P.s. When in a rush Paul Krugman whipped out a nominal graph. I did not monopolise the very rude comments. Here I barbarically deflated government expenditures by the gdp deflator before calculating the annual growth rate
Http://www.tinyurl.com/Gipbama
Does anyone know how the hell to use bit.ly with an iPad ?
Sunday, March 04, 2012
Saturday, March 03, 2012
Populist he aint
Morgan Stanley managing director William Bryan Jennings arrested for stabbing cab driver following an argument about the fare (which he could afford).
William Jennings Bryan is turning over in his grave.
But the trial could be even more fun than the monkey trial.
via Atrios
Morgan Stanley managing director William Bryan Jennings arrested for stabbing cab driver following an argument about the fare (which he could afford).
William Jennings Bryan is turning over in his grave.
But the trial could be even more fun than the monkey trial.
via Atrios
Modern Macroeconomic Methodology
Modern Macroeconomic Methodology (MMM) rests on two pillars: Milton Friedman's methodology of positive economics and the Lucas critique. The problem is that an alternative possible title for "Econometric Policy Evaluation: A Critique" is "The Methodology of Positive Economics: A Critique." One of the pillars consistgs essentially of the claim that the other is unsound.
How can two opposite claims both support the same theoretical edifice ? I think it is very simple, Friedman's methodology for me, the Lucas critique for thee.
Below I argue my claims.
A nickel version of Friedmans methodology of positive conomics start with models can be useful even if they are not true (even if they are false by definition). This is universally agreed. This implies that we shouldn't treat models as hypotheses to be tested , so we are not necessarily interested in every testable implication of the model. Instead we should care about the implications of the model for the variables which matter to us. The reason is that if the model fits the data on those variables we can reasonably use it to forecast those variables.
The Lucas critique argues that a model can fit but not be useful for conditional forecasts. Following Marschak and many others (as cited in the paper which includes the text "no claim of originality") Lucas argued that the forecasts which most interest us are forecasts of how things will be different if policy is changed, but a model might fit the data for one policy regime and not for another. To get this far, it is enough to note that correlation isn't causation. A model in which fluctuations in A cause B can fit data generated by a world where B causes A exactly until a policy maker begins to manipulate A (for example hoping to influence B).
In particular, Lucas (and his followers and leaders) focus on how expected future policy affects current behavior. The true objective mathematical expected value of future policy variables conditional on current data depends on the policy rule. Unless there is no connection between what is likely to happen and what people think is likely to happen, the link between data and expected policy must change when the policy changes. One way to force oneself to consider this is to assume that agents know the true objective probability distribution of everything -- that they have rational expectations. Lucas ordered economists to so assume and the vast majority have obeyed.
But note that Lucas's argument is exactly that an model can fit past data and yet yield misleading forecasts, and, in particular, mislead us about the effects of policy reforms which are exactly the most important forecasts. It seems to me that Friedman's methodology and the Lucas critique are not just logically inconsistent but basically opposite -- that the substance of Lucas's paper is a critique of Friedman's.
I have to put the key example which mattered somewhere so I will put it here. Lucas and Friedman agreed on something very important. They agreed that it was unwise to trust the Phillips curve. Phillips innocently noted a very simple pattern relating wage inflation and unemployment in the UK over a century (he is not to blame for the use made of his scatter plot). Some people decided that this showed a menu of options open to policy makers who could choose high inflation and low unemployment or low inflation and high unemployment. Friedman (and separately Phelps) argued that this made no sense. That if the inflation rate increased 1% and remained at that level forever, firms and workers would eventually incorporate 1% more expected price inflation when negotiating wages. So the effect of a permanent increase of inflation should be temporary. This is the key example which illustrated the Lucas critique. It is, in fact, the key reason macroeconomists decided in the 70s that they had been barking up the wrong tree. The Phillips curve was augmented so that the unemployment rate was related to actual inflation minus expected inflation (not just inflation alone). It is very hard to believe (OK impossible) that expected inflation is exogenous. Inflation depends on policy and so should expected inflation (note I have not assumed rationoal expectations just not totally dumbe expectations). The view became that the problem is that expected inflation, a key variable, which changes and which depends on policy, just happened to not change much in the UK during the century studies by Phillips. If you just look at the data and are an accidental theorist, you make assumptions which you would never make if you thought about them.
I promise the reader fortunate enough to not know economists that the claim that the two papers are the foundation of MMM (and a lot of modern microeconomic methodology too) is not controversial. How can this be ?
Friedman's argument is used whenever the realism of assumptions is questioned. The conclusion of the discussion is (in my experience) that the models might be useful and we should check if they are and not dismiss them. But it is also argued that it is essential for an economic model to have agents with well defined objectives maximizing, at least, the subjective expected values of their objectives. In practice, rational expectatoins are almost always assumed. Specifically it is almost universally agreed that we don't have rational expectations (I can recall one economist once claiming he thought we did but I think he was joking). Yet it is still often argued that models with agents with rational expectations might be useful and that we must assume rational expectations or our conclusions will be proven invalid in advance by Lucas.
The claim that rational expectations must be assumed is not as common as it was in the 80s. Many argue that one can assume rational expectations or some kind of boundedly rational learning such that agents can't be tricked by policy makers into always making expectational errors of the same sign. I think it is easy to prove that no such model can be tractable in the sense that expectations are a tractable function of available information.
Proof: If we can handle a model of boundedly rational learning and figure out agents' expected value of policy variable X as a function of lagged information, then the policy maker can figure it out then set X to that expected value plus one. So, in practice, fear of the Lucas critique forces people to assume rational expectations (not immediately, it might take some a while to come up with the not so hard proof above, but soon and for the rest of their lives).
I think the last paragraph is the only thing I have written so far which might be controversial.
The problem is that the reasoning is a logical falacy. The logic is that if we don't assume rational expectations and instead assume some other tractable expectations, then our work is definitely vulnerable to the Lucas critique. The conclusion is that if we assume rational expectations it might not be. That is if P implies Q then not P implies not Q.
