Monthly Archives: april 2011

«What I Learned in Econ Grad School» av Noah Smith. #Verdt å lese

Do you know about circulation in macroeconomics hat p148451863283500441qz14 400Noah Smith husker tilbake til de dagene han var en økonomi-stipendiat. Verdt å lese for dere econ-nerder. Favorittutdrag:

In macroeconomics, there was plenty of math, but it seemed to be used primarily as a descriptive tool for explicating ideas about how the world might work. At the end of the course, I realized that if someone asked me to tell them what unemployment would be next month, I would have no idea how to answer them.

Her er hele posten:

What I learned in econ grad school, Noahpinion: I always find it interesting that criticisms of economics education focus more on the graduate side than the undergrad. Consider this broadside by Brad DeLong and Larry Summers…

This is interesting because, as someone who never studied econ as an undergrad (I was a physics major), I learned everything I know about macro from my grad courses. If there is an aspiring economist out there whose understanding of macro has been hurt by an overly narrow graduate curriculum, it would be me.

So, what did I learn in my first-year graduate macro course at the University of Michigan?

My first semester, business cycle theory, was taught by Chris House (the second semester was all growth theory). We spent a day covering the basic history of the field – the neoclassicals, Keynes, Friedman, Lucas and the RBC people, and finally the neo-Keynesian movement. I recall reading the Summers vs. Prescott debate but not really getting what it was about. From then on it was all DSGE. We did the Ramsey model and learned about Friedmans Permanent Income Hypothesis. We spent a lot of time on RBC. We took a big break to learn value function iteration and how to numerically solve DSGE models by fixed-point convergence. Then we did Barros model of Ricardian Equivalence, learned a basic labor search model, briefly sketched a couple of ideas about heterogeneity, touched on menu costs, and spent a good bit of time on Q-theory and investment costs. Finally, at the very end of the semester, we squeezed in a one-week whirlwind overview of Calvo Models and the New Keynesian Phillips Curve…but we werent tested on it.

This course would probably have given Brad DeLong the following reasons for complaint:

1. It contained very little economic history. Everything was math, mostly DSGE math.

2. It was heavily weighted toward theories driven by supply shocks; demand-based theories were given extremely short shrift.

3. The theories we learned had almost no frictions whatsoever (the two frictions we learned, labor search and menu costs, were not presented as part of a full model of the business cycle). Other than Q-theory, there was nothing whatsoever about finance (Though we did have one midterm problem, based on Houses own research, involving an asset price shock! That one really stuck with me.).

At the time I took the course, I didnt yet know enough to have any of these objections. But coming as I did from a physics background, I found several things that annoyed me about the course (besides the fact that I got a B). One was that, in spite of all the mathematical precision of these theories, very few of them offered any way to calculate any economic quantity. In physics, theories are tools for turning quantitative observations into quantitative predictions. In macroeconomics, there was plenty of math, but it seemed to be used primarily as a descriptive tool for explicating ideas about how the world might work. At the end of the course, I realized that if someone asked me to tell them what unemployment would be next month, I would have no idea how to answer them.

As Richard Feynman once said about a theory he didnt like: ‘I don’t like that they’re not calculating anything. I don’t like that they don’t check their ideas. I don’t like that for anything that disagrees with an experiment, they cook up an explanation – a fix-up to say, Well, it might be true.’

That was the second problem I had with the course: it didnt discuss how we knew if these theories were right or wrong. We did learn Bob Halls test of the PIH. That was good. But when it came to all the other theories, empirics were only briefly mentioned, if at all, and never explained in detail. When we learned RBC, we were told that the measure of its success in explaining the data was – get this – that if you tweaked the parameters just right, you could get the theory to produce economic fluctuations of about the same size as the ones we see in real life. When I heard this, I thought ‘You have got to be kidding me!’ Actually, what I thought was a bit more…um…colorful. 

(This absurdly un-scientific approach, which goes by the euphemistic name of ‘moment matching,’ gave me my bitter and enduring hatred of Real Business Cycle theory… I keep waiting for the ghost of Francis Bacon or Isaac Newton to appear and smite Ed Prescott for putting theory ahead of measurement. It hasnt happened.)…

But all the same, I absolutely dont blame Chris House for teaching what he taught. Our curriculum was considered to be the state of the art by everyone who mattered. Without a thorough understanding of DSGE models, a macroeconomist is severely disadvantaged in todays academic job market; if he had spent that semester teaching us Kindleberger and Bagehot and Minsky, Professor House might have given us better ways how to think about history, but he would have been effectively driving us out of the macroeconomics profession.

Thus, DeLong and Summers are right to point the finger at the economics field itself. Senior professors at economics departments around the country are the ones who give the nod to job candidates steeped in neoclassical models and DSGE math. The editors of Econometrica, the American Economic Review, the Quarterly Journal of Economics, and the other top journals are the ones who publish paper after paper on these subjects, who accept ‘moment matching’ as a standard of empirical verification, who approve of pages upon pages of math that tells ‘stories’ instead of making quantitative predictions, etc. And the Nobel Prize committee is responsible for giving a (pseudo-)Nobel Prize to Ed Prescott for the RBC model, another to Robert Lucas for the Rational Expectations Hypothesis, and another to Friedrich Hayek for being a cranky econ blogger before it was popular. 

