Mark Buchanan and Noah Smith: Debating What's Wrong With Macroeconomics: "*It wasn't very long ago that macroeconomics was being hailed for answering some of the big, perplexing questions about the workings of the economy...
..."The state of macro is good," one highly respected economist wrote in August 2008, just before much of the developed world came close to economic disaster. The failure to foresee the financial crisis now is considered one glaring sign of the field's limitations. Bloomberg View columnists Mark Buchanan and Noah Smith met online to debate how macroeconomics needs to change.*
The Kelly Risk Criterion: The intelligent and thoughtful Felix Salmon makes a subtle and interesting error--an error that I would make on at least a monthly basis, had Robert Waldmann not patiently explained all this to me in the winter of 1986.
He discusses Kelly risk analysis. Pushing leverage beyond the Kelly point does not decrease expected return. Rather, it decreases the likelihood of organizational survival, and the chance that you will be wealthy.
If you are acting as one of many agents for a well-diversified principal, you will in general want to ignore the Kelly point and leverage yourself up to the gills.
If your objective is, instead, to maximize your own chances of remaining in the game with boasting rights, you will position yourself at the Kelly point.
Alexander Hamilton: The Federalist Papers: No. 9: "To the People of the State of New York:
A FIRM Union will be of the utmost moment to the peace and liberty of the States, as a barrier against domestic faction and insurrection. It is impossible to read the history of the petty republics of Greece and Italy without feeling sensations of horror and disgust at the distractions with which they were continually agitated, and at the rapid succession of revolutions by which they were kept in a state of perpetual vibration between the extremes of tyranny and anarchy.
When I was working in the Treasury in 1993-5, I was struck by how much it was the case that President Bill Clinton was still the ex-Governor of Arkansas. Thus arguments that would have been powerful and important when directed at a Governor of Arkansas still resonated in his mind. Moreover, it seemed to me that they resonated much more strongly than they perhaps should have, given that he was now not Governor of Arkansas but President of the United States, if they were evaluated purely on technocratic grounds.
There is a really great paper to be written going back and reinterviewing these 3000 people with an eye toward figuring out just why this happened. Just saying:
USC Dornsife/LA Times: The Presidential Election "Daybreak" Poll: "The 2016 USC Dornsife / LA Times Presidential Election Poll represents a pioneering approach to tracking changes in Americans' opinions throughout a campaign for the White House...
...Around 3000 respondents in our representative panel are asked questions on a regular basis on what they care about most in the election, and on their attitudes toward their preferred candidates. The "Daybreak poll" is updated just after midnight every day of the week.
This chart tracks our best estimate, over time, of how America plans to vote in November. The final blue and red figures on the right side of the chart represent our most recent estimates of Hillary Clinton's vote (blue squares) and Donald Trump's (red diamonds). These estimates represent weighted averages of all responses in the prior week. The gray band is a "95-percent confidence interval". Figures lying outside the gray band mean that we are at least 95% confident that the candidate with the highest percentage will win the popular vote.
Must-Read: The fact that Nate Silver and http://fivethirtyeight.com choose to express their forecast as a pseudo-Bayesian win probability and relies on an underlying model in which uncertainty is necessarily symmetric has, I think, substantially impeded communication about the state of the presidential election. So let me endorse this attempt by Matthew Yglesias to bring clarity:
Matthew Yglesias: Nate Silver’s model underrates Clinton’s odds: "Even if you buy Silver’s main modeling assumptions (and I largely do)...
...there’s considerable evidence outside the realm of things captured by poll aggregators that leads me to believe that if the polls are wrong, they are more likely to be underestimating Clinton’s support than overstating it....
Sam Wang: Is 99% a Reasonable Probability?: "Three sets of data point in the same direction:
- The state poll-based Meta-Margin is Clinton +2.6%.
- National polls give a median of Clinton +3.0 +/- 0.9% (10 polls with a start date of November 1st or later).
- Early voting patterns approximately match 2012, a year when the popular vote was Obama +3.9%.
Based on this evidence, if Hillary Clinton does not win on Tuesday it will be a giant surprise.
Must-Read: Cosma Shalizi vs. the Econometricians:
Cosma Shalizi: Advanced Data Analysis from an Elementary Point of View: "It Is also important to be clear that when we find the regression function is a constant...
