Sunday, September 27, 2015

The Hunting of Snark

who and what provides the best snark on the internet ? I say (uh type) Daniel Davies Matt Yglesias McSweeney's Internet Tendency The Onion (of course) The Rude Pundit Fafblog (even though the lazy bums haven't posted in almost 4 years)

Sunday, September 20, 2015

General Concludes that Bergdahl just went Galt and Should not be Jailed.

hard core Obama fans such as myself must be pleased that an investigating General has concluded that Bowie Bergdahl (the US prisoner of the Taliban for whom Obama exchanged 5 Guantanamo prisoners) should not be jailed. However, some heads might explode when we read more about Bergdahl's other than legal problems. "General Dahl testified that Sergeant Bergdahl had grossly unrealistic and idealistic expectations of others, and even identified with John Galt, the hero in Ayn Rand’s novel “Atlas Shrugged.”" Now I stress that, under the 14th amendment, US citizen Randroids have full rights and immunities, including the 9th amendment right to be a very high priority if they are taken prisoner by Islamic terrorists. Sergeant Bergdahl's political views are completely irrelevant to the question of whether his freedom was worth the cost of the exchange. But my as yet un-exploded head is spinning.

Thursday, September 17, 2015

Smart and Smarter

I linked to this Ezra Klein post just for the quote of Carly Fiorina being a fool, but actually reading it I am amazed by something which shouldn't be amazing. The post says two things -- that Fiorina won the debate in the sense that her chances of becoming President increased and that much of what she said was false or nonsensical. I was unsurprised then surprised that I was unsurprised. Of course I knew that Klein can keep both concepts in his mind at the same time -- that claims can be both false and politically useful. But I realize that it is amazing for a prominent commentator to admit this. I can't think of the last time I read both claims in the same mass circulation essay. I think one of the rules is to not insult the public -- it isn't OK to say that no one should be convinced but that most people will be convinced. I think another is that even relatively honest pundits aim to become aids to politicians, and they can't if they say the politician is a liar or a loser. But I don't understand -- obviously no one with Klein's general orientation is going to be hired by a Republican. Why don't pundits ever contrast the honesty and effectiveness of arguments by politicians with whom they disagree so strongly that they can't be angling for a job ?

Dumb V Dumber

Carly Fiorina decided to contrast her knowledge with Donald Trump's ignorance. He said the 14th amendment doesn't establish birthright citizenship (dumber) Fiorina said "The truth is, you can't just wave your hands and say 'the 14th Amendment is gonna go away.' It will take an extremely arduous vote in Congress, followed by two-thirds of the states," Uh Ms Fiorina, Article V of Constitution begs to differ
The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress;
Yet she was the relatively knowledgeable Republican candidate.

Saturday, September 12, 2015

House Republicans Attempt Kabuki and Trip Over Mask

Being upset that Democrats managed to filibuster the resolution disapproving the Iranian Nuclear deal, House Republicans decided to take three symbolic votes. First they voted on whether to approve the deal (which does not need congressional approval). For some reason this difference was important to them. On that vote 25 Democrats voted yes along with all but one Republican (one voted present). This means that there would not be enough votes against the agreement to overturn a veto of a resolution disapproving the veto (which will not pass the Senate because of the filibuster or the House because of the weird theatrics). Then they insisted on voting on a resolution suspending the President's authority to relax sanctions until January 21 2017 (that is exactly so long as Obama is the President). It is not clear to me why Conservative House Republicans demanded a vote on this resolution. It will not be proposed in the Senate and would obviously be vetoed if it passed the Senate.
On this vote two (2) Democrats voted with the Republicans. The roll call might be the closest to purely partisan in the recent history of the House of Representatives[nope see update]. So Republicans can now boast that their effort to block Obama has bipartisan support, because two (2) Democrats voted with them. If they hadn't insisted on the second resolution, they could have claimed the support of 25 Democrats.
Losing is always painful, but losing mid term elections to these buffoons is humiliating. The two Democrats are Representatives Graham and Vargas. I don't know what districts they represent, but I hereby promise to donate no less than $100 to anyone who primaries either of them (if you do primary them demand that I pay up in a comment to this post). The crazy and/or cowardly Democrats' names are in italics
Update: My mistake. On Thursday there was an even more perfectly partisan vote with 0 Republicans voting no and 0 Democrats voting yes on a motion claiming the Obama administration hadn't sent congress enough information so the 60 day clock never started. I am confident that there has never been a more purely partisan vote (that's safe to say) So why did Republicans insist on getting a record that no (0 (zero)) Democratic representatives agree with their absurd claim ? Does anyone there know how to play this game ?

