Noah Smith: Noahpinion: The swamps of DSGE despair: "A DSGE model starts with the assumption of optimization by various economic agents such as households and firms, which spits out a system of nonlinear equations representing people's optimal choices. These nonlinear equations are then 'log-linearized' around a 'steady state', and the linearized forms of the equations, which are very easy to work with mathematically and computationally, are used to compute the 'impulse responses' that tell you what the model says the effect of government policy will be. The linearization is equivalent to the assumption that the economy undergoes only small disturbances. That's probably not a good assumption… but it does make the models a LOT easier to work with. It also generally makes the equilibriim unique…. Braun et al. decide to venture into no-man's-land, and work with a non-linearized version of a New Keynesian model with a Zero Lower Bound. So what do we learn from these sorts of exercises? In my opinion, we learn relatively little about the real economy, but that's OK, since we do learn some important things about DSGE models. Namely: (1) Almost every DSGE result you see is the result of linearization, If you drop linearization, very funky stuff happens. In particular, equilibria become non-unique, and DSGE models don't give you a good idea of what will happen to the economy, even in the fictional world where the DSGE model's assumptions are largely correct!… So even putting aside the question of whether DSGE models accurately represent reality, we see that most of the DSGE models you see don't even accurately represent themselves."
Ryan Avent: Innovation: Uncle Sam, venture capitalist: "Economics points to the need for a strong government role in setting clear property rights and supporting the functioning of markets. And an englightened government should also price externalities (like those generated by greenhouse gas emissions). And it should subsidise basic research—a public good that markets simply won't do enough of without state encouragement. What the government should not do, economists seem to agree, is play venture capitalist…. I think it would be a grand thing if America's government, and governments in general, began listening to what economists have to say on these issues, taxed carbon, and focused on providing substantial funding for basic research. But we—meaning economists, elected officials, and those of us trying to translate economics into advice for elected officials—should keep in mind two very important things. The first is that the stuff that economists can agree on might not, actually almost certainly does not, capture the full range of Sensible Things to Do. There is no question that sensible support for education and basic research and a healthy market economy have been important for America's rise to global technological leadership. But America also happens to have benefitted from innovations that directly resulted from a government wildly overstepping its bounds. To give just one example: during the formative years of the computing era, government was an enormous source of demand for all the intermediates to production of computing power and computing power itself. America's military machine brought brilliant people together, demanded they do work requiring extraordinary computational power, and plied them with the funds to develop and build early computers. That work created expertise, component supply, and even private demand that fueled subsequent private investments. And government remained a significant source of final demand for the output of those later private investments. It is quite probable that computers would have been developed somewhere without all of that effort, and it's almost impossible to know whether the money spent on these efforts might have been used better elsewhere. But I don't think it's absurd to look back and feel that the government's role in supporting the development of computing (or the web, for that matter) was a Very Good Thing. Government support for innovation obviously turns up its share of duds, representing waste of real resources that could have gone toward some other end. But even America's higgledy-piggledly defence-biased innovation support network seems to generate a lot of hits… communication advances, industrial chemistry, nuclear technology, computing, and much of the technology that goes into the iPhone in your pocket and the Google driverless car soon to be ferrying you to work…. The second important thing to keep in mind is that government isn't going to adopt first-best solutions even when we're confident we know what they are. And as far as second-best solutions go, I'm not sure that throwing a lot of government money and effort at innovation programmes that generate lots of misses but the occasional big hit (and plenty of ancillary knowledge along the way) is a bad thing."
