Grasping Reality with at Least Three Hands

Some Fairly-Recent Must- and Should-Reads...

1. Stephen Fritz (2008): On Citino, 'Death of the Wehrmacht: The German Campaigns of 1942': "Continuing his examination of the German way of war, Robert Citino has produced a cogently argued, clearly written book in which he asserts that the German defeat in World War II was as much conceptual as it was material...

2. People are not effective price-sensitive consumers for health insurance. We can argue why they are not. But first we need to admit that we are not: Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel, and Jonathan T. Kolstad: What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics: "We leverage a natural experiment at a large self-insured firm that required all of its employees to switch... to a nonlinear, high-deductible plan...

3. John R. Boyd (1995): The Essence of Winning and Losing

4. The empirical studies are finding more and more hysteresis—more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all—at least all those published that cross my desk—point in the same direction: Karl Walentin and Andreas Westermark: Stabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

5. But are we sure that our debts are in dollars? Would we know it if the big New York banks had been trying to boost their earnings by selling unhedged dollar puts, in the (probably correct) belief that if they all do this together they do not have a problem, the rest of us have a problem?: Paul Krugman: Opinion | Partying Like It’s 1998 - The New York Times: "Those of us who devoted a lot of time to understanding the Asian financial crisis two decades ago were wondering whether Turkey was going to stage a re-enactment. Sure enough...

6. What Is the Proper Role of Weblogs in the 2020s?: I Asked My Readers, and They Have Said...: "Ezra Klein... was reminiscing about the early days of blogging and how that compares to the new, more popular formats, like Twitter. He made a good case...

7. Project MUSE: Reviews in American History: "Helps scholars and students of American history stay up to date in their discipline...

8. Martin Sandbu: The devastating cost of central banks’ caution: "Timidity on monetary policy since 2008 has been as costly as the financial crisis...

Martin Sandbu: The devastating cost of central banks’ caution: "Timidity on monetary policy since 2008 has been as costly as the financial crisis...

Project MUSE: Reviews in American History: "Helps scholars and students of American history stay up to date in their discipline...

What Is the Proper Role of Weblogs in the 2020s?: I Asked My Readers, and They Have Said...

Comments of the Day:

Ezra Klein... was reminiscing about the early days of blogging and how that compares to the new, more popular formats, like Twitter. He made a good case. Twitter is more about talking to those who already agree with you and you really don't expect the person you're "responding" to in your tweets to engage with you. Blogs were often (though hardly always) intended to substantively engage with people you disagree with with the intention, or at least the hope, that that person will actually take what you say seriously and respond in a serious, substantive manner.... I do miss that meatier aspect of blogs, even if they didn't necessarily lead to energetic dialogues between people of differing viewpoints. At least they offered more of a possibility of that happening. So what I would suggest is: use the blog to create energetic dialogues between people of differing viewpoints. It could be used for, oh how could I describe it, maybe "Socratic" dialogues, but between real people even if they're not as witty as the pseudo-Greeks who occasionally pop up on "Grasping Reality".... And that's my what is old is new again idea!

The role of weblogs in the 2020's will ideally be: -to be independent; -to bring one's own expertise to bear on both the matters of the day, and what one's own thinking has deemed important regardless of how popular the subject; -to bring one's readers' attention to the words of others, which seem important to you; -to persist and be brave. We are in "interesting times" which show every sign of growing ever more "interesting" (in the sense of the Chinese curse). All of these qualities and more will be needed. In my opinion you do an amazing job of all the above.

With [respect to]... 2021-2, though not beyond.... Democrats have one realistic chance to save the country in the next generation.... The inherent bias in the Senate and the EC make it very difficult for the Dems to win the presidency and both Houses of Congress for more than 2 years at a time. The demographic projections make the Senate more and more of a stretch as we get closer to, say, 2040. That means that IF (it's a big if) the Dems succeed in 2020, they will have to accomplish perhaps more than any Congress in history in order to (a) preserve a democratic system; (b) fix the structural problems in the economy such as wealth distribution, SS, and healthcare, including Medicare; and (c) do what can be done at this late date to ameliorate global warming. Legal blogs are already discussing what can/should be done for (a). What economists need to do is outline the basic ideas for (b) and (c) now, and over the next 2 years begin to develop actual bills for presentation to Congress in January 2021. Your blog seems like a good space to begin the process...

