Grasping Reality on TypePad, by Brad DeLong

Most-Recent Must-Reads:

• hrtbps: Your Workplace Requires People to Call You: “My Right Honourable Friend”!
• Nick Rowe: Cheshire Cats and New Keynesian Central Banks: How can money disappear from a New Keynesian model, but the Central Bank still set a nominal rate of interest and create a recession by setting it too high?...
• Barry Eichengreen: Closing Remarks to Policy Challenges in a Diverging Global Economy: It is one of the great pleasures of my association with the Federal Reserve Bank of San Francisco to give these closing remarks...

Most-Recent Links:

• Andrew Gellman: What has happened down here is the winds have changed
• The AI Now Report: The Social and Economic Implications of Artificial Intelligence Technologies in the Near-Term
• Vollkornbrot
• Brad W. Setser
• Miles Kimball: Sticky Prices, Sticky Inflation and the Cost of Inflation as Reflections of Cognitive Costs
• Pedro da Costa: Fiscal policy suddenly all the rage among policymakers who should have thought of it sooner

Barry Eichengreen: Closing Remarks to Policy Challenges in a Diverging Global Economy:

It is one of the great pleasures of my association with the Federal Reserve Bank of San Francisco to give these closing remarks. Having done this twice before, in 2011 and 2013, this affords me the opportunity not just to highlight some insights from this year’s papers but also to look back at the conclusions of those earlier conferences and see how they stack up in light of recent events.

Must-Read: Barry Eichengreen: Closing Remarks to Policy Challenges in a Diverging Global Economy:

It is one of the great pleasures of my association with the Federal Reserve Bank of San Francisco to give these closing remarks...

Must-Read: Nick Rowe continues his long twilight struggle to try to explain what is really going on in the New Keynesian DSGE model to the world. I think this is a Sisyphean task:

Nick Rowe: Cheshire Cats and New Keynesian Central Banks:

How can money disappear from a New Keynesian model, but the Central Bank still set a nominal rate of interest and create a recession by setting it too high?...

Must-Read: hrtbps: Your Workplace Requires People to Call You: “My Right Honourable Friend”!:

If your workplace requires people to call you “my right honourable friend”, don’t talk to me about safe spaces https://t.co/mS0M3EmuuG

— hrtbps (@hrtbps) September 14, 2016

Must-Read: Since Dick Schmalensee left the GHWB Council of Economic Advisers, it has been nearly impossible to get any Republicans on board for a serious push to do smart pro-growth regulatory reform--patents, copyrights, occupational licensing, land-use NIMBYism. Instead, Republicans' ideas of regulatory "reform" have been either a broad-brush approach that on net does more harm than good, or have been positively focused like a laser on getting rid of regulations with strong positive benefit-cost ratios: enabling consumer fraud, the freedom to pollute, and the manufacture of financial-sector toxic assets of one sort or another have been at the core of the Republican regulatory reform agenda. That and more tax cuts for the rich.

We get that powerful monied groups in the Republican coalition seek the freedoms to pollute, to manufacture toxic financial assets, and to engage in consumer fraud. But why have so many right-leaning economists been willing to enable them, and why have their been so few voices on the other side pushing for real pro-growth regulatory reform? Why hasn't Dick Schmalensee the Lord God King of Republican economists is somewhat the way Henry Aaron and Charlie Schultze have been of Democrats? There was a moment when Dick would say that Doug Holtz-Eakin would do the job... but simply no...

Paul Krugman comments on the Economists for Trump.

Paul Krugman: The Curious Confidence of the Charlatans and Cranks:

Notable... [is] the absence of many usually reliable Republican hired guns economists. But they do have a Nobelist, Eugene Fama, at the top...

Taped from the Journamalists' Self-Made Gehenna: One reason we are in so much trouble now is that our TV and newspaper "journalists" have spent and continue to spend so much of their time and energy grasping at straws and finding excuses to normalize that which not should be normalized. Sarah Palin never should have been a vice presidential nominee--somewhat less, in fact, than Dan Quayle, or Spiro Agnew, or indeed Richard Nixon (very smart and very hard-working, but already by 1952 clearly a psycho). Yet here is David Brooks:

David Brooks (2008): [The Palin Rebound][]:

There are some moments when members of a political movement come together as one, sharing the same thoughts...

Must-Read: Mark Pesce: Zombie Moore's Law: Hardware Eats Software:

Intel announce some next-generation CPUs that aren’t very much faster... delays... some of its 10nm process CPUs; and Apple’s new A10 chip, powering iPhone 7, is as one of the fastest CPUs ever...

