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16 Apr 03:14

Try Harder or Do Something Easier?, by Bryan Caplan

Joswald1

I sometimes advice "Do something easier". I certainly practice it.

A friend tells you, "I'm thinking of starting a restaurant.  Advise me."  You know that about 60% of new restaurants fail in their first three years - and have no reason to think that your friend would be anything other than average.  How should your knowledge affect your advice? 

You could say, "Open the restaurant and work like mad, because the odds are against you."  Slogan: Try Harder.

Or you could say, "Don't open the restaurant, because the odds are against you."  Slogan: Do Something Easier.

Neither recommendation is crazy.  But as the probability of failure rises, the case for Do Something Easier gets stronger and stronger.  Why tell your friend to work his fingers to the bone when he's probably going to fail anyway? 

This is especially true on the plausible assumption that people are more likely to heed advice about one-time discrete decisions than day-to-day continuous decisions.  Saying "Marry her" is more likely to sway behavior than "Be good to your wife every day" - and saying "Do Something Easier" is more likely to sway behavior than "Try Harder."

Why then are advisers so reluctant to say "Do Something Easier"?  Because Try Harder sounds better - and most advisers would rather sound good than genuinely help their advisees.

This analysis clearly applies to starting a business or choosing an occupation.  But it works equally well for educational decisions.  Suppose a kid at the 30th percentile of the high school distribution asks you if he should go to college.  You know that kids at the 30th percentile have a dismal dropout rate.  Should you respond with Try Harder or Do Something Easier?

In our society, "Try Harder" is the socially acceptable - nay, socially mandatory! - slogan.  Don't tell kids to give up on their dreams; tell them to work for their dreams.  On reflection, though, this just exposes advisers' vanity: They'd rather sound helpful than be helpful.  Do you really imagine that chanting "Try Harder" will induce weak students to devote themselves to their studies, day in, day out?  No?  Then urging weak students to "Try Harder" barely differs from "Make an expensive investment that will fail at its normal high rate." 

To be fair, most weak students will ignore you even if you urge them to Do Something Easier.  But some will probably listen to you - and refrain from making a very bad bet. 

What about the tiny minority of weak students who would have blossomed in college?  Obsession with this group is the height of pious folly.  Suppose you convince a lot of people to stop buying lottery tickets.  Should you lose sleep over the likelihood that - but for your advice - one of your advisees would have won the jackpot?  Of course not.  "Advice that works on average" is also known as "good advice."

Say it with me: Risk of failure is a reason not to try.  Not a decisive reason, but a reason nonetheless - and the higher the risk of failure, the stronger the reason.  True, if you have no alternatives, you may as well try your best and hope for the best.  But would-be restaurant owners and would-be students always have alternatives.  And as long as you have alternatives, willingness to Do Something Easier in the face of crummy odds is not cowardice.  It is good economics - and common sense.

(16 COMMENTS)
16 Apr 13:23

Rumsfeld to IRS: taxes are too damn complicated

by Jason Kottke

Uh oh, Donald Rumsfeld and I agree on something. Each year, with his tax return, Rumsfeld sends a letter to the IRS explaining that neither he or his wife are sure of how accurate their taxes are because the forms and tax code are too complex. Here is this year's letter:

Rumsfeld Tax

If only he had been less certain of his accuracy in an even more complex situation, like, say the whole WMD/Iraq War thing.

Tags: Donald Rumsfeld   IRS   taxes
16 Apr 11:16

What is a job that exists only in your country? (place-specific labor markets in everything)

by Tyler Cowen

Let us start with “Teheran markets in everything”:

I think this happens only in Tehran. Some people get paid to walk behind your car, so the traffic cameras can not capture your plate number when you enter the restricted traffic areas!

The photo alas does not reproduce, and that is from a fascinating Quora discussion on “what is a job that exists only in your country?”

The Vietnamese water bag carriers are impressive (you get into a plastic bag and they pull you across a river).  Here is some Indian arbitrage:

Disabled people get 50-75% concession on train ticket from Indian Railways. Additionally, they can take one person as escort who will be entitled to the same amount of concession.

Some disabled people earn their living with this scheme. Their only job is travelling between different cities and taking Strangers (who actually want to go to some city) as escorts. These strangers pay 75% of the fare to the disabled people. Thus Stranger saves money, Disabled person earns profit.

This also was new to me:

In China, when there are big traffic jams, you can pay a fee to have two people on a motorcycle drive to your vehicle, where one takes your place at the steering wheel, and the other will take you wherever you need to go on his motorcycle.