The pressing problem... is in finding a solution to the trust problem. How do we trust the sources of information that we consume? People with expertise in an area have all experienced the Murray-Gellman Amnesia effect. Large numbers of people have never experienced this and thus do not understand the need to question what they read/listen too. At present the only place one can really get to the truth of the matter, so to speak, is by reading blogs of knowledgeable people. The role of trusted blogs in the future will be as a check on government/corporate/powerful interest group propaganda. I wish Apple News would be Apple Blogs.... Read what experts have to say about a topic who are from the given field.... In the era of advertainment and stealth ‘news’ stories that are really press releases we should abandon the association between news and accuracy. I don’t know how one will be able to monetize this. I don’t know how to get people to realize that the Murray-Gellman Amnesia effect is real or how to solve the trust problem. With the rise of Facebook, Google, and Twitter the swaying of public opinion on a grand (global?) level is easy. People are easy to manipulate. Without trusted information being readily available we might as well abandon democracy and institute a governing AI...

Since the Daily Illuminator launched in 1994, the blog has been a website which: - is focused on publishing short essays; - can be moved to a new host or domain as needed; - is as visible to search engines as the blogger wants it to be; - is skilling not deskilling (learning basic HTML, CSS, and how to get a host and a domain name is useful for anything you want to do on the Internet, mastering the platform of the week just lets you use that platform until they change the interface); - is not prestigious, but can be influential...

Focus on the future, particularly the economic impacts of artificial intelligence, machine learning, big data, etc.... You show yourself as sympathetic to Hayek's criticism of central planning as lacking the analytic and informational firepower to manage an economy as well as distributed decision making (somewhat glibly equated with capitalism.) Surely it has occurred to you that this criticism may have been accurate in the first half of the 20th century, but not necessarily forever. A new era is obviously coming on fast.... The question is going to be, who will this new technological/economic/political system benefit? Will it be society as a whole? Or will we turn out to suffer some kind of dystopian arrangement for the benefit of the few? What principles should guide people in setting up and regulating such a system to steer things towards the utopian and away from the dystopian? I see very little genuinely insightful discussion of these issues—and hardly any discussion of them among economists. This is an area in which I believe you could make a serious contribution...

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#blogs
#publicsphere
#internet
#commentsoftheday

Economics Gone Right: Some Fairly-Recent Must- and Should-Reads

• Cosma Shalizi (2012): In Soviet Union, Optimization Problem Solves You: "There’s lots to say about Red Plenty as a work of literature; I won’t do so.... Both neo-classical and Austrian economists make a fetish (in several senses) of markets and market prices. That this is crazy is reflected in the fact that even under capitalism, immense areas of the economy are not coordinated through the market..

• The extremely wise Randall Munroe on the proper visual display of geographic quantitative information: Randall Munroe: xkcd: 2016 Election Map: "I like the idea of cartograms (distorted population maps), but I feel like in practice they often end up being the worst of both worlds—not great for showing geography OR counting people. And on top of that, they have all the problems of a chloro... chorophl... chloropet... map with areas colored in...

But are we sure that our debts are in dollars? Would we know it if the big New York banks had been trying to boost their earnings by selling unhedged dollar puts, in the (probably correct) belief that if they all do this together they do not have a problem, the rest of us have a problem?: Paul Krugman: Opinion | Partying Like It’s 1998 - The New York Times: "Those of us who devoted a lot of time to understanding the Asian financial crisis two decades ago were wondering whether Turkey was going to stage a re-enactment. Sure enough...

The empirical studies are finding more and more hysteresis—more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all—at least all those published that cross my desk—point in the same direction: Karl Walentin and Andreas Westermark: Stabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

John R. Boyd (1995): The Essence of Winning and Losing:

People are not effective price-sensitive consumers for health insurance. We can argue why they are not. But first we need to admit that we are not: Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel, and Jonathan T. Kolstad: What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics: "We leverage a natural experiment at a large self-insured firm that required all of its employees to switch... to a nonlinear, high-deductible plan...

