Lord, Enlighten Thou Our Enemies: Let us start with John Stuart Mill's prayer:
'Lord, enlighten thou our enemies,' prayed nineteenth-century British economist and moral philosopher John Stuarrt MIll: http://olldownload.libertyfund.org/Texts/MillJS0172/Works/Vol10/PDFs/Mill_1277.pdf:
Sharpen their wits, give acuteness to their perceptions, and consecutiveness and clearness to their reasoning powers: we are in danger from their folly, not from their wisdom; their weakness is what fills us with apprehension, not their strength...
Live from Century City: Josh Barro says: Take panel questions via direct message. He is correct. Requiring questions to be less than 140 characters is a major technological innovation!
Live from Peet’s Coffee: It is official: after the last winter in Kansas City, I need a quad latte to be my best self for breakfast meetings.
Is it time for Rehab?
Fascism, the more it considers and observes the future and the development of humanity quite apart from political considerations of the moment, believes neither in the possibility nor the utility of perpetual peace. It thus repudiates the doctrine of Pacifism -- born of a renunciation of the struggle and an act of cowardice in the face of sacrifice. War alone brings up to its highest tension all human energy and puts the stamp of nobility upon the peoples who have courage to meet it. All other trials are substitutes, which never really put men into the position where they have to make the great decision -- the alternative of life or death....
On Robert A. Heinlein (1964):
So the banker is the son of a bitch in the deal--Or is he, now? Bankers never handle their own money to any important extent; they are custodians of other people’s money. If the banker thinks that it is a bad deal in the long run [because of discrimination], is it not his solemn duty to his stockholders and his depositors to refuse it? No matter how it offends the “human rights” of purple people eaters? Is he morally justified in hypothecating other people’s money in a deal which he considers risky--whether the risk be on that one piece of paper, or long-term risk for his whole crazy structure of loans and futures and so forth? I say he is not; he is a steward and must behave as one--not as a social reformer. Are you and I entitled to a backseat veto over his judgment? No, it ain’t our money. So far, I think, no argument--You, the banker, and the subdivider are each morally entitled to turn down the purple people eater...
And me on Twitter via Storify:
It could have turned out very differently.
It could have been--as those of us who more-or-less hooted Raghu Rajan down at Jackson Hole in August 2005 wrongly thought—-that the money-center universal banks did understand their derivatives books; that asset-price innovation variances did drift up or down with time relatively slowly; that the weak point in the global economy in the mid 2000s was the global imbalance of the US trade deficit, and the possibility that some large bad actor had been selling unhedged dollar puts on a very large scale--not the subprime mortgages on houses built in the desert between Los Angeles and Albuquerque, and the use of securities based on those subprime mortgages as core banking reserves. READ MOAR
...about the history of men's fashion, but doesn't even know that there exist professional historians of fashion who write books about it that can be consulted by people who want to know more.
The Unreasonable Effectiveness of Mathematics in the Natural Sciences: Chad Orzel provides the pointer to Helge Kraghe, who writes in Physics Web http://physicsweb.org/articles/world/13/12/8 about how quantum theory existed in the equations of physics half a decade before the human brain of any physicist understood it:
It was 100 years ago when Max Planck published a paper that gave birth to quantum mechanics - or so the story goes.... According to the standard story... quantum theory emerged when it was realized that classical physics predicts an energy distribution for black-body radiation that disagrees violently with that found experimentally. In the late 1890s, so the story continues, the German physicist Wilhelm Wien developed an expression that corresponded reasonably well with experiment - but had no theoretical foundation. When Lord Rayleigh and James Jeans then analysed black-body radiation from the perspective of classical physics, the resulting spectrum differed drastically from both experiment and the Wien law. Faced with this grave anomaly, Max Planck looked for a solution, during the course of which he was forced to introduce the notion of 'energy quanta'. With the quantum hypothesis, a perfect match between theory and experiment was obtained. Voila! Quantum theory was born.
Glaukon: So: Blogging...