Nor had I known about the “pet food taster” (Simon and Marks) or the costumes of those Australian Meter Maids.  India is prominent on the list but Mexico makes an appearance as well:

In Mexico we have men who make a living by discharging electricity into the bodies of consenting drunk people (who gladly pay a couple of dollars for the experience). These men usually hang around bars and areas where nightlife abounds and yell “toques toques!”(“discharges, discharges!”) while banging the two metallic handles of their contraption together. The device is a battery-operated metal box with a voltage regulator that can increase the intensity of the electrical current depending on how much the customer can take. It is generally accepted by Mexicans that a bit of electricity will increase your buzz…

It costs about $2-$4 per jolt.  Maybe the real winner should be this one:

United States of America: Man who walks on the moon (currently on hiatus).

I believe I owe thanks to somebody on Twitter, alas I can no longer recall to whom.

24 Mar 04:00

March 24, 2014

Joswald1

I will share any comic with the punchline "Free Trade Motherf$#@"


Last day to support GaymerX! Thanks for all of your help.

11 Apr 04:00

April 11, 2014


19 Mar 11:16

Modeling Vladimir Putin

by Tyler Cowen

Here are some options:

1. Putin is a crazy hothead who is not even procedurally rational.  Merkel received that impression from one of her phone calls with him.

2. Putin is rational, in the Mises-Robbins sense of instrumental means-ends rationality, namely that he has some reason for what he does.  He simply wills evil ends, namely the extension of Russian state power and his own power as well.

3. Putin is fully rational in the procedural sense, namely that he calculates very well and pursues his evil ends effectively.  In #2 he is Austrian but in #3 he is neoclassical and Lucasian too.  He knows the true structure of the underlying model of global geopolitics.

Putin-2

4. Putin lives in a world where power is so much the calculus — instrumentally, emotionally and otherwise — that traditional means-ends relationships are not easy to define.  Power very often is the exercise of means for their own sake and means and ends thus meld and merge.  Our rational choice constructs may mislead us and cause us to see pointless irrationality when in fact power is being consumed as both means and end.  It is hard for we peons to grasp the emotional resonance that power has for Putin and for some of his Russian cronies.  They grew up in the KGB, watched their world collapse, tyrannized to rise to top power, while we sit on pillows and watch ESPN.

Here is a former CIA chief arguing Putin has a zero-sum mentality, though I would not make that my primary framing.  Here is Alexander J. Motyl considering whether Putin is rational (Foreign Affairs, possibly gated for you).  Here is an interesting and useful discussion of differing White House views of PutinThis account of a several-hour dinner with Putin says he is prideful, resentful of domination, and hardly ever laughs.  Here is Eric Posner on Putin’s legal astuteness.

My views are a mix of #2 and #4.  He is rational, far from perfect in his decision-making, and has a calculus which we find hard to emotionally internalize.  His resentments make him powerful, and give him precommitment technologies, but also blind him to the true Lucasian model of global geopolitics, which suggests among other things that a Eurasian empire for Russia is still a pathetic idea.

Putin is also paranoid, and rationally so.  We have surrounded him with NATO.  China gets stronger every year.  Many other Russians seek to kill him, overthrow him, or put him in prison.

Assumptions about Putin’s rationality will shape prediction.  Under #1 you should worry about major wars.  With my mix of #2 and #4, I do not expect a massive conflagration, but neither do I think he will stop.  I expect he keep the West distracted and seek to turn resource-rich neighbors into vassal states, for the purpose of constructing a power-intensive, emotionally resonant new Russian/Soviet empire, to counter the growing weight of China and to (partially) reverse the fall of the Soviet Union.  Even if he does not grok the true model of the global world order, he does know that Europe is weak and the United States has few good cards it is willing to play.

Developing…

Addendum: Whatever your theory of Russians in general may be, watch this one-minute video of a Russian baby conducting and give it a rethink.

17 Mar 04:52

The Popularity of Silly Methods, by James Schneider

In Bryan's blog post Predicting the Popularity of Obvious Methods, he suggests that social scientists are more likely to pursue non-obvious methods when the obvious methods don't provide the answer that they like. In the spirit of his post, the use of non-obvious or overly sophisticated methods can signal that the researcher kept trying until they got the "right" answer. The skeptical might view this as a warning sign about the research.

Most people do not consume research firsthand. Instead, it is filtered through the media. Journalists also have preferences over answers. If a newspaper doesn't like the answer that research provides, they have wide latitude to ignore it. This means that one can infer the preferences of the media by the research that they do cite. Instead of sophisticated methods being the "tell," journalists show their preferences by citing weak research.