Wednesday, September 09, 2015

Tuesday, September 08, 2015

Paul Romer has 3 Questions

Paul Romer has questions which should enable me to self assess my economic tribalism. I am very tribal (but in a fairly small tribe.
Consider these two statements:

1. The model in Lucas (1972), Expectations and the Neutrality of Money, made a path breaking contribution to economic theory. It is comparable in importance to the Solow model and the Dixit-Stiglitz formulation of monopolistic competition.

2. The model in Prescott and Kydland (1982), “Time to Build and Aggregate Fluctuations”, has no scientific validity.

Next, consider these two statements:

3. Einstein’s model of the universe based on his theory of General Relativity, made a path breaking contribution to theoretical physics, even though in his first application, Einstein built a model of a steady state universe.

4. Models of a steady state universe have no scientific validity.

In each case, the first statement in the pair is about the contribution of a mathematical model to scientific progress. The second is about the empirical validity of a specific model.

[skip] Here I want to point to a different indicator. Set aside the question of whether or not I am right that 1 and 2 are true. Think of some macroeconomist X that you know. Consider these questions:

A. Would X agree that there is an objective sense in which statements 1 and 2 can be said to be either true or false?

B. Would X agree that a reasonable person could conclude that statements 1 and 2 are both true?

C. Would X be able to examine dispassionately the evidence for and against these two statements and evaluate them independently?

A useful indicator of the degree to which macroeconomics has been infected by tribalism might the fraction of macroeconomists for whom the answers to at least one of the questions A, B, and C would be no.

First and in passing, I note that, after Einstein was introduced, "economic theory" was replaced by "scientific progress" . The implicit assumption is that there is some overlap between economic theory and scientific progress -- that economic theory has progressed. This view is not universally accepted. I am pretty sure that I have a problem with question A. For statement 1 to be true, "path breaking" has to be well defined.

regarding Romer's statement 1, I agree that, when originally presented, the Lucas 72 model, the Solow growth model and the Dixit Stiglitz example had similar scientific status. They were "path breaking" in that they left the existing path -- they were new and different. They were path breaking in that they were highly influential. My problem is that I don't see how that relates to "scientific progress". It was definitely scientific change, but only time could tell if it was an improvement or a worsening.

I also certainly agree with Romer's statement 2. I agree that a reasonable person could conclude that statements 1 and 2 are both true (I don't but I can see how a reasonable person might think that). I can evaluate the second independently from the first, but I need to understand what "path breaking" means to evaluate the first.

Before going on, I'd like to stress that Romer definitely did not compare Lucas '72 and Dixit-Stiglitz to General Relativity -- he compared it to the Solow growth model and the Dixit Stiglitz example of imperfect competition. However, I will contrast them. General Relativity explained an anomaly -- the precession of the perihelion of Mercury. It implied a prediction about how much gravity caused light to curve which was striking shocking and soon confirmed. Since then it has yielded a huge number of predictions which fit the data exactly (so far). It was easily modified to correspond to an expanding universe as the first formulation did, when this was pointed out Einstein added a fiddle factor to reconcile the theory with a steady state universe. Pysicists are quite sure general relativity is not the truth (because it is inconsistent with quantum mechanics and therefore a lot of data). But it is a very empirically successful theory.

In contrast, the Dixit-Stiglitz example did not attempt to explain anomalies not fit by earlier models of imperfect competition. The aim was to make models with imperfect competition tractable. The formulation is an example, and not one considered unusually plausible. They made a modelling choice not a hypothesis (neither would guess that people might actually have Dixit-Stiglitz preferences). Here I think the key cause of the enormous influence of the example was that it meant there was a standard way to handle imperfect competition.

Unfortunately, this is important not because other models are all intractable but because there are no general results. Models with imperfect competition can have a sunspot equilibrium with fluctuations which are not caused by shocks to taste and technology (this can occur if different goods are strategic complements). The set of equilibrium can be huge -- a multidimensional continuum. Together the assumptions of imperfect competition and Nash equilibrium imply almost nothing. The example made it possible to have the illusion that economic theorists understood imperfect competition, but this was discovery by assuming we have a can opener.