It is absolutely not sufficient to make assumptions about tastes and technology then have agents with the tastes use the technology rationally to avoid fitting the past and totally failing to forecast the effects of a change in policy. It would be fine to use the model if the model were the truth (then the forecasts would be the best possible). It would also be fine if we knew it were approximately true (which just means that the forecasts will be close to the best possible). It is not at all enough to know that it fits available data.
An example. One model of interest to macroeconomists is the model of a representative consumer. The idea is that aggregate consumption is (about) what it would be if (for example) we were all identical and rationally maximised a utility function whcih depends on the stream of consumption. In the simplest version, it is assumed that the utility function is the sum of a term which depends on consumption and a term which depends on everything else (so consumption saving decisions are separate from all other decisions) Also in the oldest version the utility function is assumed to be time seperable -- the sum of terms each of which depends on consumption in one period. Typically pleasure now is an unchanging function of consumption now and the consumer maximizes the stream of pleasure discounted exponetially due to impatience. In
It is very common (OK universal in fact and for relatively good reason) to assume utility functions in a parametric class called constant elaasticity of substitution. So we can try to fit the data estimating as few as two parameters the impatience factor and the intertemporal elasticity of substitution of consumption. Embarassingly estimates of the intertemporal elasticity of consumption are tiny (about 0.1) . Here is a model which fits the data not horribly (badly enough to be rejected against alternatives) but which gives implications which no one takes seriously -- that the rate of growth of consumption would increase by 0.5% if after tax real interest rates permanently increased 5%.
One way in which some economists deal with this problem is to assume that the utility function is not time separable due to habit formation (as discussed by Keneys among others). The idea is that low consumption is particularly painful to people who have had high consumption (the manner to which he/she has become accustomed). One way to think of it is that consumption is addictive. This is absolutely consistent with full rationality. It can cause a low estimate of intertemporal elasticity. However the long run effect of a permanent increase in the real interest rate is not tiny.
But see what has happened here. Writing down an optimizing model and fitting it to the data gave parameter estimates which imply terrible long term predictions. A variable (the degree of addiction to consumption) which is exogenous was not considered or, at least, was considered exogenous when it is exogenous. This is just like the case of expected inflation in the old expectations unaugmented Phillips curve.
Notice I have assumed throughout that there is a representative consumer with rational expectations.
I conclude that if you look at the data and then try to analyse them with a tractable model , you risk making assumptions which you don't believe (really its a certainty not a risk) and which are critical to your predictions. I think no problem is or could be elminated by putting some utility maximization between the assumptions and the implications which are confronted with data from the past then used to predict the future.
I think all of our models and hypotheses will be vulnerable to the Lucas critique. This is true just because we have to make assumptions which matter, in order to think about the world. When I wrote "our" I referred to us human beings not just us economists.
Modern Macroeconomic Methodology (MMM) rests on two pillars: Milton Friedman's methodology of positive economics and the Lucas critique. The problem is that an alternative possible title for "Econometric Policy Evaluation: A Critique" is "The Methodology of Positive Economics: A Critique." One of the pillars consistgs essentially of the claim that the other is unsound.
How can two opposite claims both support the same theoretical edifice ? I think it is very simple, Friedman's methodology for me, the Lucas critique for thee.
Below I argue my claims.
A nickel version of Friedmans methodology of positive conomics start with models can be useful even if they are not true (even if they are false by definition). This is universally agreed. This implies that we shouldn't treat models as hypotheses to be tested , so we are not necessarily interested in every testable implication of the model. Instead we should care about the implications of the model for the variables which matter to us. The reason is that if the model fits the data on those variables we can reasonably use it to forecast those variables.
The Lucas critique argues that a model can fit but not be useful for conditional forecasts. Following Marschak and many others (as cited in the paper which includes the text "no claim of originality") Lucas argued that the forecasts which most interest us are forecasts of how things will be different if policy is changed, but a model might fit the data for one policy regime and not for another. To get this far, it is enough to note that correlation isn't causation. A model in which fluctuations in A cause B can fit data generated by a world where B causes A exactly until a policy maker begins to manipulate A (for example hoping to influence B).
In particular, Lucas (and his followers and leaders) focus on how expected future policy affects current behavior. The true objective mathematical expected value of future policy variables conditional on current data depends on the policy rule. Unless there is no connection between what is likely to happen and what people think is likely to happen, the link between data and expected policy must change when the policy changes. One way to force oneself to consider this is to assume that agents know the true objective probability distribution of everything -- that they have rational expectations. Lucas ordered economists to so assume and the vast majority have obeyed.
But note that Lucas's argument is exactly that an model can fit past data and yet yield misleading forecasts, and, in particular, mislead us about the effects of policy reforms which are exactly the most important forecasts. It seems to me that Friedman's methodology and the Lucas critique are not just logically inconsistent but basically opposite -- that the substance of Lucas's paper is a critique of Friedman's.
I have to put the key example which mattered somewhere so I will put it here. Lucas and Friedman agreed on something very important. They agreed that it was unwise to trust the Phillips curve. Phillips innocently noted a very simple pattern relating wage inflation and unemployment in the UK over a century (he is not to blame for the use made of his scatter plot). Some people decided that this showed a menu of options open to policy makers who could choose high inflation and low unemployment or low inflation and high unemployment. Friedman (and separately Phelps) argued that this made no sense. That if the inflation rate increased 1% and remained at that level forever, firms and workers would eventually incorporate 1% more expected price inflation when negotiating wages. So the effect of a permanent increase of inflation should be temporary. This is the key example which illustrated the Lucas critique. It is, in fact, the key reason macroeconomists decided in the 70s that they had been barking up the wrong tree. The Phillips curve was augmented so that the unemployment rate was related to actual inflation minus expected inflation (not just inflation alone). It is very hard to believe (OK impossible) that expected inflation is exogenous. Inflation depends on policy and so should expected inflation (note I have not assumed rationoal expectations just not totally dumbe expectations). The view became that the problem is that expected inflation, a key variable, which changes and which depends on policy, just happened to not change much in the UK during the century studies by Phillips. If you just look at the data and are an accidental theorist, you make assumptions which you would never make if you thought about them.