To support their preferences for certain questions or certain answers, journalists might discuss research at lower quality journals. Or they might discuss research with inferior methods. In medicine, randomized controlled trials (RCT) are accepted as being better than observational studies. And within observational studies, it is agreed that more test subjects are preferred to fewer. A recent paper compares articles that get covered in the leading newspapers to articles published in the best medical journals. It finds that newspapers are more likely to discuss observational studies than RCTs. And these observational studies have smaller sample sizes than the observational studies published in the best medical journals. The paper suggests that the press skews reporting away from the most reliable research. (Given that this paper is not a million-subject, RCT published in the New England Journal of Medicine, you should infer that I "like" its conclusion.)

An article posted Friday in The Atlantic brought this topic to mind. It described how researchers took 37 girls and randomly assigned them to play with one of three dolls. The dolls were a Barbie doll, a "doctor" Barbie doll, and a Mrs. Potato Head. Each of the girls played with their assigned doll for five minutes. The girls then answered a short survey about what types of jobs they could do when they grew up. The girls who were assigned Barbie dolls saw fewer jobs open to them.

Halfway through The Atlantic article, it reads:

The paper has a few limitations: The sample size was small, as was the effect size. Still, it's ... icky. Why does a plastic spud make your daughter more likely to think she can be a scientist than an actual scientist doll does?

That would be a great question, if it was prodded by a study with more than 37 girls. I wondered if other media outlets would try to downplay the weakness of the research methodology. Interestingly, the LATimes included the weaknesses in the very first paragraph -- including the five-minute play period. Their first paragraph states:

After spending just five minutes with Jane Potato-Head, girls believed they could grow up to do pretty much anything a boy could do.
(10 COMMENTS)
14 Mar 03:15

Photo







12 Mar 07:00

the view

semi_attended_customer_activated_tantrum
09 Mar 05:42

Markets in everything

by Tyler Cowen

Horse head squirrel feeder.  Who could possibly want such a thing?  Is that the result of a fixed point theorem?  Aren’t fixed costs God’s way of keeping such nasty stuff away from us?:

You have a Creepy Horse Mask, why not the squirrels in your yard? It turns out it’s even funnier on a squirrel. This hanging vinyl 6-1/2″ x 10″ squirrel feeder makes it appear as if any squirrel that eats from it is wearing a Horse Mask. You’ll laugh every morning as you drink your coffee while staring out the window into your backyard. Now, if only the squirrels would do their own version of the Harlem Shake video. Hole on top for hanging with string (not included).

horse-head-squirrel-feeder-930x709-480x365

For the pointer I thank John De Palma.

05 Mar 15:10

Economic growth in Ukraine, a recent history

by Tyler Cowen

ukraine

From C.W. at Free Exchange, there is more here.

05 Mar 05:00

Land Mammals

Bacteria still outweigh us thousands to one--and that's not even counting the several pounds of them in your body.
05 Mar 10:43

weird

by Author

weird

I’m sure there’s a perfectly natural explanation.

Flattr this for Jesus Book shop here

04 Mar 16:26

The Principal Doctrines of Epicurus: Friendliness, Social Intelligence, and the Bubble, by Bryan Caplan

The Principal Doctrines of Epicurus is a 3rd-century outline of Epicurean philosophy.  This bullet point is so consistent with my posts on friendliness, social intelligence, and the Bubble that I feel compelled share it.
He who desires to live in tranquility with nothing to fear from other men ought to make friends.  Those of whom he cannot make friends, he should at least avoid rendering enemies; and if that is not in his power, he should, as much as possible, avoid all dealings with them, and keep them aloof, insofar as it is in his interest to do so.

(3 COMMENTS)
01 Mar 23:21

What Say You? The Intuitive Case Against the Minimum Wage, by Bryan Caplan

Don Boudreaux asks minimum wage supporters to answer two questions they should have asked themselves long ago.

Question #1:
Name some other goods or services for which a government-mandated price hike of 25 percent will not cause fewer units of those goods and services to be purchased.

Beer?  Broccoli?  Bulldozers?  Coffee?  Haircuts?  Natural gas?  Automobiles?  Housing?  Preventive health-care?  Lawn-care service?  Tickets to the movies?  Smart phones?  Subscriptions to the New York Times?  Books by Paul Krugman?  Professors of sociology?  Assistant professors of economics?  Any of these products work for you?  If none of these work, surely you can name at least one other for which a 25-percent price hike will not cause fewer units of that product to be purchased.  Or does low-skilled labor just happen to be the one good or service in the entire world for which a government-mandated 25-percent rise in the price that its buyers must pay for it will not diminish buyers' willingness to buy it?