If you want to change economics education, it is to these people that you must appeal. The ghost of Francis Bacon, unfortunately, is not available for comment.

Merket med , ,

USA vokste 1,8% i de første 3 mnd. Årsjustert vel å merke.

Dette fra Bureau of Economic Analysis:

Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — increased at an annual rate of 1.8 percent in the first quarter of 2011 (that
is, from the fourth quarter to the first quarter) according to the «advance» estimate released by the
Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.1 percent.

De fleste estimater har blitt nedjustert i det siste, fra flere kilder. Det laveste tallet jeg så var 1,9%. BEA har altså anslått årsjustert vekst til 1,8% i de første 3 mnd. Tallet for siste kvartal 2010 var 3,1%.

Dårlig, men ikke uventede nyheter.

(Graf: CalculatedRisk)

Merket med ,

John Meynard Keynes vs. Friedrich Hayek: Runde 2

Keynes og Hayek møtes igjen, denne gangen i ringen for runde 2 av de økonomiske ideologier. Denne gangen mer velprodusert, med rap. Fullskjerm anbefales.

Merket med ,

Ordsky etter Bernanke møtte pressen

Akkurat nå kommenterer alle som føler at de skal kommentere på sentralbanksjefens aller første pressekonferanse. Etter at støvet har lagt seg oppsummerer vi på denne bloggen. Inntil da, her er Reuters ordsky av pressekonferansen:
Bernanke cloud

Merket med ,

Herr Bernanke møter pressen.

Om noen timer møter sentralbanksjef Ben Bernanke til sin aller første pressekonferanse. Det er nå bestemt at det skal holdes fire slike pressekonferanser i året, hvor sentralbanken skal få en ekstra mulighet til å kringkaste sin pengepolitikk. Rentemøtet som kommer inneholder ingen overraskelse, vil pressekonferansen gjøre det? Se live video her.

Blogger i morgen om hva som skjedde. I mellomtiden litt utfyllende fra en som skal være tilstede:

Mr Bernanke meets the press:

IN JUST a couple of hours, Ben Bernanke will make a little history by stepping to the podium at the first post-meeting press conference held by the Federal Reserve. It’s hard to believe that the press conference could generate more stories after the fact than it has before. See this, this, this, and this for just a small sampling. The conference creates the opportunity to tease meaning out of slightly more material than the Fed watchers normally have.

The Fed will almost certainly not announce any big changes in policy. Rather all eyes and ears will be trained on the chairman in an attempt to discern whether he has grown any more concerned about inflation. Inflation figures have continued to tick up, but long-term inflation expectations remain muted and the weak state of the labour market has prevented rising energy and food prices from translating into wage gains. Historically, output and employment gaps of the present magnitude have simply not been consistent with sustained growth in inflation expectations. I’d expect Mr Bernanke to acknowledge the latest data and profess his determination to keep expectations anchored, but I suspect he will declare his confidence that the situation is well under control.

It will be interesting to see if the chairman is pressed on whether the Fed should be doing more. I think there’s a case that it should be doing more, and I imagine Mr Bernanke may even be sympathetic to that case. At the same time, I feel fairly sure that he and other key FOMC members are too cautious to move toward additional expansion given the generally, if weakly, positive trends in the data.

In any case, your blogger will be in attendance. Please leave suggested questions for Mr Bernanke in the comments.

(Via Free exchange.)

Merket med ,

Norge har nå ett sete i FNs Befolkning- og Utviklingskommisjon

Spania, Norge og Malta kjempet om to ledige seter i kommisjonen. Høres ut som den kjedeligste stolleken noensinne. Tviler på at det er slik de bestemmer hvem som sitter hvor.
FNnorge.png Les mer om Norge i FN her.

Merket med ,

Libya ned, Saudi Arabia opp? Vi følger opp…

Mr. Hamilton ved Econbrowser stilte spørsmålet her og følger nå opp i en bloggpost. Her er mitt favorittutdrag:

Econbrowser: Saudi oil production and the Libyan conflict:

One of the key questions in assessing the effect of the Libyan conflict on world oil prices was the extent to which an increase in Saudi production would offset some of the lost output from Libya. Now we know the answer, and it’s not reassuring.

Back on Feb 25, Reuters reported what sounded like some favorable indications:

Top exporter Saudi Arabia has raised oil output above 9 million barrels per day (bpd) to make up for a near halt in Libyan exports, an industry source said, helping prices fall further from the highest since 2008….

The Saudi move follows reassurances from Riyadh earlier in the week that it was prepared to act to prevent shortages as a result of the rebellion in Libya.

Only it later turned out that this production increase was not in response to events in Libya, but in fact had been implemented some months earlier. And this week Saudi Oil Minister Ali Al-Naimi tried to get us to believe that the Saudis have now gone back to lower production levels because there’s way too much oil being supplied already.