I promise the reader fortunate enough to not know economists that the claim that the two papers are the foundation of MMM (and a lot of modern microeconomic methodology too) is not controversial. How can this be ?
Friedman's argument is used whenever the realism of assumptions is questioned. The conclusion of the discussion is (in my experience) that the models might be useful and we should check if they are and not dismiss them. But it is also argued that it is essential for an economic model to have agents with well defined objectives maximizing, at least, the subjective expected values of their objectives. In practice, rational expectatoins are almost always assumed. Specifically it is almost universally agreed that we don't have rational expectations (I can recall one economist once claiming he thought we did but I think he was joking). Yet it is still often argued that models with agents with rational expectations might be useful and that we must assume rational expectations or our conclusions will be proven invalid in advance by Lucas.
The claim that rational expectations must be assumed is not as common as it was in the 80s. Many argue that one can assume rational expectations or some kind of boundedly rational learning such that agents can't be tricked by policy makers into always making expectational errors of the same sign. I think it is easy to prove that no such model can be tractable in the sense that expectations are a tractable function of available information.
Proof: If we can handle a model of boundedly rational learning and figure out agents' expected value of policy variable X as a function of lagged information, then the policy maker can figure it out then set X to that expected value plus one. So, in practice, fear of the Lucas critique forces people to assume rational expectations (not immediately, it might take some a while to come up with the not so hard proof above, but soon and for the rest of their lives).
I think the last paragraph is the only thing I have written so far which might be controversial.
The problem is that the reasoning is a logical falacy. The logic is that if we don't assume rational expectations and instead assume some other tractable expectations, then our work is definitely vulnerable to the Lucas critique. The conclusion is that if we assume rational expectations it might not be. That is if P implies Q then not P implies not Q.
It is absolutely not sufficient to make assumptions about tastes and technology then have agents with the tastes use the technology rationally to avoid fitting the past and totally failing to forecast the effects of a change in policy. It would be fine to use the model if the model were the truth (then the forecasts would be the best possible). It would also be fine if we knew it were approximately true (which just means that the forecasts will be close to the best possible). It is not at all enough to know that it fits available data.
An example. One model of interest to macroeconomists is the model of a representative consumer. The idea is that aggregate consumption is (about) what it would be if (for example) we were all identical and rationally maximised a utility function whcih depends on the stream of consumption. In the simplest version, it is assumed that the utility function is the sum of a term which depends on consumption and a term which depends on everything else (so consumption saving decisions are separate from all other decisions) Also in the oldest version the utility function is assumed to be time seperable -- the sum of terms each of which depends on consumption in one period. Typically pleasure now is an unchanging function of consumption now and the consumer maximizes the stream of pleasure discounted exponetially due to impatience. In
It is very common (OK universal in fact and for relatively good reason) to assume utility functions in a parametric class called constant elaasticity of substitution. So we can try to fit the data estimating as few as two parameters the impatience factor and the intertemporal elasticity of substitution of consumption. Embarassingly estimates of the intertemporal elasticity of consumption are tiny (about 0.1) . Here is a model which fits the data not horribly (badly enough to be rejected against alternatives) but which gives implications which no one takes seriously -- that the rate of growth of consumption would increase by 0.5% if after tax real interest rates permanently increased 5%.
One way in which some economists deal with this problem is to assume that the utility function is not time separable due to habit formation (as discussed by Keneys among others). The idea is that low consumption is particularly painful to people who have had high consumption (the manner to which he/she has become accustomed). One way to think of it is that consumption is addictive. This is absolutely consistent with full rationality. It can cause a low estimate of intertemporal elasticity. However the long run effect of a permanent increase in the real interest rate is not tiny.
But see what has happened here. Writing down an optimizing model and fitting it to the data gave parameter estimates which imply terrible long term predictions. A variable (the degree of addiction to consumption) which is exogenous was not considered or, at least, was considered exogenous when it is exogenous. This is just like the case of expected inflation in the old expectations unaugmented Phillips curve.
Notice I have assumed throughout that there is a representative consumer with rational expectations.
I conclude that if you look at the data and then try to analyse them with a tractable model , you risk making assumptions which you don't believe (really its a certainty not a risk) and which are critical to your predictions. I think no problem is or could be elminated by putting some utility maximization between the assumptions and the implications which are confronted with data from the past then used to predict the future.
I think all of our models and hypotheses will be vulnerable to the Lucas critique. This is true just because we have to make assumptions which matter, in order to think about the world. When I wrote "our" I referred to us human beings not just us economists.
Damnedest if they do damnedest if they don't.
Chris Cillizza wrote
Boy if that's their damnedest, I like Democrats' chances. "inappropriate" ouch -- that's got to leave a mark.
But my point, if there is one, is that the three are presented as typical when they aren't. For example, it appears that at press time, Mitt Romney was still doing his damnedest to dodge the question. Since then he has done his darnedest (well maybe just his drattest) to distance himself going so far as to say that those are not the words he would have used.
Also (see post below) Cillizza changes policy on anonymous quotes in the middle of his article writing both " said one senior party strategist granted anonymity to speak candidly out of wariness of crossing Limbaugh publicly" and "the amount of discussion on birth control had many senior GOP strategists nervously wringing their hands and wishing privately that the presidential candidates would get back to talking about the economy." Cillizza neither named those senior GOP strategists nor explained why he granted them anonymity.
Chris Cillizza wrote
Republican politicians are doing the damndest to distance themselves from Limbaugh. House Speaker John Boehner called Limbaugh’s comments “inappropriate” . Carly Fiorina, a 2010 candidate for Senate in California and now the vice chairwoman of the National Republican Senatorial Committee, described Limbaugh’s remark as “insulting”. Of Limbaugh, former Pennsylvania senator Rick Santorum said: “He’s being absurd, but that’s you know, an entertainer can be absurd. He’s in a very different business than I am.”
Boy if that's their damnedest, I like Democrats' chances. "inappropriate" ouch -- that's got to leave a mark.