The Productivity Puzzle:

On September 9, 2016 the Initiative on Business and Public Policy and the Hutchins Center on Fiscal and Monetary Policy at Brookings hosted a forum on the policy implications of the growth slowdown.

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...

Must-Read: The conventional wisdom in the communities in which I sit is that commercial bankers are being extremely stressed by the fact that interest rates are so low and they cannot charge for deposits. The longer-run point that raising interest rates may well crash the economy and crash the value of their loan books appears to be something that is not in the forefront of their minds. And the conventional wisdom is that regional Federal Reserve bank presidents respond to this stress.

What I do not understand is why the regional Federal Reserve bank presidents are not enormous and vocal advocates of a higher inflation target. Their loan books are not long enough (housing aside, and that risk has been laid off) to seriously suffer from expropriation-via-moderate-inflation. A higher inflation target that boosted the economy would actually improve the quality of their loan books. And it would provide a wedge between short-term real interest rates and the zero bound.

So why not?

William Spriggs: Trying to Teach Old Dogs New Tricks:

Last December, after a long period of keeping the Fed funds rate near zero, the FOMC voted unanimously to raise the Fed funds rate by one-quarter to one-half points....

Live from Trumpland: Various twits are telling me that the Economists for Trump--Eugene Fama in the lead, with June O'Neill, Richard Vedder, Douglas Holtz-Eakin, Larry Kudlow, Arthur Laffer, David Malpass, James Miller III, Steve Moore, and a half-dozen or so others--are not for Trump, but rather "Concerned by Hillary Clinton's Economic Agenda".

Here's how they say you can reach them:

Here's 725 Fifth Avenue:

In no bullshit level too much for these people?

David Glasner: Paul Romer on Modern Macroeconomics, Or, the “All Models Are False” Dodge:

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:

Comment of the Day: Phil Koop: Weekend Reading: Richard Feynman: Cargo Cult Science:

I also thought of this [Feynmann speech] when I read Gellman's rant. There is nothing wrong with [Gellman's] timeline per se, and he even correctly diagnoses the underlying problem, which is experimental design, not the technicalities of statistical analysis. But it lacks the perspective on display here.

KyForward.com: Annual re-enactment of 1778 Siege of Boonesborough scheduled for Sept. 24-25:

Fort Boonesborough State Park will host its annual “1778 Siege of Boonesborough” weekend, Sept. 24-25.... The event commemorates the September 1778 attack on the fort by Native Americans and French Canadians during the Revolutionary War. The settlers in the fort refused to surrender, and the attackers gave up and left. Guests are encouraged to arrive early and spend the day learning about 18th-century life in Kentucky. There will be militia and settlers’ camps, a Native American village, merchants, traders, food and more....

In addition to the reconstructed fort, the park also has a campground, hiking trails, mini-golf, picnic shelters and a gift shop.

Fort Boonesborough is located near Richmond. From Interstate 75, take Exit 95 to KY 627. On Interstate 64, exit at Winchester to KY 627. For more information, call 859-527-3131.

Live from Trumpland: Blind Squirrel:

(1) Erica Grieder (2011): The Trash Talker: Why Rick Perry Will Thrive:

On the issues where he has been motivated to mastery... [Perry] typically has a commanding grasp of the facts. When I’ve interviewed him, I’ve been most concerned about economic issues, and have found him to be an articulate and nimble advocate for the Texas model, controversial though his views may be. Perry also has a natural facility for language. Jonathan Martin, at Politico, excavated a brilliant comment that Perry made about Karl Rove back in 1994. “My brain is like a chicken pot pie,” said Perry, “His is like a refrigerator that is all very organized—pickles here, salad there.” A chicken pot pie, perhaps, but a lot of professional speechwriters would struggle to come up with an image so apt and evocative...

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.