Globalization: Some Fairly-Recent Should- and Must-Reads

• Marti Sandbu: EuroTragedy: A Drama in Nine Acts, by Ashoka Mody: "Writing about the euro... doing justice to the technicalities threatens to kill any narrative, while simplified storytelling risks misguided analysis. Ashoka Mody’s... is an ambitious attempt to avoid this trap...

• We really do not know what effect a trade war would have on the global economy. All of our baselines are based off of what has happened in the past, long before the age of highly integrated global value chains. It could be small. It could be big. The real forecast is: we just do not yet know: Dan McCrum: Trade tension and China : "The war on trade started by the Trump administration is percolating through the world's analytical apparatus.... Tariffs could be bad for the global pace of economic activity, but only if the economic warfare escalates...

Very much worth reading from Nick Bunker: Nick Bunker: Puzzling over U.S. wage growth: "Hiring has not been particularly strong during this recovery...

See: here is another study that finds a lot of hysteresis—an ungodly amount: Christina D. Romer and David H. Romer: Why Some Times Are Different: Macroeconomic Policy and the Aftermath of Financial Crises: "Analysis based on a new measure of financial distress for 24 advanced economies in the postwar period shows substantial variation in the aftermath of financial crises...

Pam Weintraub: The roots of writing lie in hopes and dreams, not in accounting: "In the four wellsprings of writing, it never (as far as we know) sprang forth as fully phonographic but evolved to become that–there’s usually some kind of proto-writing, and some kind of proto-proto-writing...

Cosma Shalizi (2012): In Soviet Union, Optimization Problem Solves You: "Both neo-classical and Austrian economists make a fetish (in several senses) of markets and market prices. That this is crazy is reflected in the fact that even under capitalism, immense areas of the economy are not coordinated through the market...

As I often say, academic freedom is not "free speech". Universities are safe spaces for people to learn, for scholars to grow, and for ideas to be propounded and evaluated. You can argue—as Ernst Kantorowicz did, and as I more than half believe—that grownup full members of a university are their own sovereign judges of this propounding-and-evaluating business: that they are under an obligation to think as hard as they can and to argue fairly and fully for what they believe to be the truth, and that the sole sovereign judges of whether they have met this responsibility are their consciences day and their gods. And that makes it very, very important indeed to draw a clear line between those who can and those who cannot fulfill this responsibility: Dani Rodrik: No to Academic Normalization of Trump by Dani Rodrik: "Those who have served the current US president are necessarily tainted by the experience. While they should not be barred from speaking... they should be accorded none of the trappings of institutional esteem such as fellowships, named lectures, and keynote speeches...

It wasn't just right-wing politicians who "reframed the crisis as the result of out-of-control fiscal policy rather than the product of an out-of-control financial sector". I keep coming back and back again to the moment in January 2010 when Barack Obama cut us technocrats who knew what needed to be done off at the knees: "families across the country are tightening their belts and making tough decisions. The federal government should do the same. So tonight, I'm proposing specific steps to pay for the $1 trillion that it took to rescue the economy last year. Starting in 2011, we are prepared to freeze government spending for three years..." Martin Wolf reviews Adam Tooz's book Crashed: Martin Wolf: What really went wrong in the 2008 financial crisis?: "'There is a striking similarity between the questions we ask about 1914 and 2008', writes Adam Tooze...

Larry plumps for nominal GDP targeting: Lawrence Summers: Why the Fed needs a new monetary policy framework: "A monetary framework... should... [have] enough room to respond to a recession... nominal interest rates in the range of 5 percent in normal times...

Mark Thoma sends us to: P.J. Glandon, Ken Kuttner, Sandeep Mazumder, and Caleb Stroup: Macroeconomic Research, Present and Past: "Macroeconomics journals have published an increasing share of theory papers over the past 38 years, with theory-based papers now comprising the majority of published macroeconomics research...

