** The US ..needs to create 250,000 jobs a month to just absorb people coming into the workforce and they're not doing that.[1]
** The US economy is 70% consumption.[2]
** Only roughly 15 percent of U.S. imports come from China. [3]
** The broad U6 category of unemployment rose to 17.3pc in the US [4]
** 10% of households in the US are behind on their mortgages. 30%+ of homes are in negative equity. Roughly one in seven houses is in serious problems.[5]
** Right now [Dec 09] housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade.[6]
** One million American families lost their homes in the fourth quarter of 2009. Another 2.4 million homes are expected to go in 2010. [7]
** It was a decade of zero gains for stocks, even without taking inflation into account. The Dow first topped 10,000 in 1999. "Last week [week to 27th December 2009] the market closed at 10,520."[8]
** The headline employment number for December 2009 [was expected to be] "slightly higher than that for December 1999, but only slightly."[9]
** Private-sector employment has actually declined [in the US]— the first decade on record in which that happened.[10]
** "if it isn't government, it isn't getting done" Very high levels of government debt are being financed by (i) investors concerned about the safety of other assets (ii) central banks buying bonds issued by the Treasury….like an internal transfer of printing money game that’s going on. [11]
** There is $4.2 trillion of corporate debt which has to be refinanced over the next five years. This poses a refinancing risk. [12]
** The risk of a 50-year old woman acquiring breast cancer rose to 12% in 2009 compared to 1% in 1975.[13]
REFERENCES
[1] Das is not good: post-crash stagnation. 9th December 2009
http://www.abc.net.au/pm/content/2009/s2766725.htm 09/DEC/2009
[2] Das is not good: post-crash stagnation. 9th December 2009
http://www.abc.net.au/pm/content/2009/s2766725.htm 09/DEC/2009
[3] The U.S.-China Economic Relationship: Separating Facts from Myths
Author: Steven Dunaway, Adjunct Senior Fellow for International Economics
November 16, 2009
http://www.cfr.org/publication/20757/uschina_economic_relationship.html
[4] America slides deeper into depression as Wall Street revels
December was the worst month for US unemployment since the Great Recession began.
By Ambrose Evans-Pritchard
Published: 6:35PM GMT 10 Jan 2010
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6962632/America-slides-deeper-into-depression-as-Wall-Street-revels.html
[5] Das is not good: post-crash stagnation. 9th December 2009
http://www.abc.net.au/pm/content/2009/s2766725.htm 09/DEC/2009
[6] The Big Zero
By PAUL KRUGMAN
Published: December 27, 2009
http://www.nytimes.com/2009/12/28/opinion/28krugman.html?_r=1&ref=opinion
[7] America slides deeper into depression as Wall Street revels
December was the worst month for US unemployment since the Great Recession began.
By Ambrose Evans-Pritchard
Published: 6:35PM GMT 10 Jan 2010
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6962632/America-slides-deeper-into-depression-as-Wall-Street-revels.html
[8] The Big Zero
By PAUL KRUGMAN
Published: December 27, 2009
http://www.nytimes.com/2009/12/28/opinion/28krugman.html?_r=1&ref=opinion
[9] The Big Zero
By PAUL KRUGMAN
Published: December 27, 2009
http://www.nytimes.com/2009/12/28/opinion/28krugman.html?_r=1&ref=opinion
[10] The Big Zero
By PAUL KRUGMAN
Published: December 27, 2009
http://www.nytimes.com/2009/12/28/opinion/28krugman.html?_r=1&ref=opinion
[11] Das is not good: post-crash stagnation. 9th December 2009
http://www.abc.net.au/pm/content/2009/s2766725.htm 09/DEC/2009
[12] Das is not good: post-crash stagnation. 9th December 2009
http://www.abc.net.au/pm/content/2009/s2766725.htm 09/DEC/2009
[13] Cancer From the Kitchen?
