the DNC report that I found both valuable and amusing is this:
It is strongly believed that the Democratic Party is loosely understood as a long list of policy statements and not as people with a common set of core values (fairness, equality, opportunity). This lack of cohesive narrative impedes the party’s ability to develop and maintain a lifelong dialogue and partnership with voters. The Task Force recommends creating a National Narrative Project to work with party leaders, activists, and messaging and narrative experts to create a strong values-based national narrative that will engage, inspire and motivate voters to identify with and support Democrats.
In contrast animal emeritus brother Benen singled out the narrative nugget for criticism.
While some of the ideas in the document seem to have real merit, including an aggressive emphasis on voter registration, others seem considerably less valuable, such as the “creation of a National Narrative Project to work with party leaders, activists, and messaging and narrative experts to create a strong values-based national narrative.”
I know they share the same values but they really need to sit down and have a talk about narration. I think the judicious judge and moderate moderator of the Political Animal v Political Animal debate really has to be original Political Animal Kevin Drum.

Friday, February 20, 2015

Old Keynesians on Monetary Offset of Fiscal Policy

This is an ultra pointless "someone is wrong on the internet" post. I think I read somewhere the suggestion that Keynesians had to be told by market monetarists that fiscal stimulus can (at least usually) be offset by monetary policy. I think Keynesians have made this point for a while. Here I cut and paste from Samuelson and Solow (1960) "Analytic Aspects of Anti-Inflation Policy" pdf warning also known as the Phillips curve paper.

Wednesday, February 18, 2015

Republicans Worst Idea Ever ?

With the sarcastic hyperbole that won him millions of fans (OK that makes me read everything he writes) Jon Chait declares "Poll Confirms the Republican Immigration Shutdown Plan Is Their Worst Idea Ever". The proof

"Today, CNN has a poll about who to blame in the event of such a shutdown. Fifty-three percent of Americans would blame the Republican Congress, and only 30 percent would blame Obama."

Oddly he claims that 30% is the hard core base crazication factor, when it is well known that it is 27% but I'll spot him 3%.

I think Chait may be right (although the competition is fierce) but that doesn't mean that the DHS shutdown is clearly and by a wide margin the worst idea to which they are currently committed. It doesn't even mean that it is the idea that fares worst by a wide margin in the poll which Chait cites.

There is also the Netanyahu speech.

Josh Marshall (who clearly despises Netanyahu more passionately even than I do) reports with scarcastic delight (and the headline of the week)

"Great Times for Bibi-Boehner Bund!"

click his self link (Josh Marshall is wonderful but TPM links to itself too much)

The CNN/ORC poll found that 63 percent of Americans disagreed with Boehner's decision to extend the invitation without consulting the White House, while 33 percent said it was the right thing to do

Note how I strategically spotted Chait 3% above. Now I want my 3% back so I can claim that 33% = 30% ( to be honest, subtracting the 27% crazification factor, 3% of Alan Keyes resistant US adults would blame Obama and twice as many, a ful 6% think inviting Netanyahu was a good idea).

Continuing with the B-list, I recall that the rarely interesting and otherwise never snarky David Brooks once said that he sometimes wonders if George Bush is a Democratic mole.

There has been some discussion of whether Boehner is in an impossible situtation, incompetent or both. There is another possibility -- that he is a political genius Democratic mole.

Monday, February 16, 2015

Why do Macroeconomists Think We Know Macroeconomics ?

This post is a comment on Noah Smith's brilliant post "Why do non-experts think they know about macroeconomics?" which is, itself, a reply to Scott Sumner's presumably brilliant post (which I haven't read and on which I am not commenting -- for one think I can't find a link in Noah Smith's post).

Noah Smith doesn't have a very high opinion or really existing macroeconomics. However, I think he is a bit too diplomatic. I think I will quote bits of his post and comment.