But my point, if there is one, is that the three are presented as typical when they aren't. For example, it appears that at press time, Mitt Romney was still doing his damnedest to dodge the question. Since then he has done his darnedest (well maybe just his drattest) to distance himself going so far as to say that those are not the words he would have used.
Also (see post below) Cillizza changes policy on anonymous quotes in the middle of his article writing both " said one senior party strategist granted anonymity to speak candidly out of wariness of crossing Limbaugh publicly" and "the amount of discussion on birth control had many senior GOP strategists nervously wringing their hands and wishing privately that the presidential candidates would get back to talking about the economy." Cillizza neither named those senior GOP strategists nor explained why he granted them anonymity.
I ask the Washington Post a question.
As a comment on this article, I posted
OK now that it's posted, I will google.
This is pretty recent. It gives no hint as to what the Washington Post policy is (it refers to the policy but does not provide a link).
I go back from Romanesko to Washington Post Ombudsman Andrew Alexander.
This makes it clear that the alleged policy requires explaining why they were granted anonymity.
Obviously the true policy includes no such requirement as is dramatically demonstrated by, you guessed it, The Washington Post ombudsman (not Alexander but the newer Patrick Pexton)
"And, I, too, see cautionary notes about Vargas that might have led to Brauchli’s decision. He left behind a reputation in The Post’s newsroom for being tenacious and talented but also for being a relentless self-promoter whom many colleagues didn’t trust. Editors said that he needed direction, coaching and constant watching."
I got this from Romanesko who got it from Adam Penenberg.
As a comment on this article, I posted
In this articles sources are quoted without being named "Sources say", "a Republican aide", "Both Democrats and Republicans say that those votes suggest", "another Republican aid", and "Democrats counter."
My understanding was that it is Washington Post policy to grant anonymity only for good reason *and* to always describe the reason anonymity was granted. When was the policy changed ? Could you Rachel Weiner provide a link to the new policy which explains why this article doesn't blatantly violate Washington Post policy as that policy is described to the public ?
I note that "both Democrats and Republicans" were granted anonymity so that they could express their shared theory as to why Senators voted as they did. Since sources granted anonymity were talking about what the data "suggest" (your word) it is hard to see how they could be characterized as whistle blowers. Would thinking on the job really cause them to risk being fired ?
To be frank, I think the Washington Post has decided to lie to its readers claiming to have one policy when it has a completely different policy. Of course if I missed the announcement that the policy has been completely utterly 100% changed, I apologize.
OK now that it's posted, I will google.
This is pretty recent. It gives no hint as to what the Washington Post policy is (it refers to the policy but does not provide a link).
I go back from Romanesko to Washington Post Ombudsman Andrew Alexander.
Staff-written news blogs are replete with violations of The Post's long-established and laudable standards governing confidential sources. These unnamed sources often are cited without providing readers with even a hint of their reliability or why they were granted anonymity.
This makes it clear that the alleged policy requires explaining why they were granted anonymity.
Obviously the true policy includes no such requirement as is dramatically demonstrated by, you guessed it, The Washington Post ombudsman (not Alexander but the newer Patrick Pexton)
"And, I, too, see cautionary notes about Vargas that might have led to Brauchli’s decision. He left behind a reputation in The Post’s newsroom for being tenacious and talented but also for being a relentless self-promoter whom many colleagues didn’t trust. Editors said that he needed direction, coaching and constant watching."
I got this from Romanesko who got it from Adam Penenberg.
Thursday, March 01, 2012
Don't blame God Duncan, blame Huntsman. Atrios figures God must hate him, because Bob Kerrey decided to run for the senate from his old cornhusker hustings. I think he should blame John Huntsman.
Huh ? OK there were two Senate surprises, Kerrey is running and Snowe is not. Snowe mentioned options outside of the Senate. Jon Chait ( presumably among others) suspects that she means running for President nominated by Americans Elect (they wish) the new cyberparty filling the yawning gap in opportunities for mega rich financiers to influence politics. Americans elect has a rule that their Presidential and vice Presidential candidates must be from different parties. Obviously it can be a bit tricky to find someone willing to eatrubber chicken in a no hope attempt to be second dog.
David Boren, who liked to piss me off by pretending to be a Democrat just declared his love for America's elect sorry, I mean Americans Elect ( shhhh it's not as if anyone didn't guess but you're not supposed to type it where the riff raff can read it. So that's one many temr reprehensative willing to pretend to hope to be VP. Suddenly Kerrey is available for Senate duty and Snowe isn't.
With neither evidence nor doubt, I am sure that Americans Elect tried to recruit Huntsman, Obama's ambassador to the PRC, Utah governor for Gay rights, too modeerate for Republicans and rabidly in favor of tax cuts for the rich. But he and Kerrey couldn't agree who would top the ticekt so we will have a chance to mainly not vote for Snowe Boren.
No evidence but look me in the eye your screen and tell me that you doubt it.
Or if you want more tinfoil, do you really think it is a coincidence that the Egyptian genersls just let Republican sect of transportation Ray LaHood's son leave the ocountry ? Why were they messing with a cabient secretary. I'm not suggesting that American's elect would resort to threatening to arrest a worker for the internstional Republican institute as part of their effort to end the two party sytem and their desperate search for a VP candidate. That would be crazy
Huh ? OK there were two Senate surprises, Kerrey is running and Snowe is not. Snowe mentioned options outside of the Senate. Jon Chait ( presumably among others) suspects that she means running for President nominated by Americans Elect (they wish) the new cyberparty filling the yawning gap in opportunities for mega rich financiers to influence politics. Americans elect has a rule that their Presidential and vice Presidential candidates must be from different parties. Obviously it can be a bit tricky to find someone willing to eatrubber chicken in a no hope attempt to be second dog.
David Boren, who liked to piss me off by pretending to be a Democrat just declared his love for America's elect sorry, I mean Americans Elect ( shhhh it's not as if anyone didn't guess but you're not supposed to type it where the riff raff can read it. So that's one many temr reprehensative willing to pretend to hope to be VP. Suddenly Kerrey is available for Senate duty and Snowe isn't.