By NICHOLAS D. KRISTOF Op-Ed Columnist
Published: December 5, 2009
http://www.nytimes.com/2009/12/06/opinion/06kristof.html?_r=4
Saturday, January 16, 2010
A Footnote to the Gruber Affair
Jonathan Gruber, a health economist at MIT and the main “independent” analyst the Obama administration has relied on to put numbers on its health reform proposals, was paid almost $400,000 last year by the government to do this—but the payments were kept hidden until Marcy Wheeler of Firedoglake broke the story. A small firestorm has raged over this episode: see this and this and this.
Aside from what it says about the commitment of team Obama to open, honest government, it also casts a light on a lesser-known fact about the economics profession: economists never have to disclose their funding sources to the public. They don’t have to say who’s paying them when they publish a journal article. They don’t have to say who’s paying when they write op-eds or make presentations at academic gatherings. Unlike medical researchers, who have gone through a process of soul-searching over their financial relationship to pharmaceutical companies and other interested parties, economists never discuss, and apparently never think about, the potential for money to corrupt.
Obviously, incentives are important for everyone but them.
Aside from what it says about the commitment of team Obama to open, honest government, it also casts a light on a lesser-known fact about the economics profession: economists never have to disclose their funding sources to the public. They don’t have to say who’s paying them when they publish a journal article. They don’t have to say who’s paying when they write op-eds or make presentations at academic gatherings. Unlike medical researchers, who have gone through a process of soul-searching over their financial relationship to pharmaceutical companies and other interested parties, economists never discuss, and apparently never think about, the potential for money to corrupt.
Obviously, incentives are important for everyone but them.
Friday, January 15, 2010
Real Confusion
AP is reporting that real wages declined during 2009 but their lead sentence is quite confusing.
Real wages decline if inflation exceeds the increase in nominal wages, which is what I think AP meant to say. This sentence, however, almost appears to compare some alleged increase in real wages to the increase in consumer prices.
BLS reports that average weekly earnings of production and nonsupervisory workers on private nonfarm payrolls in current dollars rose by 1.87% from December 2008 ($612.72) to December 2009 ($624.16) but when adjusted for inflation, their constant (1982) dollar weekly earnings fell from $288.12 to $283.58 or the reported decline in inflation-adjusted weekly wages. My math says this means the deflator had to rise by 3.5% over the same period not the reported 2.7%.
American families were squeezed last year as their inflation-adjusted weekly wages fell 1.6 percent — the sharpest drop since 1990 — well below the 2.7 percent consumer inflation rate.
Real wages decline if inflation exceeds the increase in nominal wages, which is what I think AP meant to say. This sentence, however, almost appears to compare some alleged increase in real wages to the increase in consumer prices.
BLS reports that average weekly earnings of production and nonsupervisory workers on private nonfarm payrolls in current dollars rose by 1.87% from December 2008 ($612.72) to December 2009 ($624.16) but when adjusted for inflation, their constant (1982) dollar weekly earnings fell from $288.12 to $283.58 or the reported decline in inflation-adjusted weekly wages. My math says this means the deflator had to rise by 3.5% over the same period not the reported 2.7%.
Thursday, January 14, 2010
Rowley Versus DeLong On The State Of Macro
This is one of those naughty little contretemps I just cannot resist reporting on. So, Charles Rowley of George Mason has been posting "on the State of Macroeconomics" in the past few days. One post was not too unreasonable, slamming the longstanding assumption in favor of rational expectations, http://charlesrowley.wordpress.com/2010/01/10/how-macroeconomics-lost-its-way-1-theory-ignores evidence. The third of these, which can be linked through http://www.coordinationproblem.org/2010/01/charles-rowley-on-the-state-of-macroeconomics, (new name for The Austrian Economists) is a much less admirable and defensible affair, although he made a better case for himself in some of his comments. It is basically a weak anti-Keynesian screed that includes the following quotation: "The Keynesian model never worked; and never will work. It has been resuscitated by opportunistic economists, not because they believe in its merits as an agent of macroeconomic rehabilitation, but because they recognize its political value as a weapon for moving economics from laissez-faire capitalism, or (hopefull) beyond to fully-fledged socialism."