Sumner argued that macroeconomics uses familiar words (with unfamiliar meanings) so people think they understand it. Like Noah, I agree that this is part of what is going on. I also mostly agree with Noah that

there are some other reasons too: 1. Macroeconomics is relevant to most laypeople. String theory, to use Scott's example, is not. String theory is something you hear Brian Greene or Michio Kaku talk about, and you think "Wow, neato, the Universe is mysterious and funky!", and then you never think about it again. Macroeconomics is something related to our jobs and our investments. It affects us every day. Notice that laypeople do not often hold forth on game theory or decision theory. 2. Macroeconomics has political implications. Many people have political agendas. The "heterodox" people you meet in the blogosphere are almost all just leftists who see mainstream econ as a tool of the neoliberal oppressor, and since macro is by far the most visible branch of econ, they equate "econ" with "macro" and bash it. Or take the "Austrians", whose goal is actually to make econ into a tool of the neoliberal oppressor, for real. Then you have a whole bunch of people who aren't pushing political agendas, but who feel that macroeconomists are pushing agendas, and don't like that. In fact, some macroeconomists are pushing political agendas, though I think it's a clear minority (no, I won't name names). This is also why a lot of laypeople get involved in climate science debates. 3. There is the perception that macroeconomists don't understand their own subject. The Great Recession convinced a lot of people that macroeconomics hasn't solved any of the problems it was created to solve. Contrast that with physics or bio or chem, which have very obviously given us a lot of the awesome stuff that makes our society rich. In addition, you have very public and acrimonious debates between macroeconomists like Krugman, Cochrane, and Sumner. That convinces a lot of people that there is no consensus within macro, which in turn makes them suspect that macroeconomists haven't gotten any answers out of the Universe. If the experts don't understand anything, why can't the amateurs weigh in?
update: I see Mark Thoma found this post (this blog is for stuff I don't want many people to read update: I post stuff which I think is worth reading at -- I do put some effort into those posts end update). I wish to clarify and revise my remarks.

First, ordinary people think they know other technical subjects too. It is easy to get into debates about microeconomics (think pf discussing the incentive effects of welfare or the economic effects of international trade) climate science, food science, and military strategy. Clearly Noah's first two points are valid.

However, I think there is special disrespect for the opinions of macroeconomists. I see two quite different problems. The first (discussed vaguely below and discussed better by Noah) is that there isn't a macroeconomists' consensus on anything. There isn't even a consensus among academics (or for that matter Nobel memorial prize winners) but also wingnut welfare recipient hacks are presented to the public as prominent economists.

I think there is a main stream of contemporary macroeconomics -- New Keynesian DSGE. It matters that the implications of those models are dismissed by real business cycle theorists, austrians, market monetarists, Post-Keynesians, and modern monetary theorists (you can't imagine how much fun I had putting real business cycle theory in that list). But it also definitely matters that new Keynesian DSGE models don't explain patterns which would otherwise be puzzling and don't generate very good forecasts.

end update:

That [Noah's] is an excellent effort. I disagree with two points. First I think macroeconomists with a political agenda are a clear majority (I will name one name -- Robert Waldmann). Second, I don't really think that the Krugman, Cochrane, Sumner debate has a big effect on the opinion the general public has of macroeconomics. The reason is simply that most people don't know who Cochrane and Sumner are ( many times as many people know who Cochrane and Sumner are than know who Robert Waldmann is, but the number is still small). I think that radically different views on everything expressed by Nobel memorial prize winners does have that effect. I note (as a member of the public) that I haven't heard anything from Lucas or Prescott recently.

I realize that I have very little sense of what most people think macroeconomists say. I'm pretty sure that most people think of macroeconomics when they think of economics. I think it is a sign of the strength of the perception that we don't understand our subject that pollsters don't ask people what they think we think.

I hand the microphone back to Noah

Ryan Decker writes in response to my Reason #3 above: When I fire up my web browser I'm not bombarded with confident non-expert opinions about earthquakes, despite seismology's apparent inability to predict them.
True, but seismologists are pretty up front about this, including any seismologist in the press. I think there's a public perception that while seismologists realize their shortcomings, and are therefore probably "on the job" in terms of trying new stuff, macroeconomists might have declared premature victory.
I don't think the modesty of seismologists is the issue. For one thing I don't think that declaring premature victory deprives people of their influence. Prominent pundits and politicians all express extreme confidence that they understand the world. They are influential. I think one clear difference is that seismologists can predict lots of things, just not the thing that we care about for practical reasons. It is hard to doubt that their model of earthquakes is approximately correct. In any case, there is an overwhelming consensus -- when there is an earthquake siesmologists publicly agree about things that happened under the earth.