Hypatia: I would like to start by offering the floor to the Great and Good Felix Salmon:
Felix Salmon: To All the Young Journalists Asking for Advice...: I’m also very flattered by the lovely things you said... about how you’d love to have a career in journalism... do[ing] the kind of thing... I do. You won’t.... By the time you’re my age... you’ll... be doing something... nobody today... foresee[s]....The obstacles facing you are much greater than anything I managed to overcome.... The exact same forces which are good for journalism and good for owners are the forces which are bad for journalists....
J. Bradford DeLong on April 12, 2015 at 12:52 PM in Economics: Information, Information: Internet, Long Form, Philosophy: Moral, Political Economy, Politics, Science: Cognitive, Streams: Economics, Streams: Highlighted, Streams: The Honest Broker, Web/Tech, Weblogs | Permalink | Comments (5)
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Matthew Yglesias puts his finger on why friends don't let friends trust any of the conclusions of Jeffrey Goldberg:
...Jeffrey Goldberg's reluctance endorsement of the Iran deal is a big PR win for the Obama administration.... You won't hear many complaints....
But part of that arbiter role is that he has to take some swipes at the White House, leading to a ridiculous interpretation of how we got here.... [Goldberg's] central--and incorrect--premise... is that the Iran deal (which is good) is better than no deal... but that a tougher approach could have produced some much better utopian deal had Barack Obama really wanted one:
...came to a parley with the suppliants and their friends, in order to save the town; and prevailed upon some of them to go on board the ships, of which they still manned thirty, against the expected attack. But the Peloponnesians after ravaging the country until midday sailed away, and towards nightfall were informed by beacon signals of the approach of sixty Athenian vessels from Leucas, under the command of Eurymedon, son of Thucles; which had been sent off by the Athenians upon the news of the revolution and of the fleet with Alcidas being about to sail for Corcyra.
...I’ll take questions as long as anybody can endure listening, until they drag me away to wherever else I’m supposed to go.
Let me get more serious, and answer a question from Noah Smith about what David Graeber means with his book Debt:
The rational kernel inside the bullshit goes roughly like this:
Humans have evolved to be gift-exchangers--beings that maintain our societies by engaging in gift-exchange relationships with kin, close friends, and immediate neighbors. Why? For two big reasons: First, to keep us all pulling roughly in the same direction. Second, to take advantage of the division of labor. There are powerful psychological mechanisms that urge us to engage in such gift-exchange relationships, and to keep such gift-exchange relationships reciprocal--in rough balance.
When agriculture and cities are invented, things get weird: rather than just gift-exchange relationships with thick-tie counterparties--kin, close friends, and immediate neighbors--we find ourselves engaged in weird thin one-sided gift-"exchange" with kings, priests (& gods).
“Time for a quick reality check. Despite the hysteria from the political class and the media, smoking doesn’t kill.”
On climate change, Pence says CO2 from burning fuels can’t be the cause of increased global temperatures because it “is a naturally occurring phenomenon in nature…” not an unnatural one. He also mixes up India and Indonesia.
Pence says George Washington was a Republican: “Republicans, from George Washington to George W. Bush just have better ideas.” Washington didn’t belong to any political party and famously warned against them in his farewell address.
Over at Medium: I have a different take on Asness and Brown than Mark Buchanan does — largely because I take Asness and Brown’s claim to be just doing “climate-knowledge-free statistics” to be made in bad-faith.
Paul Krugman is the picador:
...Whenever someone steps up to declare that "Keynesian" economics is logically and empirically flawed... you know what comes next: a series of logical and empirical howlers — crude errors of reasoning, assertions of fact that can be checked and rejected in a minute or two. Levine doesn’t disappoint. Right at the beginning... he says:
Now suppose that the phone guy suddenly decides he doesn’t like tattoos enough to be bothered building a phone.
OK, stop right there. That’s an adverse supply shock, and no Keynesian claims that demand-side policies can cure the economy from the effects of such shocks.