It is necessary to remember, every day, what Dan Froomkin reminds us of: THIS IS NOT NORMAL. This was a private cabinet meeting. Yes, there are always lots of leaks and lots of complaisant reporters who work for sources generating a cloud of misinformation in an attempt to seek personal advantage in the court that is the White House. But "our principal is an idiot" is a message that people in the White House rarely wish to send. But that is, as Dan Froomkin points out here, the message that the Whire House insiders are saying: Dan Froomkin: THIS IS NOT NORMAL: "In private FEMA remarks, Trump’s focus strays from hurricanes..."

The extremely wise Randall Munroe on the proper visual display of geographic quantitative information: Randall Munroe: xkcd: 2016 Election Map: "I like the idea of cartograms (distorted population maps), but I feel like in practice they often end up being the worst of both worlds—not great for showing geography OR counting people. And on top of that, they have all the problems of a chloro... chorophl... chloropet... map with areas colored in...

The desperate attempt to justify World War I reached into even Sherlock Holmes: Arthur Conan Doyle (1917): His Last Bow: "There's an east wind coming all the same, such a wind as never blew on England yet. It will be cold and bitter, Watson, and a good many of us may wither before its blast. But it's God's own wind none the less, and a cleaner, better, stronger land will lie in the sunshine when the storm has cleared..."

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#books
#worldwari

Marti Sandbu: EuroTragedy: A Drama in Nine Acts, by Ashoka Mody: "Writing about the euro... doing justice to the technicalities threatens to kill any narrative, while simplified storytelling risks misguided analysis. Ashoka Mody’s... is an ambitious attempt to avoid this trap...

I am being told that George Borjas still does not understand—or at least says he does not understand—the force of this critique. Can that possibly be true?: Michael A. Clemens and Jennifer Hunt: The Labor Market Effects of Refugee Waves: Reconciling Conflicting Results: "The fraction of blacks is much higher in the post- than pre-Boatlift years in Borjas’s Miami sample...

The wise Ian Buruma on the Trumpists' attempts to construct a global Fascist International: Ian Buruma: Steve Bannon’s European Adventure: "The reputed mastermind of Donald Trump’s presidential campaign has launched a full-scale effort to unite Europe's right-wing forces and bring down the European Union...

The Nazi explanation for Stalingrad, as of late 1943: it's all the fault of the Rumanians, and the Italians, and the Hungarians: Heinrich Himmler (1943): Posen Speech: The Necessity of Stalingrad English Translation: "The winter of 1941-42, with its consequences, was, on the one hand, the work of Fate, which hit us hard for the first time...

The very sharp Doug Rushkoff tries to recall tech to its utopian aspirations, rather than its current money-making reality. The fascinating thing is that tech is not very good in reality at money-making for anyone who is not the luckiest of lucky people—yet tech is very good at getting consumer surplus to users, who then use it to build utopia... or dystopia... depending: Doug Rushkoff: Survival of the Richest: "There was a brief moment, in the early 1990s, when the digital future felt open-ended and up for our invention...

I am provoked by this. The benchmark of constant research productivity" defined as the same real dollar expenditure on research produces the same proportional increase in output? I have heard people say that the benchmark should be that the same share of national product spent on R&D should produce the same proportional increase in output. I have heard people say that the benchmark should be that the natural growth in the share of national product spent on R&D should be such as to produce the same proportional increase in output. I have never heard anybody say that the benchmark is that the same real dollar expenditure on research produces the same proportional increase in output: Nicholas Bloom, John Van Reenen, Charles I. Jones, and Michael Webb: Are Ideas Getting Harder to Find?: "One of the key drivers of economic growth during the last half century is Moore’s Law: the empirical regularity that the number of transistors packed onto an integrated circuit serving as the central processing unit for a computer doubles approximately every two years...

Event studies are very dangerous tools if you truly seek robust identification for policies that operate through expectational channels: Joseph Gagnon: QE Skeptics Overstate Their Case: "David Greenlaw, James Hamilton, Ethan Harris, and Kenneth West... argued that the consensus of previous studies overstates the effects of quantitative easing (QE) on long-term interest rates...