The example was fruitful because, once a lot of people decided to explore the same special case, they could discuss its interesting behavior. The fruits however, do not include any good reason to exclude the other problematic cases in which different goods are strategic complements. Theory can grow if people agree on core assumptions. This is progress if the assumptions are useful approximations. Once a field of economic theory has developed, its core assumptions are no longer vulnerable to data. I do not think the the development of a new branch of theory is necessarily scientific progress.

I think economic theory was massively improved by the Dixit-Stiglitz example, because it made economists outside of industrial organization willing to consider imperfect competition. But I think this can be seen as an accidental trick. It gave the impression that there were simple elegant results based on assuming imperfect competition similar to those based on assuming perfect competition. There aren't. Here I cite major Dixit-Stigitz user Paul Krugman

After a while, the new approaches came to seem too liberating; by the early 90s the joke was that a smart graduate student could devise a model to justify any policy. And while some important new theoretical work continued to be done, for example the Melitz work on heterogeneous firms or the Eaton-Kortum work on bilateral trade flows, I think you have to say that the field got tired of clever theorizing and wanted data instead.

I think the point is that this excessive liberation was already implicit given the acceptance of imperfect competition (and the emptiness of theory without data could conceivably have been recognized as soon as economists admitted that they couldn't prove that competition really is perfect, that is over a century ago). By the way, I heard that joke told by Robert Barro in 1988 or 1989 so before the early 90s.

There have been dead ends in natural science. Organic chemistry was once defined as the consideration of how the laws which governed chemical reactions inside living things were different from the laws which governed chemical reactions outside of living things. A Nobel prize in physiology and medicine was awarded for a theory of cancer propagation which is now believed to have no relationship to reality. Lamarckian evolutionary biology survived into the 20th century (and not just in the USSR).

A new branch of mathematics must be a contribution to mathematical progress (perhaps a small and boring one). But a radically new hypothesis which turns out to be totally false was not a contribution to scientific progress. Finding out that it was false was and such dead ends are inevitable in science. But in science development of new theory is not necessarily progress.

OK what about the Solow growth model and the Lucas supply function ? Like Dixit and Stiglitz, Solow mainly made a large number of extreme assumptions yielding a tractable model. Here I think Solow's assumptions were fruitful also in that they fit the data surprisingly well. There are excellent arguments for why one shouldn't be able to treat capital and labor as scalers (single numbers). But empirically, the Solow radical simplification fits the available data surprisingly well. There was no reason to think that the concept of disembodied technology would be useful. But it helps economists fit the data.

Lucas formalized an argument about price level missperception and fluctutations which had been made many times (for example by Keynes in "The General Theory" as Tobin explained to Lucas in 1971). Here again the theoretical change was to assume everything else away. In particular the Lucas model abstracts from the wage system and is population by self employed "suppliers" -- this was an extreme assumption at a time when trade unions were powerful even in the USA. Lucas definitely did not identify a previous conceptual error of treating the expectations unaugmented Phillips curve as a stable relationship -- this is a myth. He added a focus on expectational errors alone and the insistence that economists assume rational expectations. I think this too is unlike Dixit-Stiglitz. The reason is that, in 1972, the Lucas model was obviously grossly false -- it implies that output is a white noise and it was well known that economic fluctuations aren't. it requires that agents have very limited information on the price level when, in fact, they have a lot of information. I think it was clear that Lucas's new research program would be sterile. I think it was entirely sterile. I count new Keynesian models as part of Lucas's intellectual legacy (even though he never recognised the bastards). Here I think nothing was explained by the new models which hadn't been explained by the old models and economic theory did not progress at all. It grew and is a richer branch of applied mathematics, but I think the right direction to go now is back to before Lucas 1972.

I certainly don't think this of the Solow growth model or imperfect competition with a Dixit-Stiglitz preferences or a Dixit-Stiglitz aggregator.

Yes Lucas 1972 was path breaking, but the new path Lucas blazed lead to a dead end.

Tuesday, September 01, 2015

Ed Kilgore Libsplains how to get Wingnuts to put Your Name in Their Headlines

Kilgore noted that a Bozellian bozo put "Martin Longman" in a headline but didn't put "Ed Kilgore" in another headline the day before because Kilgore isn't edgy enough. OK so so newsbusters this little blog aint --it gets 100 page views a day. But I thought I really had to put "Ed Kilgore in another headline (and this one has nothing to do with welfare reform).