This is the kind of story that I remember Nate Silver and his http://fivethirtyeight.com doing right over and over again in 2012 and 2008. Take the model--a very useful poll-aggregating model, even with what I regard as its unhelpful Bayesian frame--and use it as a springboard for a really smart, really high quality moderately-deep dive into some aspect of the situation that can be illuminated by the data.
I think it is time for me to issue an unconditional intellectual surrender to Cosma Shalizi. Watching Nate Silver and his now http://fivethirtyeight.com over the past two election cycles has convinced me that the Bayesian framework he throws around his model is a major obstacle to people's understanding what is going on.
What is going on is made up of three things:
Polling--that is, asking people what they think of the election candidates in a structured way.
Aggregation--so that you are not just using one sample of 1000 to assess the current mood of the electorate but instead have something like 1/5 of the sampling standard error.
Smoothing--imposing structure on the time series, both that it ought to be close to "fundamentals" and that it ought not to change too quickly.
...People who know that it is absurd to say that the policies proposed by JEB! will produce 4%/year growth.
People who know that it is absurd to say that enacting Paul Ryan's deregulation agenda will rapidly boost U.S. GDP per capita to more than $300K/year.
And then there are people like:
Josh Jordan: Nate Silver’s Flawed Model: "The New York Times number cruncher lets his partisanship show...
...“Oh, people can come up with statistics to prove anything, Kent. Forty percent of all people know that.” — Homer Simpson.
In the days before the first debate in Denver, President Obama held more than a four-point lead in the Real Clear Politics average, and Romney had been left for dead by most of the media. Then the debate came, and overnight Romney seemingly rid himself of the weaknesses that had been tacked on to him by over $100 million dollars in negative advertising. Now here we are a few weeks later with a dead heat in nationwide polls.
William H. Janeway and Raj Kushwaha: Enterprise Software: Death and Transfiguration: "Once upon a time — and it was a time that lasted some thirty years...
I have long thought somebody should go through and annotate the 2012 Mitt Romney: Full Transcript of the 47% Secret Video. So I will now do it.
Part XXIV: People Are Disappointed with Obama's Policies:
After having his only reaction to incipient Trumpism from the Fox News-addled be to call for the elimination of the civil service, Romney pivots to how he is going to reach the key middle of the electorate. It's worth unpacking the steps of Romney's argument here in logical sequence:
The problem that Mitt Romney then faced was that the natural question for that "5 to 6 or 7 percent" to ask him was: What policies has Obama gotten wrong? And Romney's replies were:
And what else was Romney going to say? That Obama had not gotten us into enough wars in the Middle East? That he had successfully implemented RomneyCare in the Blue States, and it seemed to be working?
I think the disconnect between Romney-think and Romney campaign-think inside the Romney-bubble--Obama "a failure.... a bad guy... did bad things... corrupt"--and the message Romney was trying to sell to the middle of the electorate--"you did the right thing" in voting for him, "but he just wasn't up to the task... in over his head"--accounted for a lot of the campaign and message dysfunction of fall 2012 on the Republican side.
I have long thought somebody should go through and annotate the 2012 Mitt Romney: Full Transcript of the 47% Secret Video. So I will now do it.
Part XXIII: Corruption in Washington:
Here we have a rant from an "audience member". I presume when he says "CFEC" he means "CFPB"--the Consumer Financial Protection Bureau. This makes me think that white men should not be allowed to retire and waste six hours a day watching Fox News: "Solyndra... Eric Holder... the most corrupt attorney general that we had ever... Nancy Pelosi was supposed to give us an honest Congress and has given us just the opposite as speaker... clean house, immediately..."
And Romney's only response? It was to call for getting rid of the civil service. There was nothing about: "You know Fox News's business model is to terrify you to keep your eyeballs glued to the screen? So it can charge its advertisers who sell you overpriced gold funds?"
And Romney's cowardly failure to push back against incipient Trumpism is, in my mind, something of which he should be greatly ashamed today:
Must-Read: What does it say about me that I find "we have used a Stern-Gerlach magnet with a field gradient in the direction z to measure spin in the direction y..." to be the funniest thing I have read this month?
We are all, potentially, the Friends of Wigner. It has always seemed to me that anyone with the empathy and imagination to think of him or herself as one of the Friends of Wigner is then driven inescapably to either "quantum mechanics is totally wrong wrong wrong wrong and just predicts well for incomprehensible reasons" or "many-worlds". There really are no other alternatives, or at least what alternatives there are are even stranger.
