## Austrian Non-Economic Reasoning: Robert Murphy Rejects P(A|B) = [P(B|A)P(A)]/P(B)]: Thursday How Not to Mark Your Beliefs to Market Weblogging

Non-economic reasoning? Economic non-reasoning? Non-economic non-reasoning. I'm not sure what to call rejecting Bayes's Rule…

Suppose that for some reason--never mind why--you were back in 2009 confident--70% sure--that Bernanke's policies were inappropriate and disastrous, because if they were adopted they were near-certain--90%--to bring 10%/year if not 20%/year inflation soon--by 2012.

Then 2012 rolls around. No inflation. What, then, come 2013 is your subjective probability that Bernanke's policies are inappropriate and disastrous?

Your confidence that Bernanke's policies are inappropriate and disastrous should drop. According to Bayes’s Rule--which is a simple principle designed to guard yourself from being vulnerable to Dutch Book attacks--it should drop from 70% to 19%.

Not, however, if you are Robert Murphy.

Austrian economists, you see, don't need no stinking Bayes's Rule.

To suggest that they ought or might change their minds in response to evidence is, in some bizarre way, to impugn their character:

Continue reading "Austrian Non-Economic Reasoning: Robert Murphy Rejects P(A|B) = [P(B|A)P(A)]/P(B)]: Thursday How Not to Mark Your Beliefs to Market Weblogging" »

## And the Odds of Renewed U.S. Recession in 2013 Are Rising...

Kick the can of the sequester down the road. Short-term austerity needs to wait until after economic recovery. Short-term recovery requires pulling spending forward into the present and pushing taxes back into the future.

Menzie Chinn:

Econbrowser: Macroeconomic Advisers on the Sequester's Impact: Estimated self-inflicted macro harm, from Macroeconomic Advisers today:

...we now put the odds of a sequestration at close to 50%, and rising.

• Our baseline forecast, which shows GDP growth of 2.6% in 2013 and 3.3% in 2014, does not include the sequestration.

• The sequestration would reduce our forecast of growth during 2013 by 0.6 percentage point (to 2.0%) but then, assuming investors expect the Federal Open Market Committee (FOMC) to delay raising the federal funds rate, boost growth by 0.1 percentage point (to 3.4%) in 2014.

• By the end of 2014, the sequestration would cost roughly 700,000 jobs (including reductions in armed forces), pushing the civilian unemployment rate up ¼ percentage point, to 7.4%. The higher unemployment would linger for several years.