Over at Equitable Growth: Must-Reads:

• Marc Dordal i Carreras, Olivier Coibion, Yuriy Gorodnichenko, and Johannes Wieland: Rethinking Inflation Targets for Long ZLB Episodes: The estimated frequencies and durations are quite sensitive to individual country experiences...
• Robert Novy-Marx: Is Momentum Really Momentum?: Momentum is primarily driven by firms’ performance 12 to seven months prior to portfolio formation...
• Storify: DSGE as a Degenerating Research Program in Lakatosian Terms: Brad DeLong and Friends...
• Paul De Grauwe and Yuemei Ji: Animal spirits and the optimal level of the inflation target: Low inflation targets can cause economies to hit the zero lower bound during deflationary periods caused by even mild shocks...
• Duncan Black: The Ad Cycle: I thought it would've reset by now, but the internet just keeps getting worse and worse...
• Anna Valero and John van Reenen: The Economic Impact of Universities: Evidence from Across the Globe: 15,000 universities in about 1,500 regions across 78 countries, some dating back to the 11th Century....
• Zach Beauchamp: A Conservative Intellectual Explains: Samuel Goldman is one of America’s most thoughtful conservatives...
• Ernesto Dal Bo, Pablo Hernandez, and Sebastian Mazzuca: The Paradox of Civilization: Pre-Institutional Sources of Security and Prosperity: The rise of civilizations involved the dual emergence of economies that could produce surplus (“prosperity”) and states that could protect surplus (“security”)...
• Matthew Yglesias (2008): Beware the CBPP: Robert Samuelson mounts a strong challenge to Charles Krauthammer in the “worst major newspaper columnist” sweepstakes.... People who read the Post’s op-ed pages and take what’s printed their seriously are going to be worse-informed than people who leave the paper alone. It’s a serious problem if you want people to read the paper.
• Cyrus Farivar: As Kuwait imposes world’s first DNA collection law, attorney tries to fight it
• John Timmer: Humanity left Africa in one big surge Nick Bunker: Declining U.S. labor mobility is about more than geography Nick Bunker: Weekend reading: “Grantee conference week” edition The Long-Run Economic Trend Is Our Friend: No Longer so Fresh at Project Syndicate - Equitable Growth

Comment of the Day: Kaleberg: AI:

One of the problems is that we don't always call them robots...

Comment of the Day: Invhand: Musings on "Just Deserts" and the Opening of Plato's Republic:

I would like to recommend to those musing on 'just deserts' The New Society by Peter Drucker (1950)...

Must-Read: Ernesto Dal Bo, Pablo Hernandez, and Sebastian Mazzuca: The Paradox of Civilization: Pre-Institutional Sources of Security and Prosperity:

The rise of civilizations involved the dual emergence of economies that could produce surplus (“prosperity”) and states that could protect surplus (“security”)...

Over at Project Syndicate: The Long-Run Economic Trend is Our Friend

These are days of grave disappointment at the state of the world. Sinister forces of fanatic religion-linked murder that we thought had been largely scotched by 1750 are back. They have been joined by and are reinforcing forces of nationalism, bigotry, and racism that we thought had been largely scotched in the ruins of Berlin in 1945. (There is a bright spot: the other principal fanaticism of the twentieth century, that of ideology, is comatose if not dead.) In addition, the state of economic growth since 2008 has been profoundly disappointing. There is no reasoned case for optimistically expecting a turn for the better in the next five years or so. And the failure of the globe's institutions to deliver ever-increasing prosperity has undermined the trust and confidence which in better times would be strong factors suppressing the murderous demons of our age. Read MOAR Over at Project Syndicate

Must-Read: Zach Beauchamp: A Conservative Intellectual Explains:

Samuel Goldman is one of America’s most thoughtful conservatives...

Must-Read: Paul De Grauwe and Yuemei Ji: Animal spirits and the optimal level of the inflation target:

Low inflation targets can cause economies to hit the zero lower bound during deflationary periods caused by even mild shocks...

Live from the Wretched Hive of Scum and Villainy that Is Twitter: Storify: On the Suspension of Glenn Reynolds from Twitter:

Must-Read: Anna Valero and John van Reenen: The Economic Impact of Universities: Evidence from Across the Globe:

15,000 universities in about 1,500 regions across 78 countries, some dating back to the 11th Century....

Must-Read: Duncan Black: The Ad Cycle:

I thought it would've reset by now, but the internet just keeps getting worse and worse...

John Adams: To Abigail Adams:

Letter from John Adams to Abigail Adams, 23 September 1778

My dearest Friend

A very idle, vain Conversation, at a Dinner, has produced you this Letter from a venerable old Lady, in this Neighbourhood, the Wife of Monsr. Grand the Banker.

James McHenry: To Alexander Hamilton][]:

Fredericksburg, New York, September 21, 1778

Sir,

In order to get rid of your present accumulations you will be pleased to take the pills agreeable to the directions; and to prevent future accumulations observe the following table of diet.

This will have a tendency also to correct your wit.