With neither evidence nor doubt, I am sure that Americans Elect tried to recruit Huntsman, Obama's ambassador to the PRC, Utah governor for Gay rights, too modeerate for Republicans and rabidly in favor of tax cuts for the rich. But he and Kerrey couldn't agree who would top the ticekt so we will have a chance to mainly not vote for Snowe Boren.
No evidence but look me in
Or if you want more tinfoil, do you really think it is a coincidence that the Egyptian genersls just let Republican sect of transportation Ray LaHood's son leave the ocountry ? Why were they messing with a cabient secretary. I'm not suggesting that American's elect would resort to threatening to arrest a worker for the internstional Republican institute as part of their effort to end the two party sytem and their desperate search for a VP candidate. That would be crazy
Wednesday, February 29, 2012
Why is this news ? On page A1 of www.washingtonpost.com
Notice that the word "New" does not appear before "Bunker-busting". I know that the program to produce such weapons was announced more than 23 years ago (I was in the NBER coffee room, Jim Hines read an article describing the announcement said "It's about time." (irony alert).
So why is the existence of such weapons front page news ? The real meaning of the article is that some prominent Washingtonians have decided to begin a campaign in favor of bombing Iran. The point of the article is to announce that fact. The sophisticated reader is expected to understand this. Only the naive imagine that there is anything new to report on US ability to destroy targets under 200 feet of dirt and rock.
The Washington Post serves as a notice board for semi official leaks (I'd have to read the article to even try to guess who is behind it). So why do they pretend that they are reporting technology news not participating in a political signalling game ?
Iran’s underground nuclear site more vulnerable than portrayed, experts say
Joby Warrick
Bunker-busting weapons have capability to bore through up to 200 feet of dirt and rock before exploding
Notice that the word "New" does not appear before "Bunker-busting". I know that the program to produce such weapons was announced more than 23 years ago (I was in the NBER coffee room, Jim Hines read an article describing the announcement said "It's about time." (irony alert).
So why is the existence of such weapons front page news ? The real meaning of the article is that some prominent Washingtonians have decided to begin a campaign in favor of bombing Iran. The point of the article is to announce that fact. The sophisticated reader is expected to understand this. Only the naive imagine that there is anything new to report on US ability to destroy targets under 200 feet of dirt and rock.
The Washington Post serves as a notice board for semi official leaks (I'd have to read the article to even try to guess who is behind it). So why do they pretend that they are reporting technology news not participating in a political signalling game ?
Tuesday, February 28, 2012
Sunday, February 26, 2012
Does this observation tell us more about Rick Santorum or about David Fahrenthold
"Rick Santorum does not provide doughnuts."
Is the aim to convince the last 3 people who take the political press seriously that they think it is all about them ?
To be deadly serious, I think the key solution is to use the magic power of the internet, or hell how about the telephone. They don't have to ride on the bus and scrounge for doughnuts anymore. They can listen to the speaches from the comfort of their own homes, then fact check them on the web. Maybe someday hard working reporters will have as much interesting to write as lazy amateur bloggers.
But I'm not holding my breath.
Also
"Santorum, ...
His premise is that only he — a man who lacks the logistical wherewithal to rustle up snacks —"
I could have saved Kaplan some ink and paper. "logistical wherewithal" means money. Fahrenthold's position (clearly his deeply held view) is that only candidates who have huge campaign budgets are competent leaders. Just above, he noted the collosal Romney stagecraft fail in Ford Stadium. But Romney has the right stuff to manage, to be a competent CEO -- dollars.
Now I don't like Santorum (see post below). I've always rejected his claim that US Democracies is threatened by internal enemies who are determined to make it fail. But I can't think of another explanation of the existence of this article.
"Rick Santorum does not provide doughnuts."
Is the aim to convince the last 3 people who take the political press seriously that they think it is all about them ?
To be deadly serious, I think the key solution is to use the magic power of the internet, or hell how about the telephone. They don't have to ride on the bus and scrounge for doughnuts anymore. They can listen to the speaches from the comfort of their own homes, then fact check them on the web. Maybe someday hard working reporters will have as much interesting to write as lazy amateur bloggers.
But I'm not holding my breath.
Also
"Santorum, ...
His premise is that only he — a man who lacks the logistical wherewithal to rustle up snacks —"
I could have saved Kaplan some ink and paper. "logistical wherewithal" means money. Fahrenthold's position (clearly his deeply held view) is that only candidates who have huge campaign budgets are competent leaders. Just above, he noted the collosal Romney stagecraft fail in Ford Stadium. But Romney has the right stuff to manage, to be a competent CEO -- dollars.
Now I don't like Santorum (see post below). I've always rejected his claim that US Democracies is threatened by internal enemies who are determined to make it fail. But I can't think of another explanation of the existence of this article.
Thursday, February 23, 2012
Glenn "Pinocchio" Kessler attempts to fact check the Republican presidential debate.
On Santorum's claim that Obamacare adds to the deficit he wrote "the Congressional Budget Office calculated that it slightly reduced the deficit in the first 10 years, though much of the law was not fully implemented in the first four years. All bets are off in the next 10 years, however."
This "fact check" contains one highly misleading observation "though ... years." Since the CBO scored year by year. Kessler must know that the first four years contribute almost nothing to the total, since almost none of the new taxes are being collected.
The "All bets are off" claim, in contrast, is totally false. The CBO scored the Senate budget committee draft bill for the next ten years and reported huge gigantic massive deficit reduction. Kessler might not believe the CBO (which he cites as authoritative in the preceding sentence". He can't however argue that all bets are off because the final bill is different from the draft the CBO scored. The changes have a lot to do with the timing of new taxes (having the cadillac insurance tax start later) and so imply larger deficit reductions in the second 10 years out.
The claim that "All bets are off" could only be true if there were not extensive calculations of the numbers which Kessler denies have been calculated at all. His assertion is simply grossly false. It is also highly inflamatory and on a very important pattern.
I award Glenn Kessler four Pinocchios.