Kevin O'Rourke (2013): Why economics needs economic history: "In a recent Humanitas Lecture in Oxford, Stan Fischer said that 'I think I’ve learned as much from studying the history of central banking as I have from knowing the theory of central banking and I advise all of you who want to be central bankers to read the history books'...

Three cheers for the Verge, willing to tell it like it is and try to be a trustworthy information intermediary: T.C. Sottek et al.: Newsrooms must stand up to targeted campaigns of harassment: "A widespread campaign of harassment has targeted Verge reporter Sarah Jeong for a number of tweets she wrote years ago. Many of those now reacting to these tweets have intentionally taken them out of context...

Unfogged

Ogged (2017): We Will Lie Down And Wait For Death To Overtake Us: "What is it with Drum and AI? Even aside from his fervent belief in its imminence, this list is nuts...

We really do not know what effect a trade war would have on the global economy. All of our baselines are based off of what has happened in the past, long before the age of highly integrated global value chains. It could be small. It could be big. The real forecast is: we just do not yet know: Dan McCrum: Trade tension and China : "The war on trade started by the Trump administration is percolating through the world's analytical apparatus.... Tariffs could be bad for the global pace of economic activity, but only if the economic warfare escalates...

It has always seemed to me that the sharp Josh Bivens is engaging in some motivated reasoning here: "[1] Putting pen-to-paper on trade agreements contributed nothing to aggregate job loss in American manufacturing. This is almost certainly true.... [2] The trade agreements we have signed are mostly good policy and have had only very modest regressive downsides for American workers. This is false." How am I supposed to reconcile [1] and [2] here?: Josh Bivens (2017): Brad DeLong is far too lenient on trade policy’s role in generating economic distress for American workers on Brad DeLong (2017): NAFTA and other trade deals have not gutted American manufacturing—period: "I could rant with the best of them about our failure to be a capital-exporting nation financing the industrialization of the world...

Nils Gilman:" A largely hereditary elite: "A largely hereditary elite is anathema to the principles of meritocracy. But this much must be said: an elite that is secure in its prerogatives has a strong incentive to focus on the care and feeding of the system...

I would say: "policy was fantastic between Lehman and the trough, grossly subpar after the trough, and —if you believe the Fed—criminally negligent before Lehman": Niccola Gennaioli and Andrei Shleifer: A Crisis of Beliefs: Investor Psychology and Financial Fragility: "Instability from Beliefs...

700,000-Year-Old Stone Tools Point to Mysterious Human Relative

Michael Greshko: 700,000-Year-Old Stone Tools Point to Mysterious Human Relative: "Someone butchered a rhinoceros in the Philippines hundreds of thousands of years before modern humans arrived—but who?...

Doyle McManus: There is no 'civil war' between progressive and centrist Democrats: "Democrats may be locked in a struggle for the soul of their party, but that’s been true in almost every election cycle since 1828...

Sunday Morning Twitter: Functional Finance/A Better World Is Possible Tweeting...

A better world—a better twitter—is indeed possible...

Suresh Naidu: I will stake my fancy economics job on this: Nothing in @Ocasio2018's policy program is inconsistent with a 2018 understanding of economics.

Wojtek Kopczuk: I missed it before, by my favorite colleague to disagree with. Congratulations on tenure @snaidunl!

Suresh Naidu: Sigh you drew me out. Tell me which policy is infeasible and not addressing some market failure?

Wojtek Kopczuk: They are inconsistent with the government budget constraint. And her MMT support is definitely inconsistent with mainstream economics.

Suresh Naidu: MMT is totally consistent with lots of mainstream macro when the economy is demand constrained (and fiscal theory of the price level when its not). it is unfortunate its adherents dont see that. And budget constraints are endogenous.

Ivan Werning: What do you have in mind?

Suresh Naidu: Oh crap a real macroeconomist. I think stripped of mysticism, MMT is really boils down to "fiscal mutipliers greater than 1", which could be true in demand constrained economy.

David Rothkopf: "A brief note to my Republican friends (and other supporters of the president): Keep your eye on the penny. It is about to drop...