Live from the Internet: I need--very badly--a better aggregation-on-the-fly tool than Storify. Fold might be a possibility (in spite of its quirks) if only its "remix cards" feature would become a reality. But at the moment it just takes too long to put something together in it vis-a-vis Storify's compose pane-search pane interface. And simply dumping links with text in a weblog compose window produces a much more compact presentation than does Storify...

Are there any other better tools than those two for vacuuming up things on the internet quickly that I have missed?

Must-Read: Storify: DSGE as a Degenerating Research Program in Lakatosian Terms: Brad DeLong and Friends...

Must-Read: Willem Buiter (2009): The Unfortunate Uselessness of Most ‘State of the Art’ Academic Monetary Economics:

If one were to hold one’s nose and agree to play with the New Classical or New Keynesian complete markets toolkit, it would soon become clear that any potentially policy-relevant model would be highly non-linear....

Must-Read: Robert Novy-Marx: Is Momentum Really Momentum?:

Momentum is primarily driven by firms’ performance 12 to seven months prior to portfolio formation...

Must-Read: Marc Dordal i Carreras, Olivier Coibion, Yuriy Gorodnichenko, and Johannes Wieland: Rethinking Inflation Targets for Long ZLB Episodes:

The estimated frequencies and durations are quite sensitive to individual country experiences...

Over at Equitable Growth: Must-Reads:

• Laura Tyson and Anu Madgavkar: The Great Income Stagnation: MGI surveys in France, the United Kingdom, and the US have found...
• Project Syndicate: Untruth and Consequences:
• Simon Wren-Lewis: Economics, DSGE and Reality: Just before 1990... with colleagues I showed that entering the ERM at an overvalued exchange rate would lead to a UK recession...
• Ben Thompson: What the Media Misses About Facebook, Facebook’s Missing Humans, Will the iPhone 7 Be a Hit?: Media executives need to take a very hard look at their businesses and decide where they can survive...
• Harry Brighouse: Why Have Classroom Discussions Anyway?: I didn’t give any reasons why students actually should discuss....
• Narayana Kocherlakota: The Fed Is About to Make a Mistake: More than seven years after the recovery began in mid-2009, inflation remains below the central bank's 2-percent target...
• Bill White: Ultra-Easy Money: Digging the Hole Deeper?: Ultra Easy Monetary Policy: Why it Hasn’t Worked as Intended**
• Paul Krugman: What Have We Learned From The Crisis?: We’re talking about an... episode... longer than the famous era of stagflation in the 1970s and early 1980s...
• V.V. Chari, Lawrence Christiano, and Patrick J. Kehoe (2008): Facts and Myths about the Financial Crisis of 2008: We examine three claims about the... financial crisis... and argue that all three claims are myths...
• Nick Bunker: Unemployment and models of U.S. consumption - Equitable Growth
• Nick Bunker: Equitable Growth’s inaugural grantee conference - Equitable Growth
• The Clones of Jim Tobin vs. the Gravitational Pull of Chicago: A Paul Krugman Production... - Equitable Growth Bridget Ansel: More women in the United States are working past retirement age - Equitable Growth

They are the usual suspects--people who have been 100% wrong since at least 2007, and yet lack any intellectual curiosity to try to rethink their view of the world and so understand why things have developed differently than they had thought they would: Eugene Fama in the lead, with June O'Neill, Richard Vedder, Douglas Holtz-Eakin, Larry Kudlow, Arthur Laffer, David Malpass, James Miller III, Steve Moore, and a half-dozen or so others. At least they are thin on the ground this morning...

The interesting thing is that they don't dare attempt to get signatures for an "Economists for Trump" letter. All they dare do is try for an "Economists Concerned by Hillary Clinton's Economic Agenda" letter. (And, of course, they do not have a parallel "Economists Concerned by Donald Trump's Economic Agenda" letter...

Curiously enough, only three of the signatories on the infamous "Bernanke is debasing the dollar!" letter of 2010 have signed up: Calomiris, Holtz-Eakin, and Malpass.

The other living signatories--Asness, Boskin, Bove, Chanos, Cogan, Ferguson, Gelinas, Grant, Hassett, Kristol, Senor, Shlaes, Singer, Taylor, Wallison, Wood--are missing in action. Don't think I've seen any of them on Team #I'mWithHer, though...

Must-Read: Is this the most totally clueless macroeconomics paper ever? If not, what is?