I am reminded of Sidney Coleman's joke--or was it--that he concluded that he and he alone could cause the reduction of wave packets, and his advisor's natural question: "Before you were born, could your father collapse wave packets?":
W. H. Zurek (1981): Pointer basis of quantum apparatus: Into what mixture does the wave packet collapse?: "Hence, there is also a 100% correlation between the state of the atom and the spin in a basis completely different...
Matthew Yglesias: The Best Book on the Wild 2016 Campaign: "The best--and in some ways, most disturbing--account... comes from a recent work of political science that doesn’t mention Clinton or Donald Trump... Christopher Achen and Larry Bartels... Democracy for Realists...
...based on years of scholarship they’ve done on the ugly realities of how American voting behavior really works. It sheds crucial light on a question that liberals have been banging their heads over for months — why on earth would anyone vote for Donald Trump? Their analysis is both troubling and important: Throughout history, people in general have cast their votes for no particularly good reason at all, so there’s no reason to expect Trump supporters to be any different.
John Bell (1989): Against "Measurement":
Uncertainty over terms such as 'apparatus' is still rife in serious discussions of quantum mechanics, over 60 years after its conception:
This article is published with the permission of Plenum Publishing, New York; it will appear in the proceedings of 62 Years of Uncertainty (Erice, 5—14 August 1989):
John Maynard Keynes (1937): The General Theory of Employment:
I: I am much indebted to the Editors of the Quarterly Journal for the four contributions relating to my General Theory of Employment, Interest and Money which appeared in the issue for November, 1936. They contain detailed criticisms, much of which I accept and from which I hope to benefit. There is nothing in Professor Taussig's comment from which I disagree. Mr. Leontief is right, I think, in the distinction he draws between my attitude and that of the "orthodox" theory to what he calls the "homogeneity postulate." I should have thought, however, that there was abundant evidence from experience to contradict this postulate; and that, in any case, it is for those who make a highly special assumption to justify it, rather than for one who dispenses with it, to prove a general negative. I would also suggest that his idea might be applied more fruitfully and with greater theoretical precision in connection with the part played by the quantity of money in determining the rate of interest (Cf. my paper on "The Theory of the Rate of Interest" to appear in the volume of Essays in honor of Irving Fisher). For it is here, I think, that the homogeneity postulate primarily enters into the orthodox theoretical scheme.
Live from Trumpland: David Frum: Donald Trump and the Seven Broken Guardrails of Democracy:
Many conservatives and Republicans recognize Trump as a disaster for their institutions and their ideals. Yet they have found it impossible to protect things they hold dear...
I was just curious about where the little phrase “all models are false” came from.... I found... the British statistician, G. E. P. Box who wrote in his paper “Science and Statistics” based on his R. A. Fisher Memorial Lecture to the American Statistical Association: “All models are wrong.” Here’s the exact quote:
Richard Feynman (1974): Cargo Cult Science:
During the Middle Ages there were all kinds of crazy ideas, such as that a piece of rhinoceros horn would increase potency. (Another crazy idea of the Middle Ages is these hats we have on today—which is too loose in my case.) Then a method was discovered for separating the ideas—which was to try one to see if it worked, and if it didn’t work, to eliminate it. This method became organized, of course, into science. And it developed very well, so that we are now in the scientific age. It is such a scientific age, in fact, that we have difficulty in understanding how witch doctors could ever have existed, when nothing that they proposed ever really worked—or very little of it did.
Sam Tanenhaus--who has a substantial history of whitewashing wingnuts--calls for reporters to... not do their jobs. They should not cover what Donald Trump says and does. They should not cover what Trump said and did. Why not? Out of fear of some political payback or electoral backlash:
MSM is making a big mistake in current pile-on Trump exposes, and a long term price will be paid. See Agnew/Nixon in 1969.— sam tanenhaus (@samtanenhaus) August 20, 2016
Glenn Fleishman says: WTF?!?!
That implies a) coordination b) that the stories are unnewsworthy c) that media should be concerned with votes https://t.co/7YwDXOAKNn— Glenn Fleishman (@GlennF) August 20, 2016
I chime on, saying Tanenhaus has confirmed one of my judgments:
And Tanenhaus zings back:
Well, that showed me! :-)
Live from the Republicans' Self-Made Gehenna: Bill Gardner: Consensus in the policy world and the limits to motivated cognition:
Among the many things that no one would have predicted 18 months ago is that there would be anything that nearly every policy expert agrees on...
