economics
razib | October 15, 2009In the interminable debate on Wall Street compensation Ryan Avent makes an important point:
Officials in Washington scrutinising the pay packages of TARP recipients are primarily focused on the incentive effects of those pay structures--whether financial pay packages are inducing financial employees to take excessive risks. But the bigger incentive problem may be--almost certainly is--the drain of talent from other fields, into finance. If there were more evidence that this drain was producing significant net benefits for the economy, than there would be less cause to worry. To an increasing…
mikethemadbiologist | October 15, 2009One of the interesting things that's come out of Krugman's critique of macroeconomics is that it's led to a lot of economists (and others) discussing how science should work and what science is. I found Robert Waldmann's take on the role of mathematics in science and economics:
I'd say that economists have not accomplished much using the mathematical scientific approach, because economists almost never use an approach which is both mathematical and scientific.
The defining characteristic of science is that it is empirical and that hypotheses which are rejected by the data are abandoned (OK…
mikethemadbiologist | October 11, 2009A while ago, I discussed how 'fiscal conservatism'--that is, radical deficit reductionism--is an extremist ideology, not a moderate one, and that radical deficit reductionism has real-world consequences for people's lives. Steve Rhodes generalizes the problem by describing the discussion we are not allowed to have:
We are not allowed to discuss an economic structure that keeps those on the bottom at the bottom - on purpose.
When the unemployment rate, for example, gets "too low," the Federal Reserve raises interest rates to slow down the economy.
In other words, the Federal Reserve - at the…
razib | October 8, 2009For Gun-Shy Consumers, Debit Is Replacing Credit:
Visa announced this spring that spending on Visa debit cards in the United States surpassed credit for the first time in the company's history. In 2008, debit payment volume was $206 billion, compared with credit volume of $203 billion. MasterCard reported that for the first six months of this year, the volume of purchases on its debit cards increased 4.1 percent, to $160 billion, in the United States. Spending on credit and charge cards sank 14.8 percent, to $233 billion.
"Consumers are rational thinking individuals, and they're going to…
mikethemadbiologist | October 4, 2009It is still astonishing the extent to which radical deficit reductionism still rules our political discourse, even as there are six people looking for work for every job opening. Robert Reich describes how you fix this:
So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don't have customers aren't going do a lot of new investing. And foreign nations…
emjohnson | September 30, 2009Over the years anthropologists have had a good deal to say about notions of power and inequality. For example, the late CUNY anthropologist Eric R. Wolf took his early experiences working with peasants in Puerto Rico to explore these larger questions in the global system. In the opening to his book Envisioning Power he wrote:
We stand at the end of a century marked by colonial expansion, world wars, revolutions, and conflicts over religion that have occasioned great social suffering and cost millions of lives. These upheavals have entailed massive plays and displays of power, but ideas…
mikethemadbiologist | September 28, 2009Last week, you might have read about the stagnation of wages. If you didn't, here's Felix Salmon:
There's no good news in today's data from the Census bureau. Unless you're the kind of person who worries about inflation, that is: in that case you're probably reassured that real median household income fell 3.6% between 2007 and 2008, from $52,163 to $50,303. That's a drop of over $1,800: real money.
David Leonhardt puts this in a broader context:
The typical American household made less money last year than the typical household made a full decade ago.
To me, that's the big news from the…
emjohnson | September 19, 2009Buffalo News / Adam Zyglis
"As hypocrisy is said to be the highest compliment to virtue, the art of lying is the strongest acknowledgment of the force of truth."
- William Hazlitt, "On Patronage and Puffing", 1822
razib | September 18, 2009The Nightmare Of Regulatory Reform:
...the SEC and the CFTC, two agencies that have fought hard to stay apart while the products they regulate grow more and more intertwined. Both Republicans and Democrats agree the two should become one, but former House Financial Services Committee chairman Mike Oxley says the chances of that happening are about as good as him beating Tiger Woods.
This is obviously public choice theory at work. But more generally an inspection of history shows that institutions tend to go through phases, as if they have a life history like organisms. The Chinese dynastic…
pontiff | September 15, 2009Those of you interested in the recent debate over math, beauty, economics, and Paul Krugman, and who are in New York on Oct 5 might be interested in a talk by Eric Weinstein at Columbia:We will be taking a position opposite to the Claim of Nobel Laureate Paul Krugman:"As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth."
It is our claim that in Economics as well as Physics, Mathematics and Biology, Elegance has been an essential guide to understanding how to properly construct the foundations of…
mikethemadbiologist | September 13, 2009Economist Brad DeLong criticizes an economics reporter from ProPublica who claims "his job is looking for 'gotcha' stories about stimulus money going for 'lion cages at the National Zoo.'" In DeLong's comments, I asked:
What's wrong with lion cages at the National Zoo? I like the National Zoo, and someone would be employed by this. Seriously, I don't get it.