Seriously, name just one other good or service for which you believe that a government-mandated price-hike of  25 percent will not reduce the quantity demanded of that good or service.

Question 2:

[B]ecause if Mr. Obama's full proposal is enacted the national minimum wage will also from here on in be indexed to inflation, here's another challenge to anyone who dismisses as unscientific or ideological the standard economic argument against the minimum wage: name one other good or service whose real price, according to economic theory, should never fall relative to the prices of other goods or services?

The least-bad answers to Boudreaux's Question #1 that occur to me probably salt and soap.  As Oskar Lange asked in 1937: "[W]ould a decline of the price of soap to zero induce them [the "well-to-do"] to be so much more liberal in its use?"  By the standard of 1937, almost everyone in the First World is well-to-do today.  For Question #2, I'm utterly stumped.

(27 COMMENTS)
03 Mar 05:00

March 03, 2014


21 Feb 19:08

WalMart fact of the day

by Tyler Cowen

Wal-Mart has 1.3 million U.S. employees, and about 4,000 of them currently make either a state or federal minimum wage, Tovar said.

There is more here, via @ModeledBehavior., who points out that is about 0.3%, and Clive Crook.

23 Feb 10:35

Who Should We Revere?, by James Schneider

SAM_8793.jpgSifting through the coins in your pocket, you will likely find many images of politicians. In some sense, this conveys the impression that government leaders are the most important figures in society. However, everyday currency can honor other contributors to society. For example, check out this 50-cent euro coin featuring Miguel de Cervantes. Or these 20th-century physicists on currency. European currency lavishes less honor on political leaders than American currency (perhaps because almost all "great" European leaders have waged war on other European countries).

If we were to rethink which professions should be honored, we might consider where additional talent would most benefit society. This seems unlikely to be the political sphere. Imagine a world where twice as many people vied for political office. This would yield little social benefit.

  • Regardless of how many people vie for a political office, only one person will be elected. Political office really is a winner-take-all field. More capable candidates would lead to more capable officials, but this effect would be mild.
  • If both Democrats and Republicans became more capable, they could hypothetically reach more intelligent compromises. But it seems that a lot of political ability is used to misrepresent opponents in clever ways.
  • Most political differences are not caused by one side solving a difficult technical problem that eludes the other side. Much of politics is a zero-sum game because Democrats and Republicans simply want different things.
  • The actions of politicians are constrained by the demands of relatively uninformed voters. Simply making politicians more capable probably isn't enough to change the system.

    If government leaders were demoted from currency, should artists take their place? Most people benefit greatly from artists; however, attracting additional talent to the arts might yield little incremental value. If Mozart and Wagner never existed, most of their current fans would spend more time listening to Verdi and Puccini. There is simply too much music and literature for any one person to consume in a lifetime. Additional artistic output largely steals attention away from other works of art. Many people write novels and compose music for the sheer pleasure of creation; (at least) the socially optimal output of art is already being supplied without providing additional encouragement. In the past, paying to self-publish a novel was considered a vanity project. Now there are so many fiction writers that trying to get any publisher for a novel could be considered a vanity project.

    How about the fields of science and technology? Additional effort in the fields of science and technology would yield significant incremental value. Every scientist relies on the contributions of those that came before her. Miniaturization allows for faster processors and better manufacturing techniques, which in turn facilitates further miniaturization. In recent times, scientists and engineers might have done as much to further the enjoyment of the arts as artists. For example, using a Kindle app, I can instantly download a huge selection of free literary works written before 1923 (since they are in the public domain). Many of these works are out-of-print and would be extremely difficult to acquire otherwise.

    IMG_2466.jpgIt may be obvious that I endorse shifting honor away from politicians and towards scientists and engineers. Towards this end, I have a proposal for a Norman Borlaug memorial. Notice that to keep construction costs low, I've repurposed a pre-existing structure.

    (17 COMMENTS)
  • 15 Feb 12:25

    The Moral Is the Practical

    by Alex Tabarrok

    Tyler concedes the moral high ground to advocates of open borders but argues that the proposal is “doomed to fail and probably also to backfire in destructive ways.” In contrast, I argue that the moral high ground is tactically the best ground from which to launch a revolution. In Entrepreneurial Economics I wrote:

    No one goes to the barricades for efficiency. For liberty, equality or fraternity, perhaps, but never for efficiency.