Now there is much to criticize in those remarks alone, along with the rest of the post. However, Brad DeLong proceeded to make a complete fool of himself by jumping in on this with the following comment: "Why do you lie about what I think?" Rowley then very reasonably pointed out that he named no names in his mostly egregious post, but this triggered DeLong to call him a "coward." When Peter Boettke reposted and linked this on Coordination Problem, Brad jumped in there also to accuse Boettke of lying. This is a pathetic decline for Brad, who has long had a record of excessively deleting comments (and I think most of what he posts is very intelligent). Really too bad.
Rowley's further explanation, which made some sense, although it was not in his original post, was that he was annoyed with economists who had been labeling themselves "New Keynesians," which models do generally assume some ratex, but who were now advocating old-fashioned "hydraulic Keynesianism" in the current situation. He said that there were many such who had this inconsistency problem, not just Brad, although he said he had no problem with genuine "old Keynesians" who had never lost their faith, mentioning Robert Solow in particular by name. Whoosh!
Now there is much to criticize in those remarks alone, along with the rest of the post. However, Brad DeLong proceeded to make a complete fool of himself by jumping in on this with the following comment: "Why do you lie about what I think?" Rowley then very reasonably pointed out that he named no names in his mostly egregious post, but this triggered DeLong to call him a "coward." When Peter Boettke reposted and linked this on Coordination Problem, Brad jumped in there also to accuse Boettke of lying. This is a pathetic decline for Brad, who has long had a record of excessively deleting comments (and I think most of what he posts is very intelligent). Really too bad.
Rowley's further explanation, which made some sense, although it was not in his original post, was that he was annoyed with economists who had been labeling themselves "New Keynesians," which models do generally assume some ratex, but who were now advocating old-fashioned "hydraulic Keynesianism" in the current situation. He said that there were many such who had this inconsistency problem, not just Brad, although he said he had no problem with genuine "old Keynesians" who had never lost their faith, mentioning Robert Solow in particular by name. Whoosh!
Hansen Tries to Explain Why He Appeared to Be Confused, But Just Adds to it
When Jim Hansen, a genuine hero in the world of climate science, published an op-ed in the New York Times last December, he was excoriated by many writers, including yours truly. The piece was deeply confused, almost incoherent, in its attack on carbon caps and defense of carbon taxes.
Now Hansen has published a new account of “what I really meant”. It is just as muddled as the original. Hansen tells us, for instance, that he knew all along that caps and taxes are reflections of one another:
(Actually, caps and taxes are not equivalent in a world of uncertainty, but we will let that pass.) So now the claim is that taxes are simple and pure, while caps are murky and lead only to corruption. This is no doubt true if you compare a perfect, hypothetical tax to an actual, highly compromised cap. If Hansen thinks that a tax system passed by Congress will be the pristine, comprehensive, loophole-free policy of his dreams, he hasn’t had much contact with the IRS recently.
What he can’t seem to get clear on is that he has two entirely legitimate complaints, but they have nothing to do with caps vs taxes. Hansen is against giving away carbon permits and against offsets. I (and many others) agree with him completely. This should be a reason to weigh into the public debate against giveaways and offsets. But no, he says the solution is to switch to a tax—as if there can’t be giveaways (rebates) and offsets (credits) in a system of carbon taxes.
Finally, he dumps on the Cantwell Bill, which proposes a carbon cap without giveaways and offsets—a bill that is as short, sweet and uncomplicated as anything you could hope for. Why? Well, it’s a cap, and, you know, complicated and sure to be stuffed with giveaways and offsets and....
Now Hansen has published a new account of “what I really meant”. It is just as muddled as the original. Hansen tells us, for instance, that he knew all along that caps and taxes are reflections of one another:
I do not dispute the economic theory that a cap and a fee are, in principle, equivalent. But cap and trade's complexity allows special interests to take over, killing its effectiveness.
(Actually, caps and taxes are not equivalent in a world of uncertainty, but we will let that pass.) So now the claim is that taxes are simple and pure, while caps are murky and lead only to corruption. This is no doubt true if you compare a perfect, hypothetical tax to an actual, highly compromised cap. If Hansen thinks that a tax system passed by Congress will be the pristine, comprehensive, loophole-free policy of his dreams, he hasn’t had much contact with the IRS recently.