In short, the story of the downturn remains depressingly simple. We have nothing to replace the huge amount of construction and consumption demand created by the $8 trillion housing bubble. Perhaps if the problem were more complicated policy types would have an easier time seeing it. ## Mike Beggs: "On the Point at Issue, [DeLong] Was Right": Yet More Fama's Fallacy Freshman Macroeconomic Mistakes Weblogging I see that today, in the Journal of Australian Political Economy, Mike Beggs has taken his 2011 Jacobin essay up to the top of the Temple of Huitzilpochtil, ripped its heart out with an obsidian knife, and left it dead on the ground. The most important paragraph--and my favorite paragraph--is missing. The paragraph reads, as Beggs evaluates my critique of David Harvey's word-salad: [O]n the point at issue, [whether boosting government spending would boost employment, DeLong] was right – it is a question of interest rates, not of the number of bonds that can be sold. When Harvey went on to clarify his argument, it was only with some casual empiricism of his own. He noted that he was hardly the only one to be making the argument that East Asian central banks could stop collecting US Treasuries, so that “the track of long-term treasury interest rates may go the way of the housing market data in just a couple of years (if not months).” This was an argument you could read in mainstream business pages; there was nothing particularly Marxist about it. Now that we are more than a couple of years down the track, DeLong still looks right: the yields on long-term Treasury bonds are, as I write in July 2011, about the same as they were in February 2009, when the exchange took place. The limits to stimulus have been political, not financial. With that paragraph in place, Beggs's argument that David Harvey and others should abandon their Zombie Marx was powerful and compelling: Beggs argued--correctly!--that their obedience to Zombie Marx led them to say things that were wrong, silly, and eminently mockable by people like me. With that paragraph gone, the heart is missing from Beggs's essay. Beggs's argument that David Harvey and others should abandon their Zombie Marx is now--what? It is aesthetic--that Beggs's is "a more elegant treatment of relative prices"--and careerist--"I have discussed aspects of how this integration could take place, through an engagement with the Keynesian concept of liquidity preference and particularly post-Keynesian structuralist versions of it (Beggs, 2011: chapters 3, 10)"--and thus much, much weaker. Thus these edits strike me as a big mistake on Beggs's part: to argue that people should change how they think to avoid saying things that are wrong is praiseworthy, to argue that people should change how they think because Beggs thinks that his way is prettier and because it would boost Beggs's citation count has much less point… Continue reading "Mike Beggs: "On the Point at Issue, [DeLong] Was Right": Yet More Fama's Fallacy Freshman Macroeconomic Mistakes Weblogging" » ## Liveblogging World War II: February 19, 1943 Kasserine Pass, from Rick Atkinson's An Army at Dawn: Just beyond the Roman ruins west of Sbeïtla, Rommel tried to draw his own line between what he wanted to do and what he had been told to do. Hands clasped behind his back, goggles perched on his visor, he studied the distant peaks of Semmama and Chambi. That way led seventy miles to Tébessa and the great supply dumps he had hoped to despoil before following the glory road to Bône. But it also offered, via Highway 17 through Thala, a backdoor route to Le Kef, the objective ordered by Comando Supremo. A more direct and slightly shorter path to Le Kef could be had by taking Highway 71 north for eighty miles from Sbeïtla along the eastern flank of the Grand Dorsal. The enemy would certainly contest both routes. Where would the defenses be softer? Left, through Kasserine Pass, or right, directly toward Le Kef? Rommel studied the terrain with his field glasses while staff officers in slouch hats toed the ground with their double-laced desert boots. His choice had been complicated by Arnim, who instead of giving Rommel the entire 10th Panzer had held back half the division’s tanks, including the Tigers, on a thin claim of needing them in the north. While denouncing the “pigheadedness” of his two African commanders, Kesselring had yet to return from East Prussia to adjudicate their squabble. Kesselring believed the order from Comando Supremo contained enough ambiguity to permit Rommel a full attack on Tébessa before he turned toward Le Kef. But Kesselring was not here and Rommel—demonstrating an atypical obedience possibly infused with spite—chose to believe that Le Kef must be his first objective. Continue reading "Liveblogging World War II: February 19, 1943" » ## Crowding-in and Rapid Growth in the 1990s: Dean Baker Gets One Wrong, I Think Dean Baker writes: Can We Cut the Crap on Robert Rubin and Deficit Reduction?: Ezra Klei… feed[s] this myth when he tells us of the great virtue of deficit reduction in the Clinton years. Back in the 1990s, we knew why we feared deficits. They raised interest rates and “crowded out” private borrowing. This wasn’t an abstract concern. In 1991, the interest rate on 10-year Treasurys was 7.86 percent. That meant the interest rate for private borrowing was, for the most part, much higher, choking off investment and economic growth. Enter Clintonomics. The theory was simple: Bring down deficits, and you’d bring down interest rates. Bring down interest rates, and you’d make it easier for the private sector to invest and grow. Make it easier for the private sector to invest and grow, and the economy would boom. The theory was correct. By the end of Clinton’s term, the interest rate on 10-year Treasurys had fallen to 5.26 percent — lower than it had been in 30 years. And the economy was, indeed, booming. 'The deficit reduction increased confidence, helped bring interest rates down, and that, in turn, helped generate and sustain the economic recovery, which, in turn, reduced the deficit further,' Treasury Secretary Robert Rubin said in 1998. Okay, fans of intro economics know that it is the real interest -- the difference between the nominal interest rate and the inflation rate -- that matters for investment, not the nominal interest rate. The inflation rate in the first half of 1991 was over 5.0 percent. This means that the real interest rate -- the rate that all economists understand is relevant for growth -- around 2.5 percent… [in] the last half year of the Clinton administration (and not some cherry picked low-point) the interest rate on 10-year Treasury bonds averaged around 5.7 percent. The inflation rate for the second half of 2000 averaged around 3.5 percent. This gives us a a real interest rate of 2.2 percent (5.7 percent minus 3.5 percent equals 2.2 percent). So we are supposed to believe that the difference between the 2.5 percent real interest rate in the high deficit pre-Clinton years and the 2.2 percent real interest rate at the end of the Clinton years is the difference between the road to hell and the path to prosperity? The actual inflation rate in 1991 was 5%/year, but the expected inflation rate over the next decade was more like 3%/year. We are not talking about an 0.3 percentage-point decline in real interest rates, but rather about a 2.3 percentage-point decline in real interest rates. Moreover, back in 1992 when we unwound the yield curve and projected interest rates in the future we saw nominal interest rates has highly likely to rise unless the deficit was substantially reduced. The 2000 we were looking forward at had forecast nominal interest rates of not 7.86%/year but 10%/year or so--a real interest rate of 7%/year. The counterfactual for 2010 is thus different not by 0.3 percentage-points but by 4.8 percentage-points. That is a much bigger deal. How big a deal? Enough to boost the growth rate of potential output by between 0.5 and 1.0 percentage points per year, in my estimation… ## Brownback's Kansas: Good Example or Horrible Warning? No More Mister Nice Blog: Brownback's Kansas: Good Example or Horrible Warning?: I've told you, and others have told you, that cutting or eliminating state income taxes (which tend to be somewhat progressive) is all the rage among GOP governors, as is raising sales taxes (which fall disproportionately on the poor, the lower middle class, and the middle class, because the more of your paycheck you have to spend to live, the more they get to tax you). Bobby Jindal is a big fan of this approach (he wants to eliminate all income and corporate taxes in Louisiana) -- and you know he wants to be president. So it's not a surprise to read what I'm reading in The Wall Street Journal this morning: that Republicans -- bizarrely -- think this approach could win them the White House four years from now. Continue reading "Brownback's Kansas: Good Example or Horrible Warning?" » ## Tuesday Ten Years Ago on the Internet: The Destuction of Space Shuttle Columbia ## Noted for February 19, 2013 • Adam Gopnik: What Galileo Saw: "A number of books have come out in anticipation of the anniversary…. Modern scholars have a gravitational pull toward ancient bureaucrats—keep records even of your cruelties and history will love you—and the new research has produced a slightly, if significantly, revised picture of Galileo’s enemies. The newer (and, unsurprisingly, Church-endorsed) view is that Galileo made needless trouble for himself by being impolitic, and that, in the circumstances of the time, it would have been hard for the Church to act otherwise. The Church wanted, as today’s intelligent designers now say, to be allowed to “teach the controversy”…. The complaint is, in a way, the familiar torturer’s complaint: Why did you force us to do this to you? But the answer is the story of his life." • John Holbo: GOP Outreach Efforts Proceed Apace: "A post by Michael Walsh, at the Corner, advocating repeal of the 19th Amendment: 'And women’s suffrage … well, let’s just observe that without it Barack Obama could never have become president. Time for the ladies to take one for the team. Who’s with me?' Not enough women, would be my back-of-the-envelope guesstimate. Just so you know I can explain a joke as well as anyone: the form of this ‘repeal the 19th’ joke is that he knows it’s not acceptable to say so. So he says so, knowing people will realize he must be joking. But the thing is: he isn’t! On some level! Otherwise it wouldn’t be funny. But you could never get him to admit that. He’ll always have ‘it was a joke!’ deniability, due to the manifest unacceptability of his opinions. Even though it wouldn’t be a joke unless, on some level, it wasn’t a joke. That’s what makes it hilarious! Hide in plain sight! Anti-feminism ninja! I wonder why more women don’t vote GOP? They must not have a sense of humor. Bwa-ha-ha-ha! Go team! Go team! Go team! (We are so clever. What? We lost again? Dumb broads, this is all their fault.)" • Jordi Gali: Monetary Policy and Rational Asset Price Bubbles: "I examine the impact of alternative monetary policy rules on a rational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interest rates in response to a growing bubble is shown to enhance the fluctuations in the latter, through its positive effect on bubble growth. The optimal monetary policy seeks to strike a balance between stabilization of the bubble and stabilization of aggregate demand. The paper's main findings call into question the theoretical foundations of the case for 'leaning against the wind' monetary policies." Continue reading "Noted for February 19, 2013" » ## Mark Thoma Sends Us to Jonathan Chait: Scarborough and Friends 'Bug-Eyed, Table-Pounding Terror' After two relatively wonky posts, let's turn to Jon Chait for a bit of (serious) fun: Scarborough and Friends Trying to Make ‘Debt Deniers’ Happen, by Jonathan Chait: The deficit scold cause has suffered significant intellectual erosion…. In the short run, the interest rate spike they keep insisting will happen keeps not happening. In the long run, the health-care-cost inflation that is at the root of the long-term fiscal predicament is growing markedly less dire. The case for prudent fiscal adjustment remains strong, but the case for bug-eyed, table-pounding terror is growing increasingly ridiculous. But bug-eyed, table-pounding terror is the stock-in-trade of the fiscal scold movement. And so they are striking back by labeling anybody with a calmer view of the deficit as a “debt denier.” Joe Scarborough… has a new op-ed in Politico brandishing the epithet…. Continue reading "Mark Thoma Sends Us to Jonathan Chait: Scarborough and Friends 'Bug-Eyed, Table-Pounding Terror'" » ## Gary King and Maya Sen: How Social Science Research Can Improve Teaching Gary King and Maya Sen: How Social Science Research Can Improve Teaching: Principles: Principle 1: Social Connections Motivate. Coaxing individuals to take actions that benefit themselves…. is often extremely difficult. But getting them to take actions that involve social interaction…. is often far easier…. [O]r argument that they can also be applied to education and learning should be no surprise…. Principle 2: Teaching Teaches the Teacher. Social psychologists have demonstrated that under normal circumstances, we “mind wander”… half of all our waking hours…. [S]ocial interactions eliminate about half of this effect…. If we can turn the students into teachers… we can capture a great deal more of their attention than would otherwise be possible…. Principle 3: Instant Feedback Improves Learning.… Implementing this advice involves frequent evaluation… eliminating waiting periods before questions can be answered, understanding the limits of their knowledge, and encouraging students to ask questions…. Continue reading "Gary King and Maya Sen: How Social Science Research Can Improve Teaching" » ## The Business Cycle and the Climate for Enterprise II: Japanese Growth in the Aftermath of Its Financial Crisis of the Early 1990s I continue to worry about (and worry) the issue of what the experience of the past generation tells us about the relationship between short-run cyclical economic downturns and long-run enterprise, entrepreneurship, and growth... From the end of World War II until the beginning of the 1990s, it looked as though the Japanese economy was "converging" to the American economy in living standards and productivity levels--that although Japan started the post-World War II period with a labor force inferior in education, with a lower level of installed technology, and with a capital stock deeply depleted by the fact that Curtis LeMay's bombers had made the rubble of Japan bounce, that eventually Japan's economy would "catch up" to that of the United States Take the data from the Penn World Table 7.1. It looked as of 1990 as though, in an average year, Japan closed 1/14 of its economic gap vis-a-vis the United States. If you drew the line of best statistical fit on a graph of relative growth rates vs. relative GDP-per-capita levels out to the right, it suggested that Japanese and U.S. growth rates would be equal when Japanese GDP per capita would have risen to be 3% higher than that of the United States. That 3% was, statistically, so fuzzy as to be indistinguishable from zero. Continue reading "The Business Cycle and the Climate for Enterprise II: Japanese Growth in the Aftermath of Its Financial Crisis of the Early 1990s" » ## Liveblogging World War II: February 18, 1943 The White Rose was composed of university (mostly medical) students who spoke out against Adolf Hitler and his regime. The founder, Hans Scholl, was a former member of Hitler Youth who grew disenchanted with Nazi ideology once its real aims became evident. As a student at the University of Munich in 1940-41, he met two Roman Catholic men of letters who redirected his life. Turning from medicine to religion, philosophy, and the arts, Scholl gathered around him like-minded friends who also despised the Nazis, and the White Rose was born. Continue reading "Liveblogging World War II: February 18, 1943" » ## Monday Hoisted from Comments: On Gene Steuerle's 2005 Social Security Reform Plan Gene Steurle's article is excellent policy analysis but, as noted by Lancelot, DOA politically. Steurle writes from the point of view of a social planner with a budget contstraint. Policy is made by politicians under political constraints. I don't think that cutting middle class benefits is a way to have more money to help the poor. I tihnk that politicians can aid the poor only by linking aid to the poor to middle class benefits (I recall a heated discussion with you about this in the greenhouse cafe in the science center some decades ago). A tinhat paranoid view is that somewhere there is a right of center advocate of directing benifits towards the poor who is just trying to trick progressives into implementing a good policy which is politically doomed so as to get to no social welfare state at all. Now if you want to help the poor more someone has to lose. You can try to soak the middle class and you will get nowhere. If you try to soak the rich, there will be no problem. Continue reading "Monday Hoisted from Comments: On Gene Steuerle's 2005 Social Security Reform Plan" » ## Noted for February 18, 2013 • Paul Krugman: The Kids Are Alright: "Traditional families are indeed in decline; so is traditional organized religion. From these declines Eberstadt concludes that we are in danger of social collapse. But what he somehow misses is that the notion