    Contra Tyler, the lesson of history is that few things are as effective at launching a revolution as is moral argument. Without the firebrand Thomas “We have it in our power to begin the world over again“ Paine, the American Revolution would probably never have happened. Paine’s Common Sense, the most widely read book of its time, is about as far from Tyler’s synthetic, marginalist argument as one can imagine and it was effective.

    Paine2When in 1787 Thomas Clarkson founded The Society for the Abolition of the Slave Trade a majority of the world’s people were held in slavery or serfdom and slavery was considered by almost everyone as normal, as it had been considered for thousands of years and across many nations and cultures. Slavery was also immensely profitable and woven into the fabric of the times. Yet within Clarkson’s lifetime slavery would be abolished within the British Empire. Whatever one may say about this revolution one can certainly say that it was not brought about by a “synthetic and marginalist” approach. If instead of abolition, Clarkson had settled on the goal of providing for better living conditions for slaves on the voyage from Africa it seems quite possible that slavery would still be with us today.

    In more recent times, civil unions have gone nowhere while equality of marriage has succeeded beyond all expectation. The problem with civil unions, and with the synthetic and marginalist approach more generally, is that even though it offers everyone something that they want, it concedes the moral high ground–perhaps there is something different about gay marriage which makes it ok to treat it differently–and for that reason it attracts few adherents. Moreover, the argument for civil unions doesn’t force the opposition to enunciate the moral arguments for their opposition and when the moral ground of the opposition is weak that is a strategic failure.

    The moral argument for open borders is powerful. How can it be moral that through the mere accident of birth some people are imprisoned in countries where their political or geographic institutions prevent them from making a living?  Indeed, most moral frameworks (libertarian, utilitarian, egalitarian, and others) strongly favor open borders or find it difficult to justify restrictions on freedom of movement. As a result, people who openly defend closed borders sound evil, even when they are simply defending what most people implicitly accept. When your opponents occupy ground that they cannot–even on their own moral premises–defend then it is time to attack.

    19 Feb 10:13

    The CBO report on the minimum wage

    by Tyler Cowen

    Spin it as you wish, we should not have a major party promoting, as a centerpiece initiative and for perceived electoral gain, a law that might put half a million vulnerable people out of work, and that during a slow labor market.

    And the American people will never understand the ins and outs of the monopsony debate and the like.  Overall, what kind of useful lesson is being taught here about the determinants of wages and prosperity?

    I’m sorry people, but those are the bottom lines on this one.

    20 Feb 16:12

    Unlikely simultaneous historical events

    by Jason Kottke

    A poster on Reddit asks: What are two events that took place in the same time in history but don't seem like they would have? A few of my favorite answers (from this thread and a previous one):

    When pilgrims were landing on Plymouth Rock, you could already visit what is now Santa Fe, New Mexico to stay at a hotel, eat at a restaurant and buy Native American silver.

    Prisoners began to arrive to Auschwitz a few days after McDonald's was founded.

    The first wagon train of the Oregon Trail heads out the same year the fax machine is invented.

    Nintendo was founded in 1888. Jack the Ripper was on the loose in 1888.

    1912 saw the maiden voyage of the Titanic as well as the birth of vitamins, x-ray crystallography, and MDMA.

    1971: The year in which America drove a lunar buggy on the moon and Switzerland gave women the vote.

    NASA's Gemini program was winding down at the same time as plate tectonics, as we know it today, was becoming refined and accepted by the scientific community.

    Spain was still a fascist dictatorship when Microsoft was founded.

    There were no classes in calculus in Harvard's curriculum for the first few years because calculus hadn't been discovered yet.

    Two empires [Roman & Ottoman] spanned the entire gap from Jesus to Babe Ruth.

    When the pyramids were being built, there were still woolly mammoths.

    The last use of the guillotine was in France the same year Star Wars came out.

    Oxford University was over 300 years old when the Aztec Empire was founded.

    Related: true facts that sound made up, timeline twins, and the Great Span.

    Tags: history
    17 Feb 15:35

    In the 1930s it seemed "obvious" that financial turmoil had caused the Great Depression, by Scott Sumner

    But now we know the actual problem was tight money, which caused NGDP to fall in half.

    Here's Noah Smith:

    This seems to be the overwhelming consensus in academic macro these days. It seems obvious to most people that the Great Recession was caused by stuff that happened in the financial sector; the only alternative hypothesis that anyone has put forth is the idea that fear of Obama's future socialist policies caused the recession, and that's just plain silly.
    Perhaps some day economists will realize that the models they were teaching their students in 2007 imply that the world's central banks caused the Great Recession.