What he can’t seem to get clear on is that he has two entirely legitimate complaints, but they have nothing to do with caps vs taxes. Hansen is against giving away carbon permits and against offsets. I (and many others) agree with him completely. This should be a reason to weigh into the public debate against giveaways and offsets. But no, he says the solution is to switch to a tax—as if there can’t be giveaways (rebates) and offsets (credits) in a system of carbon taxes.
Finally, he dumps on the Cantwell Bill, which proposes a carbon cap without giveaways and offsets—a bill that is as short, sweet and uncomplicated as anything you could hope for. Why? Well, it’s a cap, and, you know, complicated and sure to be stuffed with giveaways and offsets and....
Cochrane Too
Cassidy has him saying:
To be filed under “not understanding the difference between necessary and sufficient conditions”.
What efficient markets says is that prices today contain the available information about the future. Why? Because there’s competition. If you think it’s going to go up tomorrow, you can put your money where your mouth is, and your doing it sends (the price) up today. Efficient markets are not clairvoyant markets. People say, “nobody foresaw saw the market crash.” Well, that’s exactly what an efficient market is—it’s one in which nobody can tell you where it’s going to go. Efficient markets doesn’t say markets will never crash. It certainly doesn’t say markets are clairvoyant. It just says that, at that moment, there are just as many people saying its undervalued as overvalued.
To be filed under “not understanding the difference between necessary and sufficient conditions”.
Fama’s Fallacy
Listen to this excerpt from his interview with John Cassidy:
He makes this point several other times within a few minutes: we know markets are efficient because they are unpredictable.
But those famous monkeys, who sat at their keyboards for centuries hoping to randomly tap out Hamlet, could just as well be inputting unpredictable asset prices.
How can someone be a world famous financial economist and not know the difference between necessary and sufficient conditions?
Back to the efficient markets hypothesis. You said earlier that it comes out of this episode pretty well. Others say the market may be good at pricing in a relative sense—one stock versus another—but it is very bad at setting absolute prices, the level of the market as a whole. What do you say to that?
People say that. I don’t know what the basis of it is. If they know, they should be rich men. What better way to make money than to know exactly about the absolute level of prices.
He makes this point several other times within a few minutes: we know markets are efficient because they are unpredictable.
But those famous monkeys, who sat at their keyboards for centuries hoping to randomly tap out Hamlet, could just as well be inputting unpredictable asset prices.
How can someone be a world famous financial economist and not know the difference between necessary and sufficient conditions?
Tuesday, January 12, 2010
A Hatchet Job on the Landesbanken
Today’s New York Times putdown of public banking in Germany was probably not intended to be ideological, but, with the luck of the Rolodex, that’s how it turned out. It is certainly true that several Landesbanken have engaged in stupid and even corrupt practices and have needed to be bailed out. What’s missing, however, is the context.
Contrary to the claim by the EU official quoted in the article, Brussels has been on the warpath against the Landesbanken for years. They have been under intense pressure to demonstrate market rates of return, to show that they are not subsidizing domestic credit in Germany. But they have no competence in speculative finance; their stock in trade is financing the extraordinarily productive Mittelstand—the small, family-owned enterprises that outperform any other SME sector in the world and provide the basis for the country’s export machine. Forced to show instant hyper-profits, these naive public bankers went out and loaded up on mortgage-backed securities, Icelandic delicacies, and other such fare. In other words, they tried to turn themselves overnight into poster children for EU financial neoliberalism and got seriously burned.
No doubt Brussels will use this disaster as an excuse to put still more pressure on Germany to move to a private, profit-driven financial system. The consensus in Germany, however, is to find a way to restore the Landesbanken and return them to their core task of maximizing the profits and productivity of their borrowers. American readers would be better informed by an article that described the EU’s campaign for financial liberalization and the role it played in making Europe even more susceptible to a financial implosion whose epicenter was the US.