I wrote the above and went back to check more checking
No he doesn't you illiterate. Santorum made a claim about debt not spending. No one who confuses deficits and debt has any place attempting to check facts, but anyone who confuses debt and spending had better enroll in remedial elementary school.
I award Glenn Kessler a dictionary.
I am not going to debt any more of my almost valueless time reading the crap which Kessler writes. Just by reading this far, I feel I have paid my spending to society.
On Santorum's claim that Obamacare adds to the deficit he wrote "the Congressional Budget Office calculated that it slightly reduced the deficit in the first 10 years, though much of the law was not fully implemented in the first four years. All bets are off in the next 10 years, however."
This "fact check" contains one highly misleading observation "though ... years." Since the CBO scored year by year. Kessler must know that the first four years contribute almost nothing to the total, since almost none of the new taxes are being collected.
The "All bets are off" claim, in contrast, is totally false. The CBO scored the Senate budget committee draft bill for the next ten years and reported huge gigantic massive deficit reduction. Kessler might not believe the CBO (which he cites as authoritative in the preceding sentence". He can't however argue that all bets are off because the final bill is different from the draft the CBO scored. The changes have a lot to do with the timing of new taxes (having the cadillac insurance tax start later) and so imply larger deficit reductions in the second 10 years out.
The claim that "All bets are off" could only be true if there were not extensive calculations of the numbers which Kessler denies have been calculated at all. His assertion is simply grossly false. It is also highly inflamatory and on a very important pattern.
I award Glenn Kessler four Pinocchios.
I wrote the above and went back to check more checking
“The 12 years I was in the United States Senate, we went from — the debt-to-GDP ratio, which is now over a hundred percent — when I came to the Senate, it was 68 percent of GDP. When I left the Senate, it was 64 percent of GDP. So government as a size of the economy went down when I was in the United States Senate.”
— Santorum
[skip]
Santorum has spending going down as a percentage of the economy
No he doesn't you illiterate. Santorum made a claim about debt not spending. No one who confuses deficits and debt has any place attempting to check facts, but anyone who confuses debt and spending had better enroll in remedial elementary school.
I award Glenn Kessler a dictionary.
I am not going to debt any more of my almost valueless time reading the crap which Kessler writes. Just by reading this far, I feel I have paid my spending to society.
QOTD. In this case quoting DAY here (first comment).
DAY on February 21, 2012 12:25 PM:
Obama claims to be a Christian; and I will take him at his word.
Santorum claims to be a human, and I will take him at his word.
(Others may want to see DNA evidence)
DAY on February 21, 2012 12:25 PM:
Obama claims to be a Christian; and I will take him at his word.
Santorum claims to be a human, and I will take him at his word.
(Others may want to see DNA evidence)
Kids these days, they just aint got no culture
In comments to Iceland's Saga
Robert WaldmannRome Italy
I searched as you recommended and I got sent to some advertisement by the North Malden Icelandic Saga Society. So tell me, should I invest in North Malden, South Malden or East Malden ?
Feb. 22, 2012 at 6:50 p.m.
joelOakland, CA
Trusted
I didn't. I got exactly the kind of list of blog entries about Iceland one would expect. Sure you were in the right box?
Feb. 22, 2012 at 7:25 p.m.RECOMMEND4
Dem VoterDallas, TX
Use the box labeled "Search This Blog" rather than the one labeled "Search All NYTimes.com."
Uh come on you really think that Search All NYTimes.com sends you here ?
If I thought so then I would Search All NYTimes.com more often.
Someone is not getting the (feeble) joke. Is it me ?
In comments to Iceland's Saga
Robert WaldmannRome Italy
I searched as you recommended and I got sent to some advertisement by the North Malden Icelandic Saga Society. So tell me, should I invest in North Malden, South Malden or East Malden ?
Feb. 22, 2012 at 6:50 p.m.
joelOakland, CA
Trusted
I didn't. I got exactly the kind of list of blog entries about Iceland one would expect. Sure you were in the right box?
Feb. 22, 2012 at 7:25 p.m.RECOMMEND4
Dem VoterDallas, TX
Use the box labeled "Search This Blog" rather than the one labeled "Search All NYTimes.com."
Uh come on you really think that Search All NYTimes.com sends you here ?
If I thought so then I would Search All NYTimes.com more often.
Someone is not getting the (feeble) joke. Is it me ?
Wednesday, February 15, 2012
Generic comment.
Generic comment I made on some other blog which I cut and paste here
Excellent post. I admire you very much. I do have one quibble
(skip)
So the evidence tends to undermine
(skip)
clearly false
(skip)
reckless disregard for the truth
(skip)
I never dreamed that an actual Homo sapiens could write something so stupid
(skip)
might have something to do with damage from congenital syphilis since your mother is a
(skip)
just want to stress again how much I admire you, like your blog and hope that this little disagreement won't make you less willing to link to mine.
Why ?
Generic comment I made on some other blog which I cut and paste here
Excellent post. I admire you very much. I do have one quibble
(skip)
So the evidence tends to undermine
(skip)
clearly false
(skip)
reckless disregard for the truth
(skip)
I never dreamed that an actual Homo sapiens could write something so stupid
(skip)
might have something to do with damage from congenital syphilis since your mother is a
(skip)
just want to stress again how much I admire you, like your blog and hope that this little disagreement won't make you less willing to link to mine.
Why ?
Thursday, February 09, 2012
Simon Wren-Lewis writes more on schools of thought.
I am very very rude in comments
I agree with almost everything here. I will only type about disagreements.
First note the quick mention of "behavioral ..." Then later the casual statement that there is a mainstream consensus in favor of assuming rational expectations. This is a plain contradiction. I think it is clear what is going on -- when we discuss expectations (elicited or maybe revealed in simple experiments) we admit that there are systematic predictable deviations from rationality. Also when we attempt to explain behavior, we admit that what sure looks like the combination of that irrationality and plausible preferences is probably what it seems (although it is always possible to reconcile any behavior with full rationality).
I think it is clear what is going on. Economists like models with rational expectations and all use the same "as if" excuse. Also the Phillips curve turned out not to be an economic law refuting "Keynesian" economics (and confirming Keynes's warning which was as clear as a warning could be given the disadvantage of writing long before Phillips).
