Grasping Reality on TypePad, by Brad DeLong

This post isn't really about Jim Geraghty, I promise. He's trying to be good here. And so we get this, about Obama's comments on the Skip Gates arrest: "I may disagree with some other NRO folk, in that I think the Cambridge Police handled this terribly (particularly the aftermath)." As I say: not about Geraghty. He's clearly writing in good faith, even if I don't agree with where he ends up. But how can these "other NRO folk" not agree that the Cambridge PD handled the Gates arrest terribly? 57-year old man -- obviously not a burglar -- in his own home arrested after showing ID? Even if we take for granted the disputed proposition that  Gates didn't show a form of ID that detailed his address, the cop didn't arrest him for breaking and entering, he arrested Gates for disorderly conduct. Even if we're going to take the most generous possibly interpretation of the officer's behavior, what about this outcome, and the process leading to this outcome, isn't terrible?

Potential output is an important concept in economics. Policymakers often use a one sector neoclassical model to think about long-run growth, and they often assume that potential output is a smooth series in the short run—approximated by a medium- or long-run estimate. But in both the short and the long run, the one-sector model falls short empirically, reflecting the importance of rapid technological change in producing investment goods; and few, if any, modern macroeconomic models would imply that, at business cycle frequencies, potential output is a smooth series. Discussing these points allows the authors to discuss a range of other issues that are less well understood and where further research could be valuable. (JEL E32, O41, E60). Federal Reserve Bank of St. Louis Review, July/August 2009, 91(4), pp. 187-213.

I found Obama’s health care presentation so impressive — so much command of the issues — that it had me worried. If I really like a politicians’ speech, isn’t that an indication that he lacks the popular touch? (A couple of points off for “incentivize” — what ever happened to “encourage”? — but never mind.) Seriously, it’s really good to see how much he gets it. Update: So Howard Fineman was unimpressed. And Fineman knows presidential greatness when he sees it: "He’s the Texas Ranger of the world, and wants everyone to know it. He’s the guy with the silver badge, issuing warnings to the cattle rustlers."

Stephen Colbert, once again, nails it (via): "For instance, take the Dred Scott case. Those justice's life experience, being white men in pre-civil war America some of whom owned slaves, in no way influenced their decision that black people were property. And, their personal backgrounds had nothing to do with the all-neutral court decision that it was legal to send Japanese Americans to internment camps in 1942. Imagine how the life experience of an Asian judge would have sullied that neutrality."

I don't know if the way Barack Obama repeatedly Terri Schiavos the GOP is conscious, or not, but I think it's brilliant.... [T]his Liz Cheney rant, where--as James Carville astutely points out--Cheney can not come out and say that she believes Barack Obama was born in America. Obama does not so much drive right-wingers crazy, as he drives the extreme right wingers crazy. But here's the the thing--so many of the respectable one have fed the "Proud to Ignorant" line to their audience so long, that they can't say, "OK guys, it's time to be serious."... [P]ople like Liz Cheney end up having to defend crazies.... They need their crazies. Either that, or they are stupid enough to believe that the birthers are America.

Yesterday's 58-40 vote in the Senate to cut funds for the F-22 is a big deal. But this was a vote on an authorization bill and the funds can still be provided in the DOD appropriation that will be considered later in the year. An appropriation enacted after an authorization is the most recent indication of congressional intent and, therefore, legally may provide funds for programs that have not been authorized. That makes this vote important (especially because it shows what the White House can do on Capital Hill), but not the end of the story It is not inconceivable that someone who voted against F-22 in the authorization eventually will vote for it in the appropriation. So those who think it's time to celebrate should hold the champagne.

There is a deeper problem, though, that will be more difficult to resolve. This is the underlying paradigm of macroeconomic models. Mainstream models take the view that economic agents are superbly informed and understand the deep complexities of the world. In the jargon, they have “rational expectations”. Not only that. Since they all understand the same “truth”, they all act in the same way. Thus modelling the behaviour of just one agent (the “representative” consumer and the “representative” producer) is all one has to do to fully describe the intricacies of the world. Rarely has such a ludicrous idea been taken so seriously by so many academics. (Other fields of economics have not been deluded by this implausible idea and therefore do not face the same criticism.) We need a new science of macroeconomics. A science that starts from the assumption that individuals have severe cognitive limitations; that they do not understand much about the complexities of the world in which they li

One of the points that Bernanke makes in his op-ed is that the Fed could continue to use this device, if need be, to prevent essentially any volume of its asset side activity from showing up as an increase in currency held by the public, simply by raising the interest rate the Fed offers to pay on reserves to whatever level is necessary to persuade banks to continue to hold these funds idle overnight. In effect, the Fed is through this device borrowing directly from the public to fund its asset-side activities rather than by "printing money". Should that allay any inflationary concerns people may have about the doubling in the size of the Fed's balance sheet? In a narrow mechanical sense, perhaps. It is true that the new assets have not yet shown up as an increase in the money supply, and it is true that the Fed has the power to prevent them from doing so in the future.

f you came up with a list of obstacles to economic recovery in this country, it would include all the usual suspects—our still weak banking system, falling house prices, overindebted consumers, cautious companies. But here are fifty culprits you might not have thought of: the states. Federalism, often described as one of the great strengths of the American system, has become a serious impediment to reversing the downturn. It’s easy enough, of course, to mock state governments nowadays, what with California issuing I.O.U.s to pay its bills and New York’s statehouse becoming the site of palace coups and senatorial sit-ins. But the real problem isn’t the fecklessness of local politicians. It’s the ordinary way in which state governments go about their business.

But what I best remember about that lunch [with Aldrin] is that when we got onto the subject of the “Aldrin Cycler,” his proposed trajectory for a manned Earth-Mars mission, he began to demonstrate the relative positions of Earth, Mars, the spacecraft, and the sun by vigorously moving various implements of tableware around. At that exact moment I thought to myself (but did not say), “The grizzled old spaceman is now explaining the ballistics of space travel by using the tablecloth and the silverware. I am in a Heinlein juvenile, somewhere in the vicinity of Starman Jones or Have Space Suit, Will Travel, and my life is now complete.”