Ezra Klein: Scalia’s gay adoption claim: Even wronger than I thought | Enochian | Richard Owen (1860): Review of the Origin of Species by Means of Natural Selection | Mark Thoma sends us to Paul Krugman: Economist's View: 'The Price Is Wrong' | Fungi Discovered In The Amazon Will Eat Your Plastic | | The good, the bad and... the austeritist! | Is That Sarah Palin’s Hand In Your Pocket Or Is She Just Happy To See You?: SarahPAC spent more than twice as much on consultants in the 2012 election cycle as it did on candidates. (Candidates received less than $300k of the $5 mill SarahPAC grifted from the doubtless aged and infirm.) You guys, that buys SO MUCH NORDSTROM. |
Aaron Carroll: I don’t think that quote means what Liz Cheney thinks it means: "Liz Cheney has an op-ed in the WSJ today on how if Republicans don’t act, and soon, to fight President Obama’s agenda (and Obamacare!), it will soon be too late to save America. She starts with a stirring quote from Ronald Reagan in 1961: 'Freedom is never more than one generation away from extinction. We didn’t pass it on to our children in the bloodstream. The only way they can inherit the freedom we have known is if we fight for it, protect it, defend it and then hand it to them with the well-taught lessons of how they in their lifetime must do the same. And if you and I don’t do this, then you and I may well spend our sunset years telling our children and our children’s children what it once was like in America when men were free.' Pretty persuasive stuff. That is, if you don’t know of the history of that quotation. Reagan, was of course, warning people against the passage of Medicare…. Yes, Medicare was the death of freedom in 1961. It was tyrrany. It was the end of America. Last I checked, Medicare passed, and America is still here…. At what point do people who use such hyperbolic rhetoric stop and recognize that their dire warnings never come to pass? One would imagine that people who repeated Reagan’s talking points back in 1961 might find it a bit humbling to see how wrong they were. You’d think they’d shy from repeating those arguments again. But, no. They get op-ed space on the WSJ. For the record, this hypocrisy isn’t new."
Mike Konczal: How an anti-rentier agenda might bring liberals, conservatives together: "Piketty argues that '[o]ur empirical and theoretical findings suggest that inherited wealth will most likely play as big a role in twenty-first-century capitalism as it did in nineteenth-century capitalism.' The best way to learn about the future of the economy will soon be to join the Jane Austen Society. Here again the left and the right will likely break. Historically, the right views inheritance as the right of the bestower to give something, or for people to do whatever they want with their property. However liberal reformers have viewed inheritance as an issue related to the right of the recipient to receive something. What could be more of an 'unearned increment', or unearned and undeserved rent income, than someone just happening to be the child of a rich person?"
Digby: The undisputed wingnut welfare queen: "I have to admit that this shows so much chutzpah, even for her, that I have to grant her my grudging admiration. In a world of sanctimonious phonies and hucksters, nobody does it with more upfront obviousness: 'Sarah Palin attempted to relaunch her political career and her political action committee, SarahPAC, on Thursday… the former Alaska governor as the new kingmaker for conservative populists in the GOP. The video riffed off her speech at CPAC, in which Palin railed against 'the big consultants, the big money men, and the big bad media'. But there’s an irony alert ahead: the current stated purpose of SarahPAC is to raise money ahead of the 2014 election—most of which will be spent on conservative consultants…. Palin’s PAC spent $5.1 million in the last election cycle… just $298,500 to candidates. The bulk of the rest of it, more than $4.8 million, went to—you guessed it—consultants. That’s some seriously hypocritical overhead….' That's a lot of money don't you think? To what end? And how much of those 'expenses' went to keep Palin and her family living high on the hog, I wonder? But it's an old story, isn't it?"
Joe Weisenthal: The Euro Is Destroying The European Union: "If you haven't had a chance to read it yet, take some time this weekend reading Matthew Boesler's interview with Bernd Lucke, the German professor who is is leading an insurgent movement called Alternative für Deutschland (Alternative For Germany) which advocates an end to the Eurozone. A key part of Lucke's argument is that the euro must be sacrificed to save the greater European project (the European Union), as the status quo is tearing apart the continent."
On March 29, 2013:
- Liveblogging World War II: March 29, 1943 http://delong.typepad.com/sdj/2013/03/liveblogging-world-war-ii-march-29-1943.html
- Noted for March 29, 2013 http://delong.typepad.com/sdj/2013/03/noted-for-march-29-2013.html
- L'Esprit de l'Escalier: March 29, 2013 http://delong.typepad.com/sdj/2013/03/lesprit-de-lescalier-march-29-2013.html
- Black Friday Music http://delong.typepad.com/sdj/2013/03/black-friday-music.html
- A Changing Argument Against Expansionary FIscal Policy Right Now? http://delong.typepad.com/sdj/2013/03/a-changing-argument-against-expansionary-fiscal-policy-right-now.html
- Χριστός ἀνέστη! Ἀληθῶς ἀνέστη! http://delong.typepad.com/sdj/2013/03/χριστός-ἀνέστη-ἀληθῶς-ἀνέστη.html