    Here's Ludwig Wittgenstein:

    Tell me," the great twentieth-century philosopher Ludwig Wittgenstein once asked a friend, "why do people always say it was natural for man to assume that the sun went around the Earth rather than that the Earth was rotating?" His friend replied, "Well, obviously because it just looks as though the Sun is going around the Earth." Wittgenstein responded, "Well, what would it have looked like if it had looked as though the Earth was rotating?
    Now let's assume Wittgenstein was a market monetarist:
    Wittgenstein: Tell me, why do people always say it's natural to assume the Great Recession was caused by the financial crisis of 2008?

    Friend: Well, obviously because it looks as though the Great Recession was caused by the financial crisis of 2008.

    Wittgenstein: Well, what would it have looked like if it had looked like it had been caused by Fed policy errors, which allowed nominal GDP to fall at the sharpest rate since 1938, especially during a time when banks were already stressed by the subprime fiasco, and when the resources for repaying nominal debts come from nominal income?


    Inevitably when I make this argument there are a few tiresome "people of the concrete steppes" who insist the Fed did not cause the recession, they merely failed to offset the fall in velocity. Unfortunately they haven't bothered to look at the data. After rising at roughly a 5% rate for many years, the Fed brought growth in the monetary base to a complete halt between August 2007 and May 2008. That triggered the onset of recession in December 2007. Velocity actually rose during that 9 month period, but not enough to offset the Fed's tight money policy.

    Of course later on V did fall sharply, and the Fed failed to take affirmative steps like level targeting of NGDP, which would have prevented the mild recession from turning into the Great Recession. But it's the Fed's job to control AD. When they do it well they take credit for their success, as when they took credit for the Great Moderation. And when they fail? Well let's just say Milton Friedman would not be surprised by any of the Fed's recent excuses. Here he describes what it's like to read all their annual reports, back to back:

    An amusing dividend from reading annual reports of the Federal Reserve System seriatim is the sharp cyclical pattern that emerges in the potency attributed to monetary forces and policy. In years of prosperity, monetary policy is a potent instrument the skillful handling of which deserves credit for the favorable course of events; in years of adversity, other forces are the important sources of economic change, monetary policy has little leeway, and only the skillful handling of the exceedingly limited powers available prevented conditions from being even worse.
    There were only 45 reports to read back in 1959. Now there are 100. But nothing has really changed.

    PS. I do understand that Noah's "financial system" could be read as including central banks. But the rest of his post makes clear he is looking at the financial causes in the same way as 99% of other economists do--banking distress and associated problems.

    PPS. A note on my earlier comment that we've forgotten everything we taught our students back in 2007. I was thinking of these sorts of lessons, which back in 2007 appeared in the number one money textbook (by Frederic Mishkin):

    It is dangerous always to associate the easing or the tightening of monetary policy with a fall or a rise in short-term nominal interest rates. . . .

    Monetary policy can be highly effective in reviving a weak economy even if short term rates are already near zero.


    In my earlier days of blogging (in 2009) I tried to do a humorous take on how everything changed after 2008:
    Now I'm starting to feel like Kevin McCarthy in the film Invasion of the Body Snatchers. Have I "misremembered" my history of progress in 20th century macro? Has some quantum fluctuation plunged me into a parallel universe where post Keynesian theory accurately describes the laws of macroeconomics?

    I try to remain dispassionate and look at things logically. What are the odds that some pod-people from space have not only rewired Paul Krugman's brain, but that of most other macroeconomists? Isn't it more likely that I am going crazy? Like a character in a Borges story, I am now afraid to open Mishkin's textbook, for fear that the passage I remember may not be there. If you see a tall thin guy at the Harvard or MIT economics parking lots, jumping on the windshields of cars, please call the appropriate authorities.


    Now I can update that story. There's a scene at the end of the film where the authorities hear of a truck overturning that is full of giant pods. There's a palpable shudder as they realize that Kevin McCarthy is no raving lunatic. I had a similar feeling when I opened the newest addition of Mishkin's text, and found that "highly effective" was no longer there, merely "effective." Here are some other mysterious changes in Mishkin's text.

    It's starting to happen. Keep an eye on Noah Smith, I fear he may be one of the space aliens.

    PPPS. Marcus Nunes has a reply to my previous post. I have no objection to his claim that money was not too tight during 2003-06. I also have no objection to the claim that money was too tight, given the Fed's 2% inflation target, or even a "dual mandate" of 2% inflation target plus minimizing the output gap.

    HT: TravisV.

    (19 COMMENTS)
    11 Feb 05:00

    February 11, 2014


    06 Feb 16:55

    Contradictoration?

    by noreply@blogger.com (Mungowitz)
    (I'm sure GWB never used the non-word "contradictoration."  But he should have, so I will).