that traditional families and religion are essential to social order is a theory, not a fact — and it’s a theory that is overwhelmingly refuted by recent experience…. Weren’t we supposed to me in Escape From New York territory right now? Instead, New York in particular is a nicer, cleaner, safer place than anyone imagined possible a couple of decades ago. And yes, I’m aware that this also means that inequality can’t be quite as corrosive as some liberals, myself included, sometimes imagine. But back to Eberstadt: his whole argument is based on the presumption that society is doomed if the traditional — and, I think it’s fair to say, patriarchal — structure isn’t maintained without change. Let people cohabit, maybe even marry others of the same sex, choose their faith or choose not to have any faith, and we will degenerate in a Hobbesian nightmare. We used to point to Scandinavia as a counter-example, but the reply would be that their homogeneous societies (not really, but that was the legend) were nothing like ours. But now we’re a cohabiting, free-love, free-religion dystopia too — and it’s OK. Why do they hate America?" • O. Hai and I. B. Hakkenshita: Journal of Apocryphal Chemistry | Feb. 2012: A Simple and Convenient Synthesis of Pseudoephedrine From ￼N-Methylamphetamine: Pseudoephedrine, active ingredient of Sudafed®, has long been the most popular nasal decongestant in the United States due to its effectiveness and relatively mild side effects. In recent years it has become increasingly difficult to obtain psuedoephedine… with the medicine kept behind the counter… pharmacies require signatures and examination of government issued ID…. [I]t would be of great interest to have a simple synthesis of pseudoephedrine from reagents which can be more readily procured. A quick search of several neighborhoods of the United States revealed that while pseudoephedrine is difficult to obtain, N-methylamphetamine can be procured at almost any time on short notice and in quantities sufficient… the availability of N- methylmphetamine has remained high while prices have dropped and purity has increased…. We present here a convenient series of transformations using reagents which can be found in most well stocked organic chemistry laboratories to produce psuedoephedrine from N-methylamphetamine. While N-methylamphetamine itself is a powerful decongestant, it is less desirable in a medical setting because of its severe side effects and addictive properties. Such side effects may include insomnia, agitation, irritability, dry mouth, sweating, and heart palpitations. Other side effects may include violent urges or, similarly, the urge to be successful in business or finance." • Arindrajit Dube, T. William Lester, and Michael Reich: State Regression Discontinuity Estimates of the Effects of the Minimum Wage Continue reading "Noted for February 18, 2013" » ## Ezra Klein's Internet Neighborhood Ezra Klein's Internet Neighborhood A correspondent who wishes to be anonymous, and was also disappointed with Julia Ioffe's profile of Ezra Klein, writes: These days, if you do a Google search for a person, at the bottom right of the search screen it gives you eight people whom "people also search for". Start with Ezra Klein (with total number of Google hits appended): Ezra Klein 1.4M • Matt Yglesias 0.71M • Andrew Sullivan 3.6M • Paul Krugman 8.9M • Nate Silver 4.0M • Jonathan Chait 0.33M • E.J. Dionne 1.1M • Rachel Maddow 6.7M • Kevin Drum 0.78M And go down the list, looking at who you get by searching for each in turn, starting with MY: Continue reading "Ezra Klein's Internet Neighborhood" » ## 7 Tesla Model S Owners Set Out to Recreate New York Times Reporter John Broder's Road Trip to Groton 7 Tesla Model S Owners Set out Saturday 2/16 to recreate the NY Times Reporter's uncommitted test drive from Maryland to Connecticut and prove it can be done. ## Over on Twitter Jeet Heer Demands Some Calvin Coolidge Blogging... Appropriately for Silent Cal, there ain't all that much to say. Coolidge did little, and what he did was largely harmful to America. Remember that for Calvin Coolidge America's biggest problem was that it had too many Jews, too many Italians, too many Slavs. Of all the disasters inflicted by American governmental policies on human welfare in the twentieth century, Calvin Coolidge's immigration policy seems to me to win the prize: IMMIGRATION…. New arrivals should be limited to our capacity to absorb them into the ranks of good citizenship. America must be kept American. For this i purpose, it is necessary to continue a policy of restricted immigration…. I am convinced that our present economic and social conditions warrant a limitation of those to be admitted…. Those who do not want to be partakers of the American spirit ought not to settle in America It is closely followed, perhaps, by his financial regulatory policy: Frederick Lewis Allen: Only Yesterday: The bull party in Wall Street had been still further encouraged by the remarkable solicitude of President Coolidge and Secretary Mellon, who whenever confidence showed signs of waning came out with opportunely reassuring statements which at once sent prices upward again. In January 1928, the President had actually taken the altogether unprecedented step of publicly stating that he did not consider brokers' loans too high, thus apparently giving White House sponsorship to the very inflation which was worrying the sober minds of the financial community. He was, at least, strongly in favor of the International Criminal Court. Continue reading "Over on Twitter Jeet Heer Demands Some Calvin Coolidge Blogging..." » ## Tivoli Theatre, Kansas City ## Liveblogging World War II: February 17, 1943 Rick Atkinson, An Army at Dawn: “I had never gambled,” Rommel later wrote, “never had to fear losing everything. But in the position as it was now, a rather greater risk had to be taken.” The weaker force must take the longer chance. A thrust to Tébessa and then on another 140 miles to Bône would unhinge the entire Allied line…. In a message to Kesselring and Comando Supremo in Rome, he requested that both the 10th and the 21st Panzer Divisions be placed under his command for “an immediate enveloping thrust of strong forces…on Tébessa and the area north of it.” Awaiting a reply from Rome, Rommel dined in Gafsa on couscous and mutton…. Arnim disagreed, in a phone call to Rommel and in messages to Kesselring. “The terrain would be against us,” he warned. Tébessa was mountainous and easily defended…. Better to veer north in a shallow envelopment…. Continue reading "Liveblogging World War II: February 17, 1943" » ## Noted for February 17, 2013 • Mark Thoma sends us to Ned Phelps on Rational Expectations: "The 'scientists' from Chicago and MIT came along to say… let's be scientific… suppose price and wage setters form their expectations with every bit as much understanding of markets as the expert economist seeking to model…. Craziness…. You’re not supposed to ask what to do if one economist has one model of the market and another economist a different model…. Roman Frydman has made his career uncovering the impossibility of rational expectations in several contexts…. When I was getting into economics in the 1950s, we understood there could be times when a craze would drive stock prices very high. Or the reverse…. But now that way of thinking is regarded by the rational expectations advocates as unscientific. By the early 2000s, Chicago and MIT were saying we've licked inflation and put an end to unhealthy fluctuations –- only the healthy 'vibrations' in rational expectations models remained…. I had to listen to Ben Bernanke and Oliver Blanchard… crowing that they had conquered the business cycle of old by introducing predictability in monetary policy making, which made it possible for the public to stop generating baseless swings in their expectations and adopt rational expectations." • Daniel Kuehn: Facts & other stubborn things: Yes, a lot of people have a very odd view of the 1970s: "Whenever I read from [Buchanan's] Democracy in Deficit I always have the same reaction that I do reading Hayek on 'scientism'. I think 'how could someone who was otherwise so brilliant go so terribly wrong?'