From the Archives: Paul Krugman:
Minunderstanding IS-LM: Some readers have asked me to reply to this Steve Keen piece claiming that I don’t understand the IS-LM model. Sigh. I really don’t want to spend time fighting against people with whom I don’t really have a current policy disagreement — and this is so silly, besides. But to satisfy those who are for some reason nervous, here’s a brief explanation of why somebody doesn’t understand IS-LM.
Getting Really Medieval: "Getting Really Medieval April Fools' Festival Day XV: Another person siding with the Ayatollah Khomeini instead of with James Madison!
Here we have James Madison, George Washington, and company:
Amendments to the Constitution VIII: Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.
Here we have Eugene Volokh:
I am especially pleased that the killing... was a slow throttling, and was preceded by a flogging.
Scott Sumner.... 'Simon Wren-Lewis also gets the GDP growth data wrong, in a way that makes austerity look worse'.... Sumner is not using ‘wrong’ and ‘claim’ in their ordinary sense.... What he means is that by choosing to use the (correct) annual data, I’m (accidentally, deliberately?) hiding something important. He then quotes two figures that supposedly prove his case. No analysis, no graphs....
Over at Equitable Growth: Apropos of my too-hot-for-Equitable-Growth, Time for a Rant!: Why Oh Why Cannot We Have Better Economists?, Paul Krugman inquires asks whether:
have forgotten, or perhaps never noticed, was Levine’s rant against me back in 2009, accusing me of failing to understand the depth and power of modern economic analysis.
I cannot remember reading it. It is a doozy--I will put it way down at the bottom. I will cut off the list of errors and just note the first four things I found wrong with it: READ MOAR
Nighttime Must-Read: Senator Tom Cotton (R-AR): "We have to stand up to Iran’s attempts to drive for regional dominance. They already control Tehran increasingly they control Damascus and Beirut and Baghdad and now Sana’a as well..."
Over at Medium: Bull Market: WRITTEN IN RESPONSE TO: [Bedtime for market efficiency](Bedtime for market efficiency)
The last time I saw Richard Thaler speak, he talked about the “Beauty Contest” game. In the “Beauty Contest” game, a bunch of people each pick a number between 0 and 100. The winner is the person whose number is closest to 2/3 of the average. And he talked about the person who, when he proposed to try the game on a group of alumni at a development function, advised him not to: it would be boring because everyone would choose zero.
Speaking of Apple, David Graeber demonstrates that he has less idea of what a "laptop" is and when it was invented than your average housecat:
The greater the need to improvise the more democratic the cooperation [within companies] tends to become. Inventors have always understood this, start-up capitalists frequently figure it out, and computer engineers have recently rediscovered the principle.... Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley in the 1980s, forming little democratic circles of twenty to forty people with their laptops in each other’s garages...
In which Robert Lucas demonstrates that he understands first-year macro less well than many horseflies understand Apple's supply chain:
...I've already said I think what the Fed is now doing is going to be enough to get a reasonably quick recovery committed. But, could we do even better with fiscal stimulus? I just don't see this at all. If the government builds a bridge, and then the Fed prints up some money to pay the bridge builders, that's just a monetary policy.... The only part of the stimulus package that's stimulating is the monetary part....
In which John Cochrane demonstrates that he understands freshman-level monetary economics less well than a duck understands advanced materials science:
It's no longer enough to have an April Fools Day.
It's no longer enough to have an April Fools Week.
It looks like we need an April Fool's Month. I do know that the question is not whether to laugh or cry, but rather of how much to do of both.
A correspondent--I presume who wishes me ill--informs me--probably because I mentioned @seanmcarroll in a tweet earlier today--that Lubos Motl, often wrong but never in doubt, has been opining on "Sleeping Bae", which he analyzes about as well as a fish would analyze Lorentz invariance.
The kha-khan Cosma Shalizi smacks me down for seeing the Federal Reserve as afflicted by intellectual errors, rather than as a prisoner of Gramscian top 0.1% hegemony and the revolving door.
He has a point, a definite point.
In a good world the Janet Yellens and the Charles Evanses would be the vital center of the Federal Reserve, not its left wing. And they would be acting as its left wing, pointing out the manifold benefits of labor-force upgrading in a high-pressure economy, the extraordinary quiescence of core inflation, and the continued overoptimism of the Fed model. READ MOAR
We analyze time series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns. The evidence is not consistent with rational expectations representative investor models of returns.