Contrary to the claim by the EU official quoted in the article, Brussels has been on the warpath against the Landesbanken for years. They have been under intense pressure to demonstrate market rates of return, to show that they are not subsidizing domestic credit in Germany. But they have no competence in speculative finance; their stock in trade is financing the extraordinarily productive Mittelstand—the small, family-owned enterprises that outperform any other SME sector in the world and provide the basis for the country’s export machine. Forced to show instant hyper-profits, these naive public bankers went out and loaded up on mortgage-backed securities, Icelandic delicacies, and other such fare. In other words, they tried to turn themselves overnight into poster children for EU financial neoliberalism and got seriously burned.
No doubt Brussels will use this disaster as an excuse to put still more pressure on Germany to move to a private, profit-driven financial system. The consensus in Germany, however, is to find a way to restore the Landesbanken and return them to their core task of maximizing the profits and productivity of their borrowers. American readers would be better informed by an article that described the EU’s campaign for financial liberalization and the role it played in making Europe even more susceptible to a financial implosion whose epicenter was the US.
Class Coalitions and Keynesian Fiscal Policy
I’ve been rethinking some of my earlier writings (this is almost always true), and have changed my views on the political economy of Keynesian fiscal policy.
Old view: Keynes offered the twentieth century’s most influential example of an economic policy that depended on, and also galvanized, a coalition between workers and employers. By recognizing that workers are also consumers and that profits depend on consumption, expansionary fiscal policy à la Keynes identified a common interest in high levels of employment, and therefore wages. While it would not be in the individual interest of any employer to raise the wages of his or her own workers alone, it is at least potentially in the collective interest of the class of employers to enlist worker-voters to support an economy-wide program to bolster worker incomes. This coalition has atrophied for a number of reasons during the past generation or so, and seriously expansionary policy is invoked only in times of economic distress.
New view: Keynesian fiscal policy was central to class coalitions in the liberal, English-speaking world, as above. In the main non-liberal capitalisms coalitions formed over policies to achieve high employment through high levels of investment. This was pursued through public ownership, public-private partnerships, worker and public stakeholder influence in corporate investment policy, and other “microeconomic” mechanisms. As long as these policies worked, additional stimulus via fiscal deficits, at least during non-recessionary times, could legitimately be criticized as inflationary. This helps explain why fiscal expansion has a bad reputation in Germany and Scandivia and a dubious reputation in France. These investment-centered coalitions have proved more durable than consumption-centered ones, although the current crisis, which may yet result in a prolonged period of dampened investment, could put them to the test.
How does Japan fit into this story?
Old view: Keynes offered the twentieth century’s most influential example of an economic policy that depended on, and also galvanized, a coalition between workers and employers. By recognizing that workers are also consumers and that profits depend on consumption, expansionary fiscal policy à la Keynes identified a common interest in high levels of employment, and therefore wages. While it would not be in the individual interest of any employer to raise the wages of his or her own workers alone, it is at least potentially in the collective interest of the class of employers to enlist worker-voters to support an economy-wide program to bolster worker incomes. This coalition has atrophied for a number of reasons during the past generation or so, and seriously expansionary policy is invoked only in times of economic distress.
New view: Keynesian fiscal policy was central to class coalitions in the liberal, English-speaking world, as above. In the main non-liberal capitalisms coalitions formed over policies to achieve high employment through high levels of investment. This was pursued through public ownership, public-private partnerships, worker and public stakeholder influence in corporate investment policy, and other “microeconomic” mechanisms. As long as these policies worked, additional stimulus via fiscal deficits, at least during non-recessionary times, could legitimately be criticized as inflationary. This helps explain why fiscal expansion has a bad reputation in Germany and Scandivia and a dubious reputation in France. These investment-centered coalitions have proved more durable than consumption-centered ones, although the current crisis, which may yet result in a prolonged period of dampened investment, could put them to the test.
How does Japan fit into this story?