. It happens I suppose. Notice the strange conflation of everything liberal he doesn't like with Keynesianism. Notice the bizarre characterization of fiscal irresponsibility as the origin of the problems of the 1970s (this was written in 1977). I especially like the line about Camelot in ruins and Vietnam. For international readers that may not know, 'Camelot' is a reference to Kennedy. The ironic thing here is that despite the tepid semi-embrace of Keynesian ideas by Roosevelt, Kennedy is usually the president most associated with a deliberate application of Keynesian principles due to his Keynesian advisors, not Johnson - who had other priorities. But apparently the loss of Camelot to the Great Society is some kind of Keynesian problem? The other guy that applied Keynesian principles pretty decently (aside from 2009 Obama) was Bill Clinton, consolidating our fiscal position in the growth years of the 1990s. Of course, Kennedy, Clinton, and Obama don't fit as nicely into Buchanan's narratives about Keynesians abandoning prudent fiscal policy. To get Buchanan's answer you have to fabricate what went on in the 1970s (like Holtz-Eakin), redefine Keynesianism, and somehow make the argument that politicians who were not Keynesian at all were somehow enabled to do what they did because Keynes was just so awful and killed any sense of fiscal responsibility (as if politicians need an economic theorist to give them license to behave badly, and as if it even makes sense to talk about Keynes as a potential source of such license)." • Paul Krugman: An Orthodoxy of One: Mark Thoma sends us to a piece by Douglas Holtz-Eakin that is both sad and funny. The sad part is seeing Holtz-Eakin come to this…. parroting the party line… not even… making much of an effort. I mean, still peddling expansionary austerity at this point? The funny part is his description of the anti-austerity position as the 'pundit orthodoxy'. Wow. Just the other day the various Joes – Joe Scarborough, Joe Kernen, etc. – were saying that I’m all alone, a 'unicorn', one of maybe 3 or 4 people in the whole world who don’t think that the deficit is the biggest problem we face…. Now I’m part of an orthodoxy?…Look at all the pundits on major op-ed pages or TV shows calling for an end to austerity and more stimulus. There’s me, and there’s… well, maybe Martin Wolf. But I guess I’m such a big guy that I’m an orthodoxy all by myself." I would say that while Paul and Martin (and Olivier!) aren't an "orthodoxy" all by themselves, they are certainly the maior et sanior pars of the chattering class Continue reading "Noted for February 17, 2013" » ## Musica Sacra: February 16, 2013 Musica Sacra reprises Giovanni Rovetta’s Messa à 4 voci, a work it first performed in a modern premiere in 2005. Rovetta was a leading composer in Venice in the mid-17th century, serving in the ducal chapel of St. Mark’s in Venice. The ensemble also will perform the Missa Dolorosa of Antonio Caldar ## John Cogan, Tobias Cwik, John Taylor, and Volker Wieland's Reputational Bet on Fiscal Policy Is Due, and They Are Bankrupt Brad DeLong, May 1, 2009, twenty one and a half months ago: "I think the odds are one-in-three that in two years we wish we would have done more [than the Recovery Act], and that the odds are close to zero that in two years we wish we would have done less." ## Fiscal Stimulus Effects **J. Bradford DeLong University of California at Berkeley and NBER brad.delong@gmail.com http://delong.typepad.com/ +1 925 708 0467 May 1, 2009 In March I got a note from Ward Hanson asking me to come down here to Stanford and talk about: the impact of the Stimulus Bill on jobs creation... the contrast between the Romer/Bernstein estimates of the benefits of the stimulus plan versus... Cogan, Taylor et al. that estimate/argue that there will be very little benefit.... I've got agreement from the "Taylor group" to present, as well as Martin Giles of the Economist Magazine to serve as a moderator... So I said yes. And Tuesday afternoon I sat down to reread Romer and Bernstein (2009), which I had read before, and Cogan, Cwik, Taylor, and Wieland (2009), which I had not, and I ran into a problem. On page 2 Cogan et al. write that their Figure 1 shows how Romer and Bernstein think government spending affects the economy along with: exactly the same policy change... in another study... by one of us [John Taylor]... the results are vastly different.... [T]he Romer-Bernstein estimates apparently fail a simple robustness test, being far different from existing published results of another model... This surprised me. I had talked to Christy. I had talked to Jared. I knew that their intention had been to pull standard models off the shelf and use them. So I dug—and found that Cogan et al.’s claim of “exactly the same policy change” was simply wrong. Romer-Bernstein model an increase in government spending with the Federal Reserve expanding and keeping on expanding the money supply in order to keep the short-term Treasury Bill interest rate the same. Taylor (1993) models an increase in government spending with the Federal Reserve contracting the real money supply to push the short-term Treasury Bill interest rate up over time as unemployment falls and inflation creeps up. There is no “robustness” problem with Romer-Bernstein at all: the results are different because the policy changes are different. Continue reading "John Cogan, Tobias Cwik, John Taylor, and Volker Wieland's Reputational Bet on Fiscal Policy Is Due, and They Are Bankrupt" » ## The Full Fiscal Offset Principle (Away from the Zero Lower Bound, That Is): Or, Why One Would Expect the Multiplier to Be Zero Away from the ZLB Weblogging In trotting around the country giving versions of DeLong and Summers (2012), “Fiscal Policy in a Depressed Economy”, I have found that a point that seemed completely obvious to us is not obvious at all to many. Here is the point: an optimizing central bank that cares only about inflation and unemployment because it does not find itself at the zero nominal lower bound and does not fear engaging in nonstandard monetary policy will engage in full fiscal offset: it will take care to make sure that if fiscal policy becomes more stimulative then it will make monetary policy less stimulative by the same amount. Here is the argument: Continue reading "The Full Fiscal Offset Principle (Away from the Zero Lower Bound, That Is): Or, Why One Would Expect the Multiplier to Be Zero Away from the ZLB Weblogging" » ## Liveblogging World War II: February 16, 1943 We can’t stop now. Charkow has been abandoned due to pressure from the enemy. The large depots and buildings have been blown up; the beautiful mansions dating back to the days of the czar have been burned down. Stalingrad-Rostow-Charkow: the big triangle is now in the hands of the Reds and lost for us. We desperately cling to every village and city. But the enemy is too strong. We have to retreat after a few hours of bitter fighting. Our faces are grey; bitter desperation settles in our hearts as our toughest enemy. It is -40° C; the snow level is as high as our bodies. The steaming, agitated and exhausted horses can’t even pull the empty sleds anymore. Our small group becomes smaller and smaller, only half of them are still able to fight. Injured soldiers, many with frostbite, load their carbines and shoot. They lumber through the snow; their faces are contorted with pain. In the midst of the blizzard, some fall behind and lose their group, which was supposed to support them. Continue reading "Liveblogging World War II: February 16, 1943" » ## I Want Cosma Shalizi to Write a Weblog Post About How Yesterday's Meteor Strike in Chelyabinsk Should Change How We Live... ## Christina Romer Is My Choice for the Next Fed Chair Consider the set of {people appointed to high federal office by President Barack Obama}. Consider the set of {people who did not grossly underestimate the seriousness of the macroeconomic situation at some time over 2008-2010}. Consider the single-element union of those two sets. Christina Romer really ought to be the next Fed Chair. Just saying… ## Proposed Panel 6: 2013 Kauffman Foundation Economic Webloggers' Conference: Friday April 12, 2013 4:15 PM: Economic and Financial Weblogging and Standard Ivy-Covered Academia (Chair: Robert Strom, Kauffman Foundation. Speaker: Mark Thoma: weblogger and Department Chair, U. Oregon. Discussant: Stephanie Kelton, weblogger and Department Chair, UMKC). ## Noted for February 16, 2013 • Roger Mahony must be an atheist--or, if not, be shitting himself 24/7/365: "Church Used Cemetery Money to Pay Sex Abuse Settlement 'Pressed to come up with hundreds of millions of dollars to settle clergy sex abuse lawsuits, Cardinal Roger M. Mahony turned to one group of Catholics whose faith could not be shaken: the dead,' the Los Angeles Times reports. 'Under his leadership in 2007, the Archdiocese of Los Angeles quietly appropriated$115 million from a cemetery maintenance fund and used it to help pay a landmark settlement with molestation victims. The church did not inform relatives of the deceased that it had taken the money, which amounted to 88% of the fund. Families of those buried in church-owned cemeteries and interred in its mausoleums have contributed to a dedicated account for the perpetual care of graves, crypts and grounds since the 1890s.'"