Idem with consumption. It is a fact that simple intertemporal optimizing models of consumption are rejected by the data. It is also true that they appear in DSGE models (often made equally harmless and pointless by adding on liquidity constrained agents). Now one might argue that we have moved beyond Keynes by noting factors which affect consumption which he didn't consider, then modifying the model to pick up the large empirical effect of current income. But only if you ignore The General Theory ..."'s chapter on consumption which does exactly that.
Needless to say, Keynes didn't critique econometrics, since it didn't exist in the form critiqued by Lucas when Keynes wrote. However, Lucas made no claim of originality, argued that the critique was very commonly made by the econometricians he critiqued and provided ample references to prove those claims.
So what is left which is "progressive." By the way, I hate that word with which I am mainly familiar from English translations of Trotsky. It was a magic word which explained why something was good even all the evidence at hand suggested it was terrible. Is it possible to write a defense of the rational expectations revolution without using the same magic word used to justify the Bolshevik revolution ?
What claim could possibly be weaker than "if interpreted flexibly, bring net benefits. " This is what one would write about a damaging orthodoxy -- the damage need not be denied given the word "flexibly". The benefits need not be listed, because ... I mean of course everyone who matters agrees that there are benefits.
It seems to me that with great effort by many smart people Macroeconomic theory has worked back to where it was in 1975 or so. There are many models with different implications which can be fiddled until they fit the data. None gives reliably good predictions. What progress justifies your use of "progressive" what net benefits have there been ?
Or finally, and I am asking for information and launching a challenge, what has been added to "The General Theory of Employment Interest and Money" ? I claim that any alleged new insight is either agreed to be false (but hey all models are false and the fact that RBC and New Keynesian models are false doesn't mean they aren't useful blah blah blah) or is in the book (I will provide page references).
I am very very rude in comments
I agree with almost everything here. I will only type about disagreements.
First note the quick mention of "behavioral ..." Then later the casual statement that there is a mainstream consensus in favor of assuming rational expectations. This is a plain contradiction. I think it is clear what is going on -- when we discuss expectations (elicited or maybe revealed in simple experiments) we admit that there are systematic predictable deviations from rationality. Also when we attempt to explain behavior, we admit that what sure looks like the combination of that irrationality and plausible preferences is probably what it seems (although it is always possible to reconcile any behavior with full rationality).
I think it is clear what is going on. Economists like models with rational expectations and all use the same "as if" excuse. Also the Phillips curve turned out not to be an economic law refuting "Keynesian" economics (and confirming Keynes's warning which was as clear as a warning could be given the disadvantage of writing long before Phillips).
Idem with consumption. It is a fact that simple intertemporal optimizing models of consumption are rejected by the data. It is also true that they appear in DSGE models (often made equally harmless and pointless by adding on liquidity constrained agents). Now one might argue that we have moved beyond Keynes by noting factors which affect consumption which he didn't consider, then modifying the model to pick up the large empirical effect of current income. But only if you ignore The General Theory ..."'s chapter on consumption which does exactly that.
Needless to say, Keynes didn't critique econometrics, since it didn't exist in the form critiqued by Lucas when Keynes wrote. However, Lucas made no claim of originality, argued that the critique was very commonly made by the econometricians he critiqued and provided ample references to prove those claims.
So what is left which is "progressive." By the way, I hate that word with which I am mainly familiar from English translations of Trotsky. It was a magic word which explained why something was good even all the evidence at hand suggested it was terrible. Is it possible to write a defense of the rational expectations revolution without using the same magic word used to justify the Bolshevik revolution ?
What claim could possibly be weaker than "if interpreted flexibly, bring net benefits. " This is what one would write about a damaging orthodoxy -- the damage need not be denied given the word "flexibly". The benefits need not be listed, because ... I mean of course everyone who matters agrees that there are benefits.
It seems to me that with great effort by many smart people Macroeconomic theory has worked back to where it was in 1975 or so. There are many models with different implications which can be fiddled until they fit the data. None gives reliably good predictions. What progress justifies your use of "progressive" what net benefits have there been ?
Or finally, and I am asking for information and launching a challenge, what has been added to "The General Theory of Employment Interest and Money" ? I claim that any alleged new insight is either agreed to be false (but hey all models are false and the fact that RBC and New Keynesian models are false doesn't mean they aren't useful blah blah blah) or is in the book (I will provide page references).
Mark Thoma explains the very basics of New Keynesian economics and I am very rude.
I came here clicking a link in a post where you indignantly deny that you are an old Keynesian. I ask what has been added by the very simple inter-temporal optimization ?
It seems to me that New Keynesian macro consists (as here) in writing models with optimizing agents which behave the way old Keynesian models behave. I ask why not cut out the middle man ?
The model as written has implications other than that there is something like an IS curve. As you note, the true expected value (that is rationally expected) of future GDP affects current GDP. Also the real interest rate affects the rate of growth of consumption.
The problem is that, to the extent new Keynessian models differ from old Keynesian models, the data are not kind to the new models. It is a fact that estimates of 1/theta made using aggregate data are tiny -- typically around 0.1. Such low intertemporal elasticities can be reconciled with the long term average rate of growth of consumption only by assuming Beta>1 which is crazy. It is also a fact that the scatter of growth of consumption on the econometricians forecast of r look a lot like scatters of independent variables. Also excess sensitivity is not in the model.
That which has been added is false and has been known to be false for decades.
Now, of course, there are more complicated new Keynesian models which also fit those facts. Like RBC new Keynesian economics can fit any summary statistic with just one arbitrary new variable for summary statistic.
The newness is all about intertemporal optimization without liquidity constraints. It clearly gives false implications. So the model is modified so that it acts just like an old Keynesian model. How is this a worthwhile activity ?
Notably, the micro foundations are not justified on the assumption that people really intertemporally optimize with rational expectations. The argument is that the economy could behave as if they did. If so, the case that it is better for macro models to have micro foundations is based on nothing at all. Anything might work. There is no reason to believe that the definitely false assumptions that new Keynesians like to make are better than any other definitely false assumptions.