Monday, January 11, 2010
Massively Misrepresenting the Econoblogosphere: "Blogometrics"
The lead article for 2010 in the Eastern Economic Journal (vol. 36, no. 1, pp. 1-10) is "Blogometrics" Franklin G. Mixon, Jr. and Kamal P. Upadhaya. It claims to rank economics bloggers, blogs, and universities, by the scholarly impact of the bloggers in question. This may be a worthy effort, but there is a complete mystery as to the set of blogs that they use in this study, with it apparently being tilted heavily towards Austrian or libertarian blogs, with none "further left" than either Brad DeLong's blog (a former official in the center-left Clinton presidency) and Mark Thoma's Economists View. While highly read Mankiw, Marginal Revolution, and Freakonomics are included, Krugman's blog is not, with him probably being more "progressive" than any of the 83 bloggers listed, of whom it is probably a race between DeLong, Thoma, and the late Paul Samuelson as to who is the "lefiest." As it is, of the 40 blogs considered, at least 5 are Austrian and at least another 5 are overwhelmingly libertarian. In terms of university rankings, while Harvard does come in at #1, George Mason is #16, while Princeton is not even on the list of 44 universities ranked. In the body of the paper it is stated once that they are studying the "main contributors to some of the most well-known blogs," although no method of selecting those is provided. On one table they give average page views per day from the EconDirectory of Gongol for 16 of their 40 blogs. Only three of these blogs are in the top ten of Gongol, with only only 7 of them coming in above the 426 for Econospeak (rank for Dec. 09, 59th), with one of them, macroblog, coming in at zero, and another that was listed as 963, at zero for the latest listing. I list below their list and top 40 from Gongol's most current posting, with commas separating the names of the blogs from the respective lists. I also note that they overstate the dominance of Americans in the econoblogosphere.
Mixon-Upadhaya Gongol
(rank by scholarly impact of
"main contributors) (rank by AVPD)
Becker-Posner, Calculated Risk
Greg Mankiw's blog, Michael Shedlock
RGE Monitor, Big Picture
Inside the Economist's Mind, Marginal Revolution
Neuroeconomics, Naked Capitalism
Organizaion & Markets, Gregory Mankiw
Freakonomics, Baseline Scenario
Game Theorist, Economist's View
Vox Baby, Tax Prof
John Lott's Blog, Credit Writedowns
Grasping Reality with Both Hands, VoxEU
Daniel W. Drezner, Coyote Blog
Marginal Revolution, European Tribune
Economist.Mom.com, Gongol
macroblog, Financial Armageddon
Core Economics, Carpe Diem
Environmental Economics, Overcoming Bias
EconLog, Half Sigma
Cafe Hayek, Angry Economist
Division of Labour, Carl Futia
The Sports Economists, Angry Bear
The Austrian Economists, Triple Pundit
Hypothetical Bias, Economic Edge
Dynamist.com, QandQ
Economics Roundtable, Mess that Greenspan Made
Economist's View, Trader Mike
Mises Economics Blog, EconBrowser
Adam Smith's Lost Legacy, Tim Worstall
timharford.com, Economic Populist
Economic Principals, Wages of Wins
the Attention Economy, John Lott
Reasonable Bystanders, Fistful of Euros
Newmark's Door, Ekonomi Turk
Market Power, Willisms
ElectEcon, Visualizing Economics
Equinometrics, Random Roger's Big Picture
Knowledge Problem, Art Diamond
The Perfect Substitute, Environmental Economics
The Blog of Diminishing Returns, Bonddad Blog
The Capital Spectator, Roth and Co.