• Emmanuel Saez: Striking it Richer: Evolution of Top Incomes in USA

Continue reading "Noted for February 16, 2013" »

## "We Would Have Gotten Away with Austerity--If Not for Those Meddlesome Economists!" -- European Commission Vice President Olli Rehn

European Commission Vice President Olli Rehn complain that Olivier Blanchard killed the Confidence Fairy. No Scooby Snacks for you, Professor Blanchard!

Jonathan Portes: Not the Treasury view...: I pointed out late last year that European Commission Vice President Olli Rehn has been predicting for at least two years that, thanks to the excellent policies recommended by the Commission and the European Central Bank, economic recovery in the crisis economies of the eurozone is imminent.  However… he's tried a different tack. Blame the economists…. Rehn… says:

I would like to make a few points about a debate which has not been helpful and which has risked to erode the confidence we have painstakingly built up over the last years in late night meetings. I refer to the debate about fiscal multipliers, ie the marginal impact that a change in fiscal policy has on economic growth.  The debate in general has not brought us much new insight.

Much of the rest of the letter is devoted to Mr Rehn's (and presumably the Commission's economists) attempt to debunk the findings of IMF Chief Economist Olivier Blanchard, who found, to no-one's great surprise, that the adverse impacts of fiscal consolidation were indeed much greater than that forecast by the Fund or the Commission.

Continue reading ""We Would Have Gotten Away with Austerity--If Not for Those Meddlesome Economists!" -- European Commission Vice President Olli Rehn" »

## A Very Brief Dialogue on Preparation...

Glaukon: Who did ultimately fill the Federal Reserve governors seat that had been reserved for Alicia Munnell?

Platon: Do you always carry with you a list of governors of the Federal Reserve from the beginning of the system in 1914 to the present?

## Noted for February 15, 2013

• Alyssa Rosenberg: Game of Thrones: "I understand why it would have been prohibitive to really get rid of Peter Dinklage’s nose to match up the damage Tyrion suffers during the Battle of the Blackwater in the books, but I do regret the preservation of his general handsomeness"

• Ta-Nehisi Coates and Harold Pollack on The Social Trends Driving American Gangs and Gun Violence

• Josh Marshall: Think There May be a Problem With That: "For a promotional video that was eventually never shown, [Dick Armey's] Tea Party group FreedomWorks got two female interns to impersonate then-Secretary of State Hillary Clinton and a Giant Panda having sex."

• Steve Benen: Yes, Republican Paul Ryan Is a Clown. Why Do You Ask?: "House Budget Committee Chairman Paul Ryan (R-Wis.), talking to CBS News yesterday, on automatic sequestration cuts: '"Don't forget it's the president who first proposed the sequester," Ryan continued. "It's the president who designed the sequester as it is now designed."' House Budget Committee Chairman Paul Ryan (R-Wis.), talking to Fox News in August 2011, on automatic sequestration cuts: 'What conservatives like me have been fighting for, for years are statutory caps on spending, legal caps in law that says government agencies cannot spend over a set amount of money. And if they breach that amount across the board, sequester comes in to cut that spending, and you can't turn that off without a supermajority vote. We got that in law. That is here.' These can't both be true. Either, as Paul Ryan said at the time, Republicans got the sequester in law, or this is all President Obama's idea."

• Mark Thoma: Economist's View: Holtz-Eakin Tries to Scare You. Don't Let Him: "[Holtz-Eakin] has learned nothing from the failure of the confidence fairy to appear. Waiting to fix the debt -- a problem driven mainly by health care cost escalation that won't become severe for many years -- is not risky, but his advice certainly is…. The headline today for Europe -- where countries have followed the advice of the Holtz-Eakin types, is (remember his claim above about austerity and growth?): 'Eurozone economy falls short of forecasts'…. The 'pundit orthodoxy' he disses is from Paul Krugman. Kind of funny, given how wrong Holtz-Eakin has been relative to Krugman"

Continue reading "Noted for February 15, 2013" »

## Hoisted from Comments: Tom Redburn on Elon Musk of Tesla Motors vs. the New York Times

What I think happened:

• Does the Tesla overstate its range? Yes, if you drive 50-55 with minimal heat/air conditioning. Reduce range by 10% if you drive 65. Reduce range by another 10% in winter with heat or summer with air conditioning.