Every once in a while I think I really ought to think some more about Knightian uncertainty. And I invariably bounce off into something like this...
Because 'integrating over the posterior distribution is the whole point of Bayesian decision theory', a Bayesian cannot be uncertain about the probability of an observable. Bayesians are uncertain about the values of parameters. Bayesians are uncertain about the truth of hypotheses. But they cannot be uncertain about the probabilities of observables--and thus they cannot be uncertain about whether to take bets or not.
Can a Bayesian come close to being uncertain about the probability of an observable?
Weekend Reading: Kelly Kleiman: The University of Chicago and John Ellison Strike Out:
My alma mater the University of Chicago has managed to get what it’s always wanted: attention from the national press. Unfortunately, it did so by sending a completely unnecessary letter to incoming students announcing the school’s opposition to trigger warnings and safe spaces, concepts the letter doesn’t seem to understand at all. So let me wade into this muck in the hope of achieving some clarity. As the University of Chicago taught me, it’s best to begin by defining one’s terms.
Live from Trumpland: Leigh Ann Caldwell and Benjy Sarlin: What Will Happen to the GOP after Trump:
The GOP for years was a diverse but sturdy three-legged stool of security hawks, tax cutters and religious conservatives....
Live from Trumpland:
I fear for my country when I reflect that Mitt Romney was so much less ridiculous as a candidate for president than is Donald Trump, and yet there polls are in the same range:
Many smart analysts across the political spectrum have rightly situated Donald Trump’s run for president in the international context of the ethno-nationalist parties found throughout Western Europe. In the UK, the Independence Party (UKIP) just led the winning referendum campaign — Brexit — in support of Britain leaving the European Union. In late 2015, the anti-Muslim French National Front (FN), received 27 percent of the vote in local elections around the country. Like Trump, these and other European rightist parties have made the limitation of immigration their most salient issue. They also claim to defend their country from forces like economic and political integration, which might dilute national sovereignty.
This embrace of a comparative perspective is a welcome development...
August 18, 2016 at 01:30 PM in Economics: Finance, Economics: History, Economics: Macro, History, Moral Responsibility, Obama Administration, Philosophy: Moral, Political Economy, Politics, Science: Cognitive, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (4)
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Across the Wide Missouri: Claire McCaskill dishes the dirt on how she energized the Trumpists-before-Trump, and how they obliged her by turning the stomachs of independents and non-wingnut Republicans, and reelected her over the truly infamous Todd Akin:
Claire McCaskill: August 7, 2012....
Running for reelection... from Missouri....
Comment of the Day: Kansas Jack: Election Forecasting: in reply to Jonathan Goodman...:
Actually Jonathan, NS himself says they didn't do very well with the primary predictions...
Storify: "But It Wasn't an Election. It Was Hell Among the Yearlings and the Charge of the Light Brigade and when the smoke cleared away not a picture still hung on the walls. And there wasn't any Republican Party... just Donald, with his hair in his eyes, and his shirt sticking to his stomach with sweat. And he had a meat ax in his hand and was screaming for blood”:
Today in Team Bedwetting: Nate Silver and company's http://fivethirtyeight.com has its morning forecasts:
Question: Just what information is there in the "polls-plus" forecast? What does it implicitly assume that Donald Trump will say and do in the next three months to double--double!--his chances relative to what the random drift of the polls under the impact of event and randomness would predict?
And how reasonable is this implicit assumption about what Trump will say and do?
Comment of the Day: Shame on the editors of Vanity Fair: RW:
It's been a long time, many years in fact...
Live from Data Journalism: Matthew Yglesias is perplexed:
Was anyone on the @FiveThirtyEight staff *really* prepared to place an even-money bet on Trump last weekend when the polls narrowed?— Matthew Yglesias (@mattyglesias) August 3, 2016
I don’t really understand the metaphysical status of a forecast that has this much volatility. pic.twitter.com/XK71ts9YwU— Matthew Yglesias (@mattyglesias) August 3, 2016
Live from Cleveland: Why we read and trust Ezra Klein's vox.com. It publishes things like this, which is dead on:
Tom Mann and Norm Ornstein: The Republicans waged a 3-decade war on government. They got Trump: "Trumpism may have parallels in populist, nativist movements abroad...
...but it is also the culmination of a proud political party’s steady descent into a deeply destructive and dysfunctional state. While that descent has been underway for a long time, it has accelerated its pace in recent years.