Mixon-Upadhaya Gongol
(rank by scholarly impact of
"main contributors) (rank by AVPD)
Becker-Posner, Calculated Risk
Greg Mankiw's blog, Michael Shedlock
RGE Monitor, Big Picture
Inside the Economist's Mind, Marginal Revolution
Neuroeconomics, Naked Capitalism
Organizaion & Markets, Gregory Mankiw
Freakonomics, Baseline Scenario
Game Theorist, Economist's View
Vox Baby, Tax Prof
John Lott's Blog, Credit Writedowns
Grasping Reality with Both Hands, VoxEU
Daniel W. Drezner, Coyote Blog
Marginal Revolution, European Tribune
Economist.Mom.com, Gongol
macroblog, Financial Armageddon
Core Economics, Carpe Diem
Environmental Economics, Overcoming Bias
EconLog, Half Sigma
Cafe Hayek, Angry Economist
Division of Labour, Carl Futia
The Sports Economists, Angry Bear
The Austrian Economists, Triple Pundit
Hypothetical Bias, Economic Edge
Dynamist.com, QandQ
Economics Roundtable, Mess that Greenspan Made
Economist's View, Trader Mike
Mises Economics Blog, EconBrowser
Adam Smith's Lost Legacy, Tim Worstall
timharford.com, Economic Populist
Economic Principals, Wages of Wins
the Attention Economy, John Lott
Reasonable Bystanders, Fistful of Euros
Newmark's Door, Ekonomi Turk
Market Power, Willisms
ElectEcon, Visualizing Economics
Equinometrics, Random Roger's Big Picture
Knowledge Problem, Art Diamond
The Perfect Substitute, Environmental Economics
The Blog of Diminishing Returns, Bonddad Blog
The Capital Spectator, Roth and Co.
Sunday, January 10, 2010
Sins Of The Sons Of Samuelson: More From Atlanta
Also in the HES/AEA session I organized in Atlanta was a paper by David Colander and Casey Rothschild entitled, "Sins of the Sons of Samuelson: Vision, Economic Pedagogy, and the Zigzag Wadnerings of Complex Dynamics," available at this link. They argue that Samuelson was aware of complex dynamics and how math models could simplify insights in Marshall and others that had been expressed only in the "zigzag wanderings" of literary expression. They blame the "sons of Samuelson" for turning the push to math models, certainly led by Samuelson, into a mindless dogma that oversimplified economics and misled many in many different ways. They proposed how to change intro textbooks to open students' minds to complexity (and Rothschild will be joining Colander as a coauthor in future editions of his popular intro textbook).
Rajiv Sethi has just posted on Samuelson's own interest in nonlinear dynamics, citing my mentioning a paper by Samuelson on Mark Thoma's blog, with Thoma linking to the Sethi piece. Sethi discusses the nonlinear version of Samuelson's multiplier-accelerator model, which appeared in the same year (1939) as his much more famous linear version. Sethi notes that I had brought this up on Thoma's blog only two weeks prior to Samuelson's death.
As a matter of fact I cite that paper by Samuelson in the paper I presented in the session at Atlanta, "Chaos Theory Before Lorenz," available on my website and also having appeared recently in print in a special issue of Nonlinear Dynamics, Psychology, and Life Sciences, honoring the late Edward Lorenz, the MIT climatologist who was reputed to have "discovered chaos on a coffee break" back in 1961. He was the person who coined the term "buttefly effect."
Rajiv Sethi has just posted on Samuelson's own interest in nonlinear dynamics, citing my mentioning a paper by Samuelson on Mark Thoma's blog, with Thoma linking to the Sethi piece. Sethi discusses the nonlinear version of Samuelson's multiplier-accelerator model, which appeared in the same year (1939) as his much more famous linear version. Sethi notes that I had brought this up on Thoma's blog only two weeks prior to Samuelson's death.
As a matter of fact I cite that paper by Samuelson in the paper I presented in the session at Atlanta, "Chaos Theory Before Lorenz," available on my website and also having appeared recently in print in a special issue of Nonlinear Dynamics, Psychology, and Life Sciences, honoring the late Edward Lorenz, the MIT climatologist who was reputed to have "discovered chaos on a coffee break" back in 1961. He was the person who coined the term "buttefly effect."
Friday, January 8, 2010
A Festschrift For Me (Brag, Brag)
If you cannot brag where you co-blog, where can you? Anyway, a book has just been published, _Nonlinear Dynamics in Economics, Finance and the Social Sciences: Essays in Honour of John Barkley Rosser, Jr._, edited by Gian-Italo Bischi, Carl Chiarella, and Laura Gardini, Berlin/Heidelberg: Springer, 2010. Unfortunately it is very expensive. It contains papers presented at a conference held at the University of Urbino in Italy in late September, 2008, honoring my 60th birthday, which was in April of that year. I gave a plenary talk there (not in the volume), and they were very nice to me (the Italians know how to do these things right, :-)).