    There seems to be some confusion about marijuana.

    First, the Democrats and some others who are pushing to legalize marijuana are trying to make tobacco illegal.  What's up with that?  Our President, himself a long-time smoker, favors this approach.

    Second, the Republicans who opposed legalizing marijuana and want people to use less of it are now trying to lower the taxes on that same marijuana

    Third, our President, also a long-time pot smoker, has said that he will never favor marijuan legalization.  Until he said that pot was "no more dangerous" than tobacco.  Let's suppose they are equally dangerous.  Then why has Obama cracked down sharply on medical marijuana

    The point being that if they are equally dangerous, then why has Obama cracked down hard on legal prescription marijuana, advocated for legal recreational marijuana, and smoked tobacco while pushing to make tobacco illegal, or at least unavailable?

    You know what?  Politicians are crazy.  Mr. Obama said "inhaling was the point."  I guess he just was using a metaphor for sucking.
    29 Jan 15:39

    Musicless music videos

    by Jason Kottke

    Mario Wienerroither takes music videos, strips out all the sound, and then foleys back in sound effects based on what people are doing in the video. You'll get the gist after about 6 seconds of this Jamiroquai video:

    Great stuff. He's also done Nirvana's Smells Like Teen Spirit, Prodigy's Firestarter, and Queen's I Want to Break Free. (via @faketv)

    Tags: Mario Wienerroither   music   remix   video
    26 Jan 16:45

    The Conference Call

    by noreply@blogger.com (Mungowitz)
    Clever.  And funny.

    22 Jan 05:01

    Mandela: Reckless But Lucky, by Bryan Caplan

    I've heard ugly rumors about Nelson Mandela for years.  Was he a Communist - or a terrorist?  His recent death inspired me to learn more.  Alex Tabarrok nudged me to start with Mandela's autobiography, which presumably puts his career in the most favorable possible light.

    By the standards of anti-colonial revolutionaries, Mandela comes off very well.  He writes no eulogies to murderous hatred, and voices no yearnings for collective revenge.  Yet I still have to condemn Mandela as criminally reckless man who knowingly played Russian roulette with forty million lives.  Here's how Mandela describes his successful campaign to move the African National Congress onto the path of violence:
    This was a fateful step.  For fifty years, the ANC had treated nonviolence as a core principle, beyond question or debate.  Henceforth, the ANC would be a different kind of organization.  We were embarking on a new and more dangerous path, a path of organized violence, the results of which we did not and could not know.
    Mandela is well-aware that in modern warfare, innocents routinely perish:
    The killing of civilians was a tragic accident, and I felt a profound horror at the death toll.  But as disturbed as I was by these casualties, I knew that such accidents were the inevitable consequence of the decision to embark on a military struggle.  Human fallibility is always a part of war, and the price for it is always high.
    Yet he never faces the obvious moral dilemma: Why on earth are you endangering innocent lives if you have no strong reason to believe the consequences will be very good?  Mandela's path is especially culpable because he was a voracious reader, but obsessed over a single political question: winning.  A typical passage:
    I was candid and explained why I believed we had no choice but to turn to violence.  I used an old African expression: Sebatana ha se bokwe ka diatla (The attacks of the wild beast cannot be averted with only bare hands).  Moses [Kotane] was an old-line Communist, and I told him that his opposition was like that of the Communist Party in Cuba under Batista.  The party had insisted that the appropriate conditions had not yet arrived, and waited because they were simply following the textbook definitions of Lenin and Stalin.  Castro did not wait, he acted - and he triumphed.
    Throughout his career, Mandela conspicuously ignores the mountain of historical evidence on the godawful overall consequences of violent revolution.  He doesn't just ignore the blood-soaked history of various Communist revolutions, decades earlier and continents away.  He also ignores the blood-soaked history of contemporary African independence movements.  (See here, here, and here for starters). 

    Soon after turning to violence, Mandela covertly tours post-colonial Africa, looking for funding.  As far as I can tell, he fails to ask his hosts a single morally serious question.  Any of the following would qualify: "So, how did independence turn out?  What was the body count?  Have the people really been 'liberated'?  Or have the tyrants merely changed nationality?"  While I'm convinced that Mandela was never a Communist, his priorities were thoroughly Leninist: "The point of the uprising is the seizure of power; afterwards we will see what we can do with it."