• Does the Tesla battery retain its charge when it is cold? No. That's why you plug it in at night.

• Did Broder set the cruise control to 54? No.

• Did Broder turn off the heat, and did his feet freeze, and did his knuckles turn white as his body tried to reduce heat loss through the hands? No. Eventually he turned the heat down to 64 1/2.

• Did he think that running out of electrons would make for a more interesting story? Yes.

• Did he try to make the car run out of electrons before Milford? I can't say.

• Did he forget to plug in the car in Groton because he was trying to make the car run out of electrons? I can't say.

• Did he fail to stop on the road from Groton to Milford because he was then trying to make the car run out of electrons? Yes.

• Did he claim the car was dead even though it was not? Probably not--probably he did not understand that turning it off meant that with the battery so low it would not automatically restart.

Tom Redburn said...

For a guy who is always criticizing the press, funny how you jump to conclusions before getting both sides.

http://wheels.blogs.nytimes.com/2013/02/12/the-charges-are-flying-over-a-test-of-teslas-charging-network/

It does look like your guy is in substantial trouble with his:

I planted myself in the far right lane with the cruise control set at 54 miles per hour (the speed limit is 65). Buicks and 18-wheelers flew past, their drivers staring at the nail-polish-red wondercar with California dealer plates. Nearing New York, I made the first of several calls to Tesla officials about my creeping range anxiety.... All the while, my feet were freezing and my knuckles were turning white...

Tesla says its telemetry says he was going not 54 but 62; that he turned the climate up to 74, only later reduced it, and never reduced it below 64.5; and when he reached the Milford charging station drove around the parking lot for five minutes hoping the car would run out of electrons...

And consider Broder's:

Virtually everyone says that I should have plugged in the car overnight in Connecticut, particularly given the cold temperature. But the test that Tesla offered was of the Supercharger, not of the Model S, which we already know is a much-praised car. This evaluation was intended to demonstrate its practicality as a “normal use,” no-compromise car, as Tesla markets it.

That seems to me to be as close to a confession of "I was going to do whatever it took to make this car run out of electrons" as we are likely to get out of Broder. When you stop for the night, you plug your electric cr in. Am I wrong?

Unless Tesla's lying about their telemetry, I simply don't see a second side here…

And Anonymous37 said:

As some Wired.com commenters have pointed out (http://www.wired.com/autopia/2013/02/tesla-logs-nytimes/), the one fact which very strongly indicates that Broder's lying is that he didn't contact Tesla when the car supposedly ran out of charge (a fact which Musk disputes with the logs). He instead went with a different towing company, despite the fact that Tesla would have arrived in minutes.

The simplest explanation for this is that the car hadn't run out of charge. Had Tesla come instead, there would have been a very embarrassing cellphone video of Broder claiming the car was out of charge and then the Tesla folks demonstrating that he's an idiot or hugely dishonest.

Broder is claiming that he'll have a rebuttal up later today, but I honestly can't see how he can manage to effectively counter Musk's claims.

## When Did Martin Peretz Become This Crazy?

The consensus is split between "well before 1969" and "when Bill Clinton defeated Al Gore in the 1992 Democratic primary"…

Today Martin Peretz denounces Whittaker Chambers fan Sam Tanenhaus as a left-wing nut job:

Martin Peretz: The New New Republic: Like many readers of the New Republic, I didn't at first recognize the most recent issue of the magazine…. Having read the cover story, I still don't recognize the magazine. "Original Sin," by Sam Tanenhaus, purported to explain "Why the GOP is and will continue to be the party of white people." The provocative theme would not have been unthinkable in the magazine's 99-year history, but the essay's reliance on insinuations of GOP racism ("the inimical 'they' were being targeted by a spurious campaign to pass voter-identification laws, a throwback to Jim Crow") and gross oversimplifications hardly reflected the intellectual traditions of a journal of ideas…

Sam Tanenhaus thus rises in my estimation--surprisingly, for somebody whose book on Whittaker Chambers struck me as significantly flawed in its willingness to give the right-wing icon infinite amounts of slack…

Tanenhaus thus joins the estimable company of, among others, George Soros:

Matthew Yglesias / proudly eponymous since 2002: "It's good to own the magazine": New Republic editor in chief Martin Peretz recently took to the pages of his magazine to accuse George Soros of being a "young cog in the Hitlerite wheel." As Soros points out (follow the link) this charge is false. Peretz, in his response to Soros' response, won't even admit what he accused Soros of doing much less concede that the allegation was false!

It seems to me that when a magazine falsely accuses someone of being a Nazi collaborator that a correction would be warranted.

And TNR never bothered to run a correction. Memo to Frank Foer: you need to. Badly.

And Sam Tanenhaus joins the company of Hilary Clinton:

Ezra Klein: I think it's fascinating that Marty Peretz doesn't understand why people don't like him after his magazine lies about them. [Hilary Rodham Clinton] didn't snub you, Marty. She treated you with precisely the lack of respect you deserved after that shameful debacle.

The context:

Ezra Klein: I'm genuinely curious if [ex-New Republic editor Andrew Sullivan's] recitation of Clinton's personal failings is some sort of barely submerged explanation for why Sullivan published and championed a dishonest, fearmongering article meant to sink the Clinton health care plan -- and it was recognized as such even at the time. Thanks to The Atlantic's open archives, you can read the fairest man in journalism, James Fallows, take it apart in a feature article called "A Triumph of Misinformation." McCaughey's article, which Sullivan commissioned, published, and praised, was, Fallows said, "simply false." Yet Sullivan still touts it in his biography...