George Orwell: Wells, Hitler and the World State: Paul Krugman sends us to George Orwell writing in the summer of 1941:
Wells, Hitler and the World State: All sensible men for decades past have been substantially in agreement with what Mr. Wells says; but the sensible men have no power and, in too many cases, no disposition to sacrifice themselves. Hitler is a criminal lunatic, and Hitler has an army of millions of men, aeroplanes in thousands, tanks in tens of thousands. For his sake a great nation has been willing to overwork itself for six years and then to fight for two years more, whereas for the common-sense, essentially hedonistic world-view which Mr. Wells puts forward, hardly a human creature is willing to shed a pint of blood.
Live from Bodega Bay: Let me, for one, welcome our avian masters:
John Timmer: Bird brains are dense—with neurons: "Birds pack neurons into their brains at densities well above densities in mammals' brains, putting some relatively compact bird brains into the same realm as those of primates when it comes to total cell counts..."
Storify: Varieties of Macroeconomics: A Conversation with Noah Smith and Others: Useful, Coffee-House, Useless, Grifter, and STUPID
Over at Equitable Growth: A very nice overview piece this morning from smart young whippersnapper Noah Smith:
Noah Smith: Economics Struggles to Cope With Reality: "Four different activities... go by the name of macroeconomics...
...But they actually have relatively little to do with each other.... Coffee-house macro.... Finance macro.... Academic macro.... Fed macro.... Read MOAR Over at Equitable Growth
Sam Wang (Jan 7, 2016): Does Trump’s ceiling matter?: "Ross Douthat... says Trump is doomed because he will hit a ceiling of support around 30%...
Live from the Self-Made Gehenna That Is Twitter: Terry Teachout: Twitter, in Four Sentences:
How dare you talk about A when B is infinitely more important!
If I disagree with you, you’re almost certainly arguing in bad faith and probably evil as well.
You are personally responsible, in toto and in perpetuity, for everything that your friends, colleagues, and/or ancestors have ever said, done, or thought.
Sentences #2 and #3 do not apply to me.
A month ago I wrote:
"You are not doing enough in the way of promiscuous link-sluttage", my conscience says to me, occasionally. "You are not doing enough in the way of making people who come to your weblog aware of very smart people whom they ought to be paying attention to--but are not. You have an obligation not only to punch up, but to extend a hand down--to promote people who, by accidents of chance and historical contingency, are just as smart (or more) and are as (or more) worth reading as you are."
"So what can I do?" I say.
The purpose of this weblog is to be the best possible portal into what I am thinking, what I am reading, what I think about what I am reading, and what other smart people think about what I am reading...
"Bring expertise, bring a willingness to learn, bring good humor, bring a desire to improve the world—and also bring a low tolerance for lies and bullshit..." — Brad DeLong
"I have never subscribed to the notion that someone can unilaterally impose an obligation of confidentiality onto me simply by sending me an unsolicited letter—or an email..." — Patrick Nielsen Hayden
"I can safely say that I have learned more than I ever would have imagined doing this.... I also have a much better sense of how the public views what we do. Every economist should have to sell ideas to the public once in awhile and listen to what they say. There's a lot to learn..." — Mark Thoma
"Tone, engagement, cooperation, taking an interest in what others are saying, how the other commenters are reacting, the overall health of the conversation, and whether you're being a bore..." — Teresa Nielsen Hayden
"With the arrival of Web logging... my invisible college is paradise squared, for an academic at least. Plus, web logging is an excellent procrastination tool.... Plus, every legitimate economist who has worked in government has left swearing to do everything possible to raise the level of debate and to communicate with a mass audience.... Web logging is a promising way to do that..." — Brad DeLong
"Blogs are an outlet for unexpurgated, unreviewed, and occasionally unprofessional musings.... At Chicago, I found that some of my colleagues overestimated the time and effort I put into my blog—which led them to overestimate lost opportunities for scholarship. Other colleagues maintained that they never read blogs—and yet, without fail, they come into my office once every two weeks to talk about a post of mine..." — Daniel Drezner
Looking Forward to Four Years During Which Most if Not All of America's Potential for Human Progress Is Likely to Be Wasted
With each passing day Donald Trump looks more and more like Silvio Berlusconi: bunga-bunga governance, with a number of unlikely and unforeseen disasters and a major drag on the country--except in states where his policies are neutralized.
Nevertheless, remember: WE ARE WITH HER!
"I now know it is a rising, not a setting, sun" --Benjamin Franklin, 1787
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