I think the problem here is that the analogy is much too kind to macroeconomists. It is true that macroeconomists can't predict recessions. It is also true that macroecomists almost all admit this. However, macroeconomists don't agree on the explanation of what happened. Also macroeconomic models have lots of implications which can be confronted with the data. However they don't fit the data as the implications of models of plate tectonics do.

Finally, I think point 2 it is critical. Seismology does not involve ideology (although it has gigantic implications such as get the hell out of Tokyo). Notably lots of non experts have strong opinions about global warming and evolution by natural selection.

A lot of macro people in the press express a lot of certitude about things. John Taylor expresses incredible confidence that the Taylor Rule (with coefficients of exactly 1.5 and 0.5!) is THE best monetary policy rule. Scott Sumner expresses incredible confidence that NGDP targeting is best. Paul Krugman expresses incredible confidence that fiscal stimulus is effective and that austerity is counterproductive. John Cochrane expresses incredible confidence that structural form - removing "sand in the gears" - is the best medicine for an economy in recession. Robert Lucas said that the "central problem of depression prevention has been solved." And so on, and so forth.

I think normal people realize that that certitude is basically never warranted. Yes, those economists often (but not always) have some evidence to back up their claims. But not the kind of evidence that people have in disciplines where data is more abundant, controlled, and replicable.

Here I object to the Ballance. I think there is overwhelming evidence that, when the economy is at the zero lower bound, stimulus is effective and austerity is counterproductive. I think the evidence collected in the 1930 was overwhelming. I think the evidence collected so far in the 21st century is overwhelming. I actuall challenge Noah Smith -- do you really think that Krugman's confidence in claims on those points is "incredible" ? Here's another one -- do you doubt that austerity in economies at the ZLB is counterproductive ?

On the others, Lucas said that long ago (I remember I was in the room) and wasn't widely quoted in the mass media. Again I ask how prominent Sumner and Cochrane are.

update 2: I don't know where to put this but here's some more Krugman fandom. Prominent pundits all express extreme confidence that they understand the world, but none of the others in a small sample of 26 were as successful forecasters as Krugman (pdf warning). Almost everyone must have been put off by his intellectual confidence and his eagerness to say I told you so. However, people who have been keeping track have to notice just how often he claims he told us so and how he always provides links to him telling us so. Noah and Decker agree that a problem for macroeconomists is that we have very little data and no experimental data. I think this is special pleading. Existing macroeconomics is based on the the decision that the 30s are irrelevant and Indonesia is irrelevant and Argentina is irrelevant. We have few data, and we ignore a substantial fraction of them, because they are inconsistent with our models. Even the most standard data set (post WWII US quarterly) doesn't fit the models at all. Yes it is hard to do well without decent data. But it is also hard to do as badly as macroeconomists have without decent data.

And this brings us to

Macroeconomists know more than a lot of people think they do. That doesn't mean they know a lot. And macro discussions in the public sphere tend to focus more on the contentious stuff - the stuff where no one really knows all that much. That's where normal people feel justified jumping in. If you tell them that investment is the most volatile component of GDP, they're not going to argue.
I note again that Noah is no admirer of current macroconomics, but this is pathetic update: not a convincing defence of current macroeconomics which convincing defence is not likely to come from harsh critic of current macroeconomics Noah Smith who wasn't trying to defend existing macroeconomics in that post anyway end update. The discovery is a simple measurement. People can guess that macroeconomists know the coefficient of variation of consumption and investment. People also have good reason not to bow down to the superior insight of someone who has done that calculation. A more interesting question is whether the pattern is convincingly explained by existing models (no) and whether it is easy to explain in many different reasonably convincing ways (yes).