    You could say, "Mandela acted justly because he knew that, once in power, he would rule well."  This seems like a stretch given how little intellectual energy he put into peacetime policy analysis.  But even if Mandela knew that he would make an excellent president, he was far from sure to land the job.  He could easily have died of old age, or been shunted aside by a rival politician promising blood.  Or Mandela's buddies in the South African Communist Party could have taken advantage of the revolutionary situation to do what Communists do best: Stab their social democratic allies in the back and assume totalitarian power.

    Toward the end of his autobiography, Mandela makes a striking admission: The ANC's turn to violence was about image, not results.  In 1990, the ANC weighed whether to suspend armed struggle.  Mandela:
    ... I defended the proposal, saying that the purpose of the armed struggle was always to bring the government to the negotiating table, and now we had done so...

    This was a controversial move within the ANC.  Although MK [the armed branch of the ANC] was not active, the aura of the armed struggle had great meaning for many people.  Even when cited merely as a rhetorical device, the armed struggle was a sign that we were actively fighting the enemy.  As a result, it had a popularity out of proportion to what it had achieved on the ground.
    So not only did Mandela resort to violence without any strong reason to believe it would lead to good consequences.  In hindsight, he wasn't even convinced that violence made much difference.  But on his own account, the idea of violence had great appeal.  Imagine the horrors the ANC's glorification of bloodshed could have inspired if, say, Mandela had been assassinated by hard-line supporters of apartheid the day after his election.
     
    Fortunately, Mandela was able to win without stepping over millions of corpses.  But he knowingly took this risk - and repeatedly pushed his luck.  He turned down a long list of reasonable compromises, hoping that the ruling regime would submit to his ultimatum: "One man, one vote - or civil war."  He romanticized violence to gain leverage, but never worried that this romance would turn ugly.  Does the fact that Mandela won his game of Russian roulette make his reckless tactics any more excusable?*

    Needless to say, Mandela's opponents were awful, too.  But no one's nominating them for sainthood.  The harsh reality is that Mandela was a politician.  Like virtually all politicians, he measures up poorly against the standards of common decency.  Seek your heroes elsewhere.

    * Was Mandela's course any more reckless than, say, George Washington's?  It's unclear - but that's another telling point against the American Revolution and its slaveholding philosophers of freedom

    (23 COMMENTS)
    17 Jan 07:00

    #996; In which Timothy is Late

    by David Malki !

    And I would have been here SOONER if I hadn't been their guide on a hypersonic tour of Earth lasting over an hour but covering every continent comprehensively. But here I am, Susan! Let's go to your VERY INTERESTING BABY SHOWER.

    17 Jan 15:03

    Eighty years later and the results are the same, by Scott Sumner

    Back in 1933 the US had experienced years of deflation and nominal interest rates were close to zero.  FDR sharply devalued the dollar over a period of 10 months, and stock prices closely tracked the value of foreign exchange during this period of monetary stimulus.  Last year the Japanese did the same, and Marcus Nunes has a great post showing that the results were pretty similar.  Here are some of his graphs:


     Screen Shot 2014-01-16 at 6.28.27 PM.png
    That certainly looks like a positive correlation.  Some people will say; "QE only helps the asset markets, it doesn't boost NGDP."  I don't know how something could dramatically impact stock prices without impacting nominal spending, but in any case NGDP growth picked up in Japan last year.

    Others will ask; "What makes you think higher NGDP growth will lead to higher RGDP growth?" This does:

    Screen Shot 2014-01-16 at 6.27.31 PM.png
    Again, that's pretty similar to what occurred in 1933.  Another complaint is that currency depreciation is a "beggar-thy-neighbor" policy, which doesn't work at a global level.  The worry is that it simply steals jobs from other countries.  And yet after the devaluation of 1933 US imports actually grew faster than our exports. Marcus shows that the same thing happened last year in Japan:

    Screen Shot 2014-01-16 at 6.28.01 PM.png

    Marcus explains why:

    This is indicative that the income effect of the expansionary policy was stronger than the terms of trade effect of the exchange devaluation. In other words, it reflects an increase in domestic demand.

    Marcus Nunes is the master of graphical analysis, and his post has four other nice graphs. Strongly recommended.

    (5 COMMENTS)
    16 Jan 16:48

    Bad British NFL commentary

    by Jason Kottke

    From the clueless British announcer who brought you this bad baseball commentary ("No! Caught by the chap in the pajamas with the glove that makes everything easier. And they all scuttle off for a nap.") comes some hilariously misinformed NFL game commentary.

    Alabama's fullback has a handkerchief in his back pocket. He must have a cold but he's pressing on regardless. That's stoicism for you.

    Tags: Anthony Richardson   football   NFL   video