(That's not the snark, but it really does make you realize how stupid that reporter is. If you don't believe that a stimulus was necessary, well, you're an idiot, but, regardless, once you do have a stimulus, what's wrong with using it…
pontiff | September 11, 2009Krugman clarifies:I've been getting some comments from people who think my magazine piece was an attack on the use of mathematics in economics. It wasn't...So by all means let's have math in economics -- but as our servant, not our master.
Word.
(Of course the point I was trying to make was that I read the end of his article as suggesting that because economics must deal with the irrational and unpredictable behavior of humans, that it must therefor be messy and beyond elegant mathematical description. I don't buy this line of reasoning, as I think it is unknown whether the conclusion is…
ejohnson | September 10, 2009
Can the elegant models of mathematics and physics be applied to something so intrinsically complicated as the economic behavior of individuals? When economist Paul Krugman argued in The New York Times Magazine last week that the failure of economists to predict the current economic crisis was due to their reliance on beautiful but flawed models of perfect markets, mathematician and hedge fund manager Eric Weinstein immediately tweeted his disagreement, asking ScienceBloggers Chad Orzel and Dave Bacon for their takes as well. Chad brought his experience with physics to bear, while Dave…
mikethemadbiologist | September 10, 2009A dissertation committee member who will remain nameless once told me, "Mike, in the end, it all comes down to those stupid fucking natural history facts." This might have been the only worthwhile thing said committee member ever told me. More about this in a bit.
Anyway, I bring this up because I think much of the commentary on Paul Krugman's recent NY Times piece about the problems with the current state of macroeconomics is missing the real problem. The problem wasn't with the theory.
Well, alright, the theory was bad. But the real problem is that there was no de facto mechanism to…
pontiff | September 8, 2009Over at the most uncertain blog, he of uncertain principles (aka Chad) takes up a challenge posed by @EricRWeinstein on twitter concerning Paul Krugman's recent article on why economists got the economic crisis so wrong. Since I know even less economics than anyone around here this seems like a great opportunity for me to weigh in (this is, after all, the blogosphere!)
Krugman's article is deceptively enticing, yet I find it disturbingly inadequate. In particular the critique is very much written as a just-so story, and there is very little in terms of concrete claims made nor of actual…
mikethemadbiologist | September 8, 2009If you haven't read Paul Krugman's recent NY Times Magazine article "How Did Economists Get It So Wrong?", I recommend it highly. One of the interesting things about Krugman is that he has been talking about this issue for over a decade. In a 1996 lecture, he presented an argument that economics needs to learn from evolutionary biology:
....consider the question of whether and how monetary policy has real effects. In the end this comes down to whether prices are sticky in nominal terms. In my view there is overwhelming evidence that they are. But many economists reject such evidence on…
stoat | September 5, 2009 Ha. I wimped out of "bonii" cos I wasn't sure of my grammar. Anyway: Bankers are this year's terrorists, who were last year's paedophiles, who were the year before's witches. Which is to say, everyone appears to be convinced that they are deeply evil and the heavy hand of government is needed (although opinions differ as to quite how heavy). This is perfectly natural: whoever may have been responsible for the Great Financial Disaster that is, errm, having such huge impacts on us all, err, everyone is convinced that it certainly wasn't them to blame. So if you're a politician it can't…
emjohnson | August 24, 2009"They say rather than cursing the darkness, one should light a candle. They don't mention anything about cursing a lack of candles."
- George Carlin, When Will Jesus Bring the Porkchops?
In Unscientific America, Chris Mooney and Sheril Kirshenbaum (the latter of whom I consider a friend) are deeply concerned that the American system is unsustainable so long as scientific results and recommendations are not appreciated by the general public or by the politicians that represent us. And there is good reason to be concerned. In their book they cite the results of a 2008 report from the Keystone…
emjohnson | August 17, 2009I'm sorry, I'm afraid that title's misleading. This is actually an early video of UnitedHealth CEO Stephen J. Hemsley (whose salary is estimated at $102,000 an hour) discussing his principled stance on why he's opposed to the public option in US health care reform.
Or it could be The Money Song from Monty Python's Flying Circus. It's difficult to tell them apart.
mikethemadbiologist | August 13, 2009I've posted several times about how confusing a slowdown in the rate at which things get worse (the second derivative) with an actual improvement (the first derivative) has led to some ridiculous claims about economic improvement. Keith Hennessey has a similar complaint:
He [Obama] said this first after the 2nd quarter GDP report showed a 1.1% decline, and again after last Friday's jobs report showed the U.S. economy lost 247,000 jobs in July. The President is making a common error by looking at the rate of change of a rate of change....
Wrong. Things are still getting worse, but more…