Update: welcome noahpinioners I really really want to extend and revise this paragraph. First, it is important that Noah Smith is a very harsh critic of macroeconomics. In the post to which I link, he mentions that there are non controversial claims in macroeconomics, but one just can't expect him to be the one who comes up with a convincing defence of current macroeconmics. I didn't mean to say that no example of a statement which is accepted by almost all macroeconomists and isn't obvious -- say just a measurement exists. I just mentioned that he (unsurprisingly ) didn't present such a statement. Oh now I am in a bit of trouble, as a commenter might ask me if I, Robert Waldmann, can come up with a non obvious statement accepted by almost all macroeconomists, and especially one not accepted by almost everyone in general. I will try 1. This recession isn't the end of the world. It's mostly cyclical. We are well into a recession so growth is likely to be unusually high averaged over the next 5 years. I think every reccession a lot of people decide that this time its different and we will go into a second great depression. Macroeconomists generally believe in mean reversion. This is, in fact, a measurement with atheoretical VARs implying hump shaped impulse response functions. I don't think it is controversial anymore and it is not obvious. Now maybe it should be controversial as the current troubles seem to have lasted for a long long time. but they haven't lead to total collapse (except in Greece -- massive foreign denominated debt makes things different and macroeconomists know this).

2.Government spending and deficits do not cause low output quickly and in the short run. There is a wide range of guesses of fiscal multipliers but none is well below zero. I think the range is zero (Fama Lucas) to 2.3 (Brad DeLong of course). I think this view is not shared by lots of ordinary people and also by a signficant number of policy makers. Macroeconomists also generally guess that deficits and unproductive government spending probably reduce the trend rate of growth.

I am, if anything, more harshly critical of existing macroeconomics than Noah, but that was a good faith effort. end update.

There are statements which aren't contentious in macroeconomics because almost all macroeconomists assume they are true, when doing academic work, and almost all macroeconomists agree that they are false (but maybe models based on those assumptions might be OK because who knows anything might be). This is not the sort of consensus which wins a field respect.

I think the post is excellent. I would put a lot of stress on point 3. I'd say that, when I think as a citizen and try to guess what policies are effective, I rely on Keynes and ignore the other stuff which was written since 1937 (date of the QJE article not The General Theory). I think I am not so unusual (and I am being paid as a macroeconomist). When I think of pure economic science, I think the same way. This is very unusual, but why ?

Matthew Yglesias's Gaffe

I learn from this wonderfully titled wonderful post "Randomgate is why politicians are so boring" that Obama's gaffe in which he said the attack on the Kosher supermarket in Paris was "random" violence when it was (as the Obama administration has said many times) anti semitic violence was an answer to a question asked by Matt Yglesias in the huge Klein Yglesias Obama interview (which I haven't watched). So Yglesias was right there. He complains that the gaffe he quoted was blown out of proportion. This sort of complaint (more ususally made by the person who uttered the gaffe not the one who reported it without noticing its gaffosity) is generally quite possible the most boring content of serious news. The media have to report the complaint to be fair, but the complaint usually is based on treating "quoted out of context" to mean "quoted." Strangely, Yglesias's post is absolutely brilliant. Read it. Yglesias fans will recognize some of his favorite themes, so the post is not a wildly original addition to the Yglesias literature, but the whole post is a devastating critique of political journalism made by someone right in the eye of the storm.

Saturday, February 14, 2015

Quote of the Day

Robert (not Paul) Waldmann wishes that he and not Paul (not Robert) Waldman had written
And New York City, population 8.4 million, just went ten days without a murder for the first time on record. Which is apparently what happens when you elect a socialist liberal hippie mayor who disrespects the police.

Talk about Wiki

IIRC Wiki means quick in Hawaiian and it sure is. Kate Brown will be sworn in as governor of Oregon on Wednesday and the Wikipedia already includes her on its list of female US state governors. from which I learn that the first states to have female governors were Wyoming, Texas and Alabama. Of course. I also find it odd that, this time last year, four of six female governors were Republicans. Jan Brewer (R Az) retired, so next Wednesday there will be as many Democratic as Republican female governors. Other than the Wikipedia, most news organizations have mainly focused on the fact that Gov. (next Wed.) Brown is openly bisexual.