Brian Kahn: Death Valley Will Have the Hottest Month Ever Recorded on Earth: "Every locale pales in comparison to what’s going on at Death Valley in California... in line to set a record for the hottest month ever recorded on Earth...

What I call Bob Rubin's Questions. They really work!: Annie Duke: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts: "In fact, questioning what you see or hear can get you eaten. For survival-essential skills, type I errors (false positives) were less costly than type II errors (false negatives). In other words, better to be safe than sorry, especially when considering whether to believe that the rustling in the grass is a lion. We didn’t develop a high degree of skepticism when our beliefs were about things we directly experienced, especially when our lives were at stake...

Comment of the Day: Robert Waldmann: Cognitive Science, Behavioral Economics, and Finance: Some Fairly-Recent Must- and Should-Reads: "On Cosma. I must read Judea Pearl. My reply to Shalizi is that we can and do have priors to within some number in the total variation norm...

The "optimal tax" literature in economics has always been greatly distorted by the fact that models simple enough to solve bring with them lots of baggage that leads to misleading—and usually anti-egalitarian and anti-equitable growth—conclusions that would not follow if we had better control over our theories. Here Saez and Stantcheva make significant progress in resolving this problem: Emmanuel Saez and Stefanie Stantcheva: A simpler theory of optimal capital taxation: "We first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth...

Henry Bodkin: Europe braced for hottest day in history as farmers granted emergency access to river water: "Europe is bracing for the hottest day ever recorded...

The Rise of the Robots: Some Fairly-Recent Must- and Should-Reads

• Very wise words from close to where the rubber meets the road about how the Rise of the Robots is likely to work out for the labor market over the next generation or so: Shane Greenstein: Adjusting to Autonomous Trucking: "Let’s come into contact with a grounded sense of the future.... Humans have invented tools for repetitive tasks, and some of those tools are becoming less expensive and more reliable...

• The answer is: probably in the late 1960s: Joe McMahon: When was the last time all the computing power in the world equaled one iPhone?: "When was the last time all the computing power in the world equaled one iPhone?...

• IMHO, the "long run" problems Martin discusses need to be postponed: we don't know enough about the future to even begin to think intelligently about them. The "medium run" problems, by contrast, deserve a lot of attention right now: Martin Wolf: Work in the age of intelligent machines: "How do you organise a society in which few people do anything economically productive?...

Is this right? Is this robust? If it is, this is amazing: Kevin Drum: College-Educated Republican Women are Extinct: "College-educated white women? They support Democrats by a net of nearly 50 points. And it shows no signs of bouncing back and forth...

Sharply distinguishing "ideology" from "partisanship" seems to me to be a potentially fatal flaw in what is otherwise an absolutely brilliant essay. We East African Plains Apes think in groups: we outsource a great deal of what we believe to others whom we trust. Thus "partisanship" and "ideology" reinforce each other massively. But that also means that when thought-leader elites change what the partisans with access to audiences say, people's "ideologies" will change as well—without the thinking about it much, if it all: Nathan P. Kalmoe: Uses & Abuses of Ideology: "Ideology is a central construct in political psychology, and researchers claim large majorities of the public are ideological, but most fail to grapple with evidence of ideological innocence in most citizens...

The key to a well-functioning society is feedback: the market economy is truly excellent at feedback—at identifying what is going wrong to the people who can take action to correct it: Cosma Shalizi (2012): In Soviet Union, Optimization Problem Solves You: "There’s lots to say about Red Plenty as a work of literature; I won’t do so.... The first of the two political problems. The objective function in the plan is an expression of values or preferences, and people have different preferences. How are these to be reconciled?...

I am swinging toward thinking that disequilibrium foundations of equilibrium economics is the only useful macro theory standing: Seppo Honkapohja and Kaushik Mitra: Price Level Targeting with Evolving Credibility: "We examine global dynamics under learning in a nonlinear New Keynesian model when monetary policy uses price-level targeting and compare it to inflation targeting...

Duncan Black: Drag Him: "The twitters dragged this reporter [Jon Steingart] over this description, as they should have...