Liveblogging from Underneath My Electric Blanket: Yes, the Internet Is a Big Cognitive Science Experiment. Why Did You Ask?
BuzzFeed: What Colors Are This Dress:
Live from La Farine: Izabella Kaminska: "How Nuts Are Markets When the Most Reasonable Analysis of an Asset Class Pumped by the Great and Good in Tech Is a Parody Sub-Reddit Entitled 'Buttcoin'?"
I missed this when it went by last September...
BitCoin's blockchain: wonderful, promising innovation in distributed trustworthy computing. BitCoin: not a safe liquid store of value--hence unlikely to be a durable unit of account, or even medium of exchange...
Some Hoisted from the Archives from Six Years Ago, Most Newer...: Speaking of people who had not done their homework, were spreading lots of wrong information, and who lack the ovaries to have ever marked their beliefs to market or apologize for their purveying misinformation, we have Allan Meltzer starting in February 2009 as the Paul Revere of the coming upward breakout of inflation.
It is a real clown show.
Over at Equitable Growth: Something has bothered me ever since I read the highly-eminent and highly-esteemed David Autor's "Polanyi's Paradox and the Shape of Employment Growth":
David Autor (2014): Polanyi’s Paradox and the Shape of Employment Growth: "[The] human tasks that have proved most amenable to computerization...
...are those that follow explicit, codifiable procedures.... Tasks that have proved most vexing to automate are those that demand... skills that we understand only tacitly.... The interplay between machine and human comparative advantage allows computers to substitute for workers in performing routine, codifiable tasks while amplifying the comparative advantage of workers in supplying problem solving skills, adaptability, and creativity. Understanding this interplay is central to interpreting and forecasting the changing structure of employment in the U.S. and other industrialized countries.... READ MOAR
Why do I like Earl Grey tea so much? Too much time spent watching "Star Trek: The Next Generation" when I was younger? Something magical and psychoactive about the inedible bergamot? Grey himself, however, never got a chance to watch ST:TNG, so it cannot be 100% the first...
.@mallelis Stash Earl Grey Double Bergamot…— J. Bradford DeLong (@delong) February 5, 2015
Over at Equitable Growth:
David Lewis: Sleeping Beauty: Reply to Elga: "Researchers at the Experimental Philosophy Laboratory... Sleeping Beauty...
...On Sunday evening they will put her to sleep [P-]. On Monday they will awaken her briefly. At first they will not tell her what day it is [P], but later they will tell her that it is Monday [P+]. Then they will subject her to memory erasure. Perhaps they will again awaken her briefly on Tuesday... depend[ing] on the toss of a fair coin: if heads they will awaken her only on Monday, if tails they will awaken her on Tuesday as well.... We shall need to consider her credence functions at three different times.
But the past generation has seen a third industrial revolution, a worthy information-age successor to the first of steam, iron, cotton, and machines and to the second of internal combustion, electricity, steel, and chemicals. Not everyone, but almost everyone in the North Atlantic and many and soon most in the world, can now if they wish have a smartphone--and so gain cheap access to the universe of human knowledge and entertainment to a degree that was far beyond the reach of all but the richest of a generation ago.
The continued absence of high-quality DeLong smackdowns on the internet distresses me.
It distresses me because it means that today, once again, for our Monday Smackdown Watch, we must continue our death-march read (see the [backstory][c]) of chapter 11 of David Graeber's Debt: The First 5000 Mistakes.
By now I am desperately hoping that I will come across even a single kindle screen that does not have egregious errors of fact or analysis on it--one single screen in which what Graeber says is at least arguably right. We are talking Alexander the Great's army in the Gederosian Desert here.
But this is not that day.
Today I read only one kindle screen before collapsing into a fit of some sort:
Remember my six-part classification of things people do to add economic value?:
Ylan Mui: I want to kick it off with a question to you Josh. There have been a lot fingers pointed when it comes to blame for the financial crisis--Wall Street greed, predatory lending, et cetera--but rarely has a finger been pointed at the economists themselves. Do you think your profession deserves blame?