Monday, February 02, 2015

I Don't Dare click the link

I don't dare click this link but I sure liked the pingback excerpt
Pingback excerpt: […] down. Robert Waldmann, a blogger and remarkable gladiator of a Keynesian team, responded in a post of his own.

2 complaints about Chait

Jon Chait has irritated me in two ways. First he doesn't post often enough. Time after time I surf to and find the same posts I've already read. I think I check for new posts approximately four times per actual new post. Second he has written a second post on political correctness. I have not read this post (this is news). I do not plan to read this post. The point of this post is that if Chait wrote something which I ,the Chait addicted Robert Waldmann, choose not to read, then he has a problem. The pointlessness of this post below. I suspect that I would find the post irritating and boring, so I will just critique the Title "Secret Confessions of the anti-anti-pc movement: in their hearts they know I'm right". In fact, based on the title alone, I suspect that it is based on a false dichotomy (a fallacy more common than any other fallacy or any valid method of reasoning) and, in particular, the claim that any concession that some pc policing has ever been other than optimal implies that in their hearts Chaits critics know he is right to write "While politically less threatening than conservatism (the far right still commands far more power in American life), the p.c. left is actually more philosophically threatening. It is an undemocratic creed." (of course there aren't any anti free speech conservatives burning Dixie Chick records or, oh hell, declaring President Bush above the law and besides who ever said that that torture is undemocratic ?). Again without reading the post, I note that Chait's critics probably agree that the police have sometimes acted other than optimally. That doesn't mean that we want to eliminate the police force. Why do milder criticisms of some of the pc police suggest we agree with Chait ? Now one might ask why I don't complain about the original anti-PC post. I did have some other than favorable thoughts but they were balanced an aspect which I appreciated. I thought the article addressed a deeply boring topic, was too long by a factor of three, and was unconvincing. Among all those words, I found anecdotes but nowhere near solid evidence that political correctitude in the USA had risen declined and risen again. Nor was I convinced that PC excesses are a significant problem. But I looked forward to the epic cyber-mobbing in store. I'm tempted to claim that I roughly guessed its epic scale. What Digby said "The guy deserves a trolling bonus. Nobody does it better." And, in the end, I think one anti-PC hippy bashing post is better than none. Now I know how it feels to be a conservative reading Chait.

Sunday, February 01, 2015

A Question for Those Skeptical about Fiscal Stimulus

There are many opponents of fiscal stimulus that argue that it doesn't work (e.g. Robert Lucas (search for (Laughs.) & Eugene Fama (search for Fama:)). Some argue that nominal aggregate demand affects only the price level. But others argue that fiscal stimulus doesn't affect aggregate demand. My question is what about Argentina.

Argentina has fairly high inflation. Amost no one trusts the official number (11%) and sober serious people are Argentine inflation truthers estimating the rate as about 30%. People with normal dislike of inflation might think ARgentina could use a reduction of aggregate demand. Do fiscal policy skeptics who think Argentina would benefit from lower aggregate demand think that a temporary reduction in Argentine public spending would cause reduced aggregate demand ?

The point of asking oneself about Argentina is that it reverses the relationship between disliking government spending and doubting the effects of fiscal policy on aggregate demand.

If someone who considers himself a fiscal stimulus skeptic realizes that he thinks that austerity is a good anti inflation tool, then he has a puzzle to solve.

I also ask those who believe in expansionary austerity if they think that Argentina should cut aggregate demand and inflationry pressure by raising public spending. If the problem is the over exuberant confidence fairy, then policy should be designed to damage confidence.

update: as usual, I didn't expect anyone to link here. Given the traffic, I have updated two ways. First I have added links to the stimulus skepticism I have in mind. Note the claims to which I link are not qualified by any assertions about monetary policy. Also I added paragraph breaks.