What is wrong with Keynes or, for that matter, Hicks ? One might argue that it is unwise to treat a Phillips curve as an economic law holding in all times and places. This is, historically, the fact which convinced macro-economists to work on micro foundations. It was also argued by Keynes in spite of the disadvantage of writing before Phillips. What, of any value, have macroeconomists added to Keynes ? (note I am counting Hicks -- the move from LM to MP is a move from Hicks back to Keynes).
I close this long and very rude comment with the usual on methodology (for no particular reason).
Modern macro rests on the twin methodological pillars of "The Methodology of Positive Economics" and "Econometric Policy Evaluation: A Critique," but a better title for the second paper would be ""The Methodology of Positive Economics: A Critique," since it argues (correctly and as was well known at the time) that even if we don't care if a model is approximately true but only if it gives useful predictions, we must care if a model is approximately true. The model you present here definitely isn't.
I came here clicking a link in a post where you indignantly deny that you are an old Keynesian. I ask what has been added by the very simple inter-temporal optimization ?
It seems to me that New Keynesian macro consists (as here) in writing models with optimizing agents which behave the way old Keynesian models behave. I ask why not cut out the middle man ?
The model as written has implications other than that there is something like an IS curve. As you note, the true expected value (that is rationally expected) of future GDP affects current GDP. Also the real interest rate affects the rate of growth of consumption.
The problem is that, to the extent new Keynessian models differ from old Keynesian models, the data are not kind to the new models. It is a fact that estimates of 1/theta made using aggregate data are tiny -- typically around 0.1. Such low intertemporal elasticities can be reconciled with the long term average rate of growth of consumption only by assuming Beta>1 which is crazy. It is also a fact that the scatter of growth of consumption on the econometricians forecast of r look a lot like scatters of independent variables. Also excess sensitivity is not in the model.
That which has been added is false and has been known to be false for decades.
Now, of course, there are more complicated new Keynesian models which also fit those facts. Like RBC new Keynesian economics can fit any summary statistic with just one arbitrary new variable for summary statistic.
The newness is all about intertemporal optimization without liquidity constraints. It clearly gives false implications. So the model is modified so that it acts just like an old Keynesian model. How is this a worthwhile activity ?
Notably, the micro foundations are not justified on the assumption that people really intertemporally optimize with rational expectations. The argument is that the economy could behave as if they did. If so, the case that it is better for macro models to have micro foundations is based on nothing at all. Anything might work. There is no reason to believe that the definitely false assumptions that new Keynesians like to make are better than any other definitely false assumptions.
What is wrong with Keynes or, for that matter, Hicks ? One might argue that it is unwise to treat a Phillips curve as an economic law holding in all times and places. This is, historically, the fact which convinced macro-economists to work on micro foundations. It was also argued by Keynes in spite of the disadvantage of writing before Phillips. What, of any value, have macroeconomists added to Keynes ? (note I am counting Hicks -- the move from LM to MP is a move from Hicks back to Keynes).
I close this long and very rude comment with the usual on methodology (for no particular reason).
Modern macro rests on the twin methodological pillars of "The Methodology of Positive Economics" and "Econometric Policy Evaluation: A Critique," but a better title for the second paper would be ""The Methodology of Positive Economics: A Critique," since it argues (correctly and as was well known at the time) that even if we don't care if a model is approximately true but only if it gives useful predictions, we must care if a model is approximately true. The model you present here definitely isn't.
Wednesday, February 08, 2012
Front Door view update.
I'm pretty sure my neighbors are getting irritated about the trees on the good fences which make good neighbors. I will do something about them when the snow melts.
I have to admit that I haven't been here. We also rent a little apartment near Monte Testaccio and we've been tehre.
Our house is a very very nice house
with two trees on the roof
and dozens on the yard
now everything is snowy
what a view.
I'm pretty sure my neighbors are getting irritated about the trees on the good fences which make good neighbors. I will do something about them when the snow melts.
I have to admit that I haven't been here. We also rent a little apartment near Monte Testaccio and we've been tehre.
Our house is a very very nice house
with two trees on the roof
and dozens on the yard
now everything is snowy
what a view.
Saturday, February 04, 2012
Mitt Romney got confused on the campaign trail. He kissed a football and threw a baby. OK I admit that is an old SNL joke about Ford, but I have two illustrations.
Friday, February 03, 2012
The View from my front Door
It snowed about a foot in the suburbs of Rome (I live where the Etruscans who were stopped by Horatio at the bridge lived). The problem is that the pines of Rome are not able to support much more than their twigs. So many branches broke. Last night I was serenaded by loud thumps and today I opened my front door and saw this
Oh just heard another thump (really honest). Yep new rather small branch on our porch.
I am sure that I will be able to drive somewhere sometime, but, since there are about three snow plows in the Rome metropolitan area, I'm not holding my breath.
I'm fine so long as I have internet access. I was alarmed when I lost power (a pine of Rome pining for the fjords on a power line I'd guess). I am impressed that ENEL got it back on in a few hours Nnothing like Pepco -- the US corporation with the lowest approval rating. This was way back when Washington was gridlocked on health care reform, but they have had another epic fail since then).
Another view out of focus but showing the door
It snowed about a foot in the suburbs of Rome (I live where the Etruscans who were stopped by Horatio at the bridge lived). The problem is that the pines of Rome are not able to support much more than their twigs. So many branches broke. Last night I was serenaded by loud thumps and today I opened my front door and saw this
Oh just heard another thump (really honest). Yep new rather small branch on our porch.
I am sure that I will be able to drive somewhere sometime, but, since there are about three snow plows in the Rome metropolitan area, I'm not holding my breath.
I'm fine so long as I have internet access. I was alarmed when I lost power (a pine of Rome pining for the fjords on a power line I'd guess). I am impressed that ENEL got it back on in a few hours Nnothing like Pepco -- the US corporation with the lowest approval rating. This was way back when Washington was gridlocked on health care reform, but they have had another epic fail since then).
Another view out of focus but showing the door
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