And:

Marty Peretz: When Hillary Snubbed Me: Hillary is known to snub people all the time. In fact, she even snubbed me once at a reception at the White House.  I was talking to someone in the Rose Garden, and she came over to greet the someone with whom I was already chatting.  That someone, in turn, introduced me, saying, "Of course, you know Marty Peretz," which actually she did not.  I had never been in a room with Hillary that didn't also contain a thousand other people.  That didn't phase her at all.  And she responded, "Indeed, I do," and turned on her heel and left. I don't have an explanation.  Except that The New Republic was not especially enamored of her health plan which, in retrospect, has impeded health reform for a decade and a half.  As it happens, we had published a devastating analysis of the proposal by Elizabeth McCaughey; and somehow, in the mysteries of Washington, this became the vivid center of the debate.  The White House actually put out what I recall as a nine page rebuttal to the TNR critique, another tactical mistake in the genius presidency.  Anyway, it is to this article that her snub to me may be attributed. But it could be something even more petty.

And, of course, there is so much more…

Continue reading "When Did Martin Peretz Become This Crazy?" »

## Elon Musk of Tesla Motors vs. the New York Times

What I think happened:

• Does the Tesla overstate its range? Yes, if you drive 50-55 with minimal heat/air conditioning. Reduce range by 10% if you drive 65. Reduce range by another 10% in winter with heat or summer with air conditioning.

• Does the Tesla battery retain its charge when it is cold? No. That's why you plug it in at night.

• Did Broder set the cruise control to 54? No.

• Did Broder turn off the heat, and did his feet freeze, and did his knuckles turn white as his body tried to reduce heat loss through the hands? No. Eventually he turned the heat down to 64 1/2.

• Did he think that running out of electrons would make for a more interesting story? Yes.

• Did he try to make the car run out of electrons before Milford? I can't say.

• Did he forget to plug in the car in Groton because he was trying to make the car run out of electrons? I can't say.

• Did he fail to stop on the road from Groton to Milford because he was then trying to make the car run out of electrons? Yes.

• Did he claim the car was dead even though it was not? Probably not--probably he did not understand that turning it off meant that with the battery so low it would not automatically restart.

And time to call this one for Elon Musk on points:

John Broder:

The phrase “the car fell short of its projected range” appeared in a caption with an accompanying map; it was not in the article.

And:

I do recall setting the cruise control to about 54 m.p.h., as I wrote. The log shows the car traveling about 60 m.p.h. for a nearly 100-mile stretch on the New Jersey Turnpike. I cannot account for the discrepancy, nor for a later stretch in Connecticut where I recall driving about 45 m.p.h., but it may be the result of the car being delivered with 19-inch wheels and all-season tires, not the specified 21-inch wheels and summer tires. That just might have affected the recorded speed, range, rate of battery depletion or any number of other parameters.

This looks very, very, very bad indeed for the New York Times:

A Most Peculiar Test Drive: You may have heard recently about an article written by John Broder from The New York Times that makes numerous claims about the performance of the Model S…. After a negative experience several years ago with Top Gear… where they pretended that our car ran out of energy and had to be pushed back to the garage, we always carefully data log media drives… In the case of Top Gear, they had literally written the script before they even received the car (we happened to find a copy of the script on a table while the car was being “tested”). Our car never even had a chance.

The logs show again that our Model S never had a chance with John Broder. In the case with Top Gear, their legal defense was that they never actually said it broke down, they just implied that it could and then filmed themselves pushing what viewers did not realize was a perfectly functional car. In Mr. Broder’s case, he simply… worked very hard to force our car to stop running….

Continue reading "Elon Musk of Tesla Motors vs. the New York Times" »

## The Republican Clown Show Continues: No, These People Should Not Run Our Economy Weblogging

Paul Krugman on the marconomics of Marco Rubio:

More Marcoeconomics: No, that’s not a misspelling of “macroeconomics”. Matt O’Brien beats me to it: Marco Rubio’s SOTU response also included a shout-out to Say’s Law:

Every dollar our government borrows is money that isn’t being invested to create jobs. And the uncertainty created by the debt is one reason why many businesses aren’t hiring.

I know where he gets this stuff: it’s what the Heritage Foundation guys were saying four years ago.

Continue reading "The Republican Clown Show Continues: No, These People Should Not Run Our Economy Weblogging" »

## The Long-Run Cost of the Economic Downturn: Gloomy News About Economic Growth

I have been staring at a very gloomy graph--at the Congressional Budget Office's forecasts of "potential output", of what the economy can produce without starting to "overheat" and putting upward pressure on inflation:

Looking at this graph tells me that:

• Real GDP fell relative to potential output by 8% in 2008-2009…
• Real has stayed 8% below its previous growth path ever since…
• The CBO is now forecasting that real GDP will return to potential output as of the end of 2017…
• The CBO is now forecasting that, come the end of 2017, the economy's full-employment productive potential will be 8% below what CBO was forecasting in 2007…

Continue reading "The Long-Run Cost of the Economic Downturn: Gloomy News About Economic Growth" »

## Liveblogging World War II: February 14, 1943

At 04:00 on 14 February four battle groups totalling 140 German tanks drawn from 10th and 21st Panzer Divisions and under the leadership of Lieutenant General Heinz Ziegler, von Arnim's deputy, advanced through Faïd and Maizila passes, sites that General Dwight D. Eisenhower had inspected three hours earlier, to attack Sidi Bou Zid.

Continue reading "Liveblogging World War II: February 14, 1943" »

## Thursday From the Archives: A Dozen Keepers from April 2005

A Dozen Keepers from April 2005:

## A Somewhat Strange Piece from Nick Eberstadt: Motes and Beams! Weblogging

What is the future of conservatism?: The “clear and present danger” for the United States today is domestic… subverting… the American way of life…. [T]he collapse of the nation’s family structure…. By 2010, a child was more likely to grow up in a broken home in America than in practically any other Western society, including the Scandinavian ones…. America’s… retirement from religion…. [O]ur citizenry’s steady slide into financial dependence on the government… healthy, able-bodied, and relatively well-to-do Americans plead[ing] “poverty” for the purpose of handouts from Uncle Sam. These powerful, deeply entwined trends are progressively degrading both our people and our polity… an ignominious end to American exceptionalism….

Continue reading "A Somewhat Strange Piece from Nick Eberstadt: Motes and Beams! Weblogging" »