Bring back The Sedition Act
So I'm reading a very interesting and funny book by Bill Bryson, Made in America, a history of American English, and I come across this oddity:
"The Sedition Act of 1918 made it illegal, among much else, to make critical remarks about government expenditure or even the YMCA."
All you windy fiscal stimulus denialists in the Windy City - you know who you are! - DO NOT PASS GO , DO NOT COLLECT $200!
"The Sedition Act of 1918 made it illegal, among much else, to make critical remarks about government expenditure or even the YMCA."
All you windy fiscal stimulus denialists in the Windy City - you know who you are! - DO NOT PASS GO , DO NOT COLLECT $200!
Euroland Hardball? Atlanta Rumors
One hears things in the hallways of American Economic Association meetings, and I heard some rumors from sources who will remain anonymous but are well connected at the recently finished meetings in Atlanta. So, when the new Greek prime minister came into office in mid-December, George Papandreou, what had been reported as a budget deficit of around 6-7% of GDP, already unpleasantly above the Euroland official limit of 3%, turned out to be more like 12-13%, if not worse. Spreads on Greek bonds have gone way up, and there is a sense of crisis on the nation's foreign indebtedness. It needs help from the ECB and the Eurozone countries more generally or else faces tough cuts. These are probably coming anyway, but Papandreou is resisting somewhat. The rumor is that hardball negotiations are getting going between him and the effective leaders of the Eurozone, Merkel and Sarkozy. The latter will be putting a lot of pressure on Papandreou, but he may use the threat of removing Greece from the euro as a counterpressure. Now many might suggest that this is not much of a counterpressure, given that various eastern European countries are begging to join the euro in the current situation, as is even formerly aloof Iceland (not even in the EU yet). However, it is probably the case that Merkel and Sarkozy do not wish to open the door to having countries leaving the euro (as others might be tempted to follow if a devaluation by Greece works out well in terms of employment growth). France and Germany have worked very hard over a several decade period to make the euro as solid as the Deutsche Mark, and having anybody leave might trigger a more general unraveling of the euro, something long forecast by some US observers such as Martin Feldstein.
It occurs to me that the rise of the US dollar over the last month from around 1.51 to the euro to more like 1.43 might in part be due to the worries about such possible defections (even though presumably the countries still on the euro would be "stronger" ones). At a minimum this will probably scotch any moves to make the euro replace the dollar as the major world reserve currency in the near term (and other alternatives such as the yuan/renmimbi are nowhere near being ready to step in). I must also note that this recent rise of the dollar rather makes ridiculous recent reports, such as one in the Washington Post today, that the rising price of oil in the last few weeks is due to the falling dollar. What falling dollar? I continue to be astounded by the decreasing competence of newspaper reporters on economic matters.
It occurs to me that the rise of the US dollar over the last month from around 1.51 to the euro to more like 1.43 might in part be due to the worries about such possible defections (even though presumably the countries still on the euro would be "stronger" ones). At a minimum this will probably scotch any moves to make the euro replace the dollar as the major world reserve currency in the near term (and other alternatives such as the yuan/renmimbi are nowhere near being ready to step in). I must also note that this recent rise of the dollar rather makes ridiculous recent reports, such as one in the Washington Post today, that the rising price of oil in the last few weeks is due to the falling dollar. What falling dollar? I continue to be astounded by the decreasing competence of newspaper reporters on economic matters.
Volcker says its all broken
"The American political process is about as broken as the financial system....The Treasury is an outstanding example of a broken system, but it's not the only one....I think people have lost confidence in government, they've lost trust in government, and it shows. This isn't a question just of this Administration. It's been kind of a steady, downhill path." [*]
[*] Business Week: At the Table December 30, 2009, 5:00PM EST
Paul Volcker: The Lion Lets Loose
Charlie Rose talks financial reform with former Federal Reserve Chairman Paul Volcker
Business Week: At the Table December 30, 2009, 5:00PM EST
http://www.businessweek.com/print/magazine/content/10_02/b4162011026995.htm
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