V.V. Chari, Lawrence Christiano, and Patrick J. Kehoe (2008): Facts and Myths about the Financial Crisis of 2008:

We examine three claims about the... financial crisis... and argue that all three claims are myths...

Live from the Republicans' Self-Made Gehenna: Jeet Heer: The Once and Future Trump:

The Republican Party was torn asunder by a populist media personality running a [white nativist]nationalist campaign based on immigration restriction, protectionism, and an anti-internationalist foreign policy....

Storify: Trumpism is Here to Stay!:

Cosma Shalizi:

I esteem DeLong's writings very highly, have learned much from them, and think he is on balance very much a force for good, but there are times when I simply cannot understand how his mind works, and do not particularly want to...

I must say the Michael Barone is the biggest Obama-hating hack in the world:

Ed Kilgore: The Ultimate “Blame Obama” Column by Ed Kilgore):

Michael Barone is a colossal hack... but not a big conservative ideologue...

Comment of the Day: Tracy Lightcap: AI:

Oh, horse manure...

Eleanor Roosevelt: My Day:

NEW YORK, Thursday—The "spheres of influence" section of Secretary of Commerce Henry Wallace's speech last week seems to me to have been written without proper explanation. Because Russia has gained a predominant military and political interest in certain countries along her borders, and because Great Britain has always shown the same type of interest in countries along what are known as her "life lines," and because we in this Hemisphere find that we have similar interests with our neighbors, many people feel that we must of necessity accept the fact that there will be spheres of influence in the future. However, I really think this matter requires a little more thinking through.

: Night Thoughts on Dynamic Scoring:

Live from DuPont Circle: Last Thursday two of the smartest participants at last Friday's Brookings Panel on Economic Activity conference--Martin Feldstein and Glenn Hubbard--claimed marvelous things from the enactment of JEB!'s proposed tax cuts and his regulatory reform program. They claimed:

• that it would boost economic growth over the next ten years by 0.5%/year (for the tax cuts) plus an additional 0.3%/year (for the regulatory reforms).

• that it would leave the U.S. economy in ten years producing $840 billion more in annual GDP than in their baseline.

• that over the next ten years faster growth would produce an average of $210 billion a year of additional revenue to offset more than half of the $340 billion a year 'static' revenue lost from the tax cuts

• that the net cost to the Treasury would be not $340 billion/year but $130 billion/year.

• that in the tenth year--fiscal 2027--the $400 billion 'static' cost of the tax cuts in that year would be outweighed by a $420 billion faster-growth revenue gain.

The problem is that if I were doing the numbers I would reverse the sign...

*Duncan Black: Bullshit Mountain:

Good Daily Show segment. I like the inclusion of Craig T. Nelson saying, "I've been on food stamps and welfare, did anybody help me out? No." Because I think that quote really gets to the true core of bullshit mountain...

The highly-esteemed Mark Thoma sends us to Paul Krugman. In praise of real science: "Some people... always ask, 'Is this the evidence talking, or my preconceptions?' And you want to be one of those people...".

Paul's most aggressive claim is that our economics profession in 2007 would have done a much better job of economic analysis and policy guidance in real time had it consisted solely of clones of Samuelson, Solow, Tobin--I would add Modigliani, Okun, and Kindleberger--as they were in 1970: that the vector of net changes in macroeconomics in the 1970s were of zero value, and that the vector of net changes in macroeconomics since have been of negative value as far as understanding the world in real time is concerned.

Must-Read: The highly-esteemed Mark Thoma sends us to Paul Krugman. In praise of real science: "Some people... always ask, 'Is this the evidence talking, or my preconceptions?' And you want to be one of those people...":

Paul Krugman: What Have We Learned From The Crisis?:

We’re talking about an... episode... longer than the famous era of stagflation in the 1970s and early 1980s....

Must-Read: In the age of the modern internet, according to Ben Thompson, publications must either...

• chase the mass advertising-based audience, and so succumb to spending most of their time publishing clickbait...
• rely on a niche audience and subscriptions, and thus block (most of their) valuable content from (the long tail of most of) their potential readership (most of the time).
• accept that they are going to be endothermic: burn more money than they take in, and survive off of sugar mommies and sugar daddies of one form or another.

If he is right, this is not a good situation from many perspectives. But is their an argument that he is wrong?

Ben Thompson: What the Media Misses About Facebook, Facebook’s Missing Humans, Will the iPhone 7 Be a Hit?:

Media executives need to take a very hard look at their businesses and decide where they can survive...