Josh Bivens: The one word answer is yes. Jeff’s book is entirely right: most the ideas covered in his book have indeed been put to damaging use in US policy debates. But we should be careful to also say that a lot of the ideas actually contain useful nuggets. They are bad and dangerous ideas when they are improperly invoked—-when the people who invoke them cannot differentiate when one of the ideas should be taken as a description of how the world works versus a prescription for how we should make it work. That is one big way that they can be put to dangerous use. I can say more about that later. But I think, even more importantly, they are really bad and dangerous when they are mobilized by people... It’s tough to say this nicely... By people with either really weak minds or with old and ideological political motivations. READ MOAR
Jeremy Hodges reports:
using a technique known as edge sorting, at Genting’s Crockfords casino in London, according to his lawyers. Genting refused to pay up, saying the practice is unfair. A casino ‘is a cat and mouse environment, it is an adversarial environment,’ Richard Spearman, Ivey’s lawyer said in court. ‘It doesn’t mean you have to be dishonest.’ Ivey, who sued Genting last year, argues that edge sorting isn’t dishonest and he should be paid the money.... Both sides agree that Ivey was in the casino in August 2012 and that he won the money.... Edge sorting is a way a card player can gain an advantage by working out the value of a card by spotting flaws or particular patterns on the back of certain cards.... It’s agreed ‘in the present case that there are legitimate strategies that may used by skilled players which have the purpose and effect of providing the player, rather than the casino, with the advantage on particular bets,’ Spearman said in court documents...
Daniel Davies again:
Daniel Davies: D-squared Digest -- FOR bigger pies and shorter hours and AGAINST more or less everything else: The D-Squared Digest One Minute MBA - Avoiding Projects Pursued By Morons 101: "Literally people have been asking me...
..."How is it that you were so amazingly prescient about Iraq? Why is it that you were right about everything at precisely the same moment when we were wrong?" No honestly, they have. I'd love to show you the emails I've received, there were dozens of them, honest. Honest. Anyway, I note that "errors of prewar planning" is now pretty much a mainstream stylised fact, so I suspect that it might make some small contribution to the commonweal if I were to explain how it was that I was able to spot so early that this dog wasn't going to hunt. I will struggle manfully with the savage burden of boasting, self-aggrandisement and ego-stroking that this will necessarily involve. It's been done before, although admittedly by a madman in the process of dying of syphilis of the brain.
Sorry, where was I?
So I was updating my basic stock-index return-predictability lecture, and moving the files for it into R, and I made an unwise data transformation in annualizing the monthly return on the stock index:
YRETURN <- MRETURN^12
LNYRETURN <- 12*log(MRETURN,exp(1))
And I got into a surprising amount of trouble...
...from which I was rescued by the bootstrap. Take a look, if you care:
Over at Project Syndicate: The extremely sharp but differently-thinking Peter Thiel:
Peter Thiel: Robots Are Our Saviours, Not the Enemy: "Americans today dream less often of feats that computers will help us to accomplish...
...[and] more and more we have nightmares about computers taking away our jobs.... Fear of replacement is not new.... But... unlike fellow humans of different nationalities, computers are not substitutes for American labour. Men and machines are good at different things. People form plans and make decisions.... Computers... excel at efficient data processing but struggle to make basic judgments that would be simple for any human.... [At] PayPal... we were losing upwards of $10m a month to credit card fraud.... We tried to solve the problem by writing software.... But... after an hour or two, the thieves would catch on and change their tactics to fool our algorithms. Human analysts, however, were not easily fooled.... So we rewrote the software... the computer would flag the most suspicious transactions, and human operators would make the final judgment. This kind of man-machine symbiosis enabled PayPal to stay in business.... Computers do not eat.... The alternative to working with computers... is [a world] in which wages decline and prices rise as the whole world competes both to work and to spend. We are our own greatest enemies. Our most important allies are the machines that enable us to do new things...