I kid you not. Here’s the quote from Bloomberg:

«Our production in February was 9,125,100 barrels a day,» al-Naimi said, as he arrived in Kuwait for a conference. «In March, it was 8,292,100 barrels. It will probably go a little higher in April. The reason I mention these numbers is to show you the market is oversupplied.»

Vent, ‘the market is oversupplied’? Vil noen vennligst svare oljeminister Ali Al-Naimi?

Merket med , ,

«Det hjalp ikke å trykke 600 milliarder dollar». Hva mener du med hjalp? Aftenposten bruker 539 ord som en introduksjon til makroøkonomi.

I påsken så jeg bildet over på trykk i Aftenpostens økonomiseksjon, og leste selvfølgelig artikkelen. Og jo mer jeg leste, jo mer hadde jeg lyst til å kommentere på den. Her er noen utdrag:

– Det hjalp ikke å trykke 600 milliarder dollar:
Økonomien i USA har gått i sneglefart siden finanskrisen slo til høsten 2008. I oktober 2010 bestemte den amerikanske sentralbanken Federal Reserve seg for å tilføre 600 milliarder dollar (3000 milliarder kroner) til økonomien frem til sommeren 2011.
Pengetrykkingen skjer ved at sentralbanken kjøper opp statsobligasjoner og andre statspapirer i finansmarkedene.

Vi har tidligere kommentert på dette her, hvor vi siterer San Fransisco Fed, og viser at den amerikanske sentralbanken har brukt 2600 milliarder dollar for å bekjempe finanskrisen, de siste 600 milliarder dollarene er kjent som QE2, eller kvantitativ lettelse. Dette fordi rentevåpenet var oppbrukt (renten i USA ligger på 0%-0,25%), og mandatet til sentralbanken ikke var oppnådd (stabil inflasjon, 2%, og full sysselsetting). Dette nevnes faktisk av Aftenposten i artikkelen, men altfor sent. Den siste setningen i sitatet over er strengt tatt feil, selve trykkingen er ikke interessant og teknisk sett er det ikke fysiske dollarsedler det legges vekt på, men en utvidelse av krita:
3 Ja den kjøper langtidsobligasjoner, men gjør dette ved å låne ‘short’ og selge ‘long’.

For meg som leser ville det vært naturlig å bli gjort klar over to separate ting: 1) tiltak som sentralbanken historisk setter igang når mandatet ikke er nådd og 2) ekstraordinære tiltak som de $600 milliardene Aftenposten fokuserer på. Vi forstetter:

På denne måten får banker og andre finansinstitusjoner tilført penger som de i sin tur kan låne ut til bedrifter og personer slik at de kan investere og bruke penger som skaper ny aktivitet og dermed får fart på økonomien.
Håpet var at pengebruken til Fed ville føre til økt fart i økonomien og økt prisvekst.

Advarslene var mange. Bill Clintons tidligere finansminister Robert Rubin mente Feds handlinger ville få begrenset effekt. Og han ser ut til å ha fått rett, ifølge amerikanske økonomer.
Ferske beregninger som en rekke økonomer har foretatt, viser at tempoet i den økonomiske utviklingen etter finanskrisen har bremset opp siden november, da seddelpressen ble startet, skriver New York Times .

Den siste setningen hinter til at ikke bare har de $600 milliardene ikke gjort det de skulle gjøre, de har faktisk gjort ting verre!? På dette tidspunktet er det verdt å gjenta at den amerikanske sentralbanken håpet på ‘økt fart i økonomien og økt prisvekst’ som følge av de første $2000 milliardene de brukte gjennom å senke renten og rettede kjøp av ‘mortgage backed securities’. Ikke bare mente sentralbanken dette ikke fungerte, de tok alternative grep og ‘trykket’ opp nye $600 milliarder. Forventingene til disse 600 var ikke store, siden de 2000 første ikke gjorde jobben. Kjerneinflasjonen i USA er lav, sysselsettingen er lav (ledigheten stor).

– Det er bra for å stanse fallet, men jeg mener pengepolitikk ikke har kraften som skal til for virkelig å få snudd utviklingen og sette fart på den økonomiske utviklingen, sier økonomiprofessor Mark Thoma til NY Times.

Les: hvor er finanspolitikken? Kanskje det er her saken ligger og ikke hos sentralbanken?

Men det er fortsatt svært svak vekst i sysselsettingen i USA og økonomien vokser tregt.
Normalt vil sentralbanken sette ned renten for å stimulere til økt vekst i økonomien. Men med tilnærmet nullrente siden desember 2008, måtte altså Bernanke ty til alternative metoder i fjor høst.

Hvorfor startet ikke artikkelen med dette?


Pengetrykkingen får konsekvenser også utover USAs grenser ved at det påvirker kapitalstrømmene mellom land. Mindre av verdens vandrende kapital vil være i et USA med lavere renter og fare for økt prisvekst.
Derfor flytter den til Asia og Latin-Amerika. Den økte kapitalinngangen driver opp valutakursene i disse landene. Det liker de ikke, fordi det hemmer eksporten deres.
Noen land har derfor innført nye skatter og avgifter for å begrense innstrømmingen av kapital. Det er økende fare for valutakrig mellom USA og de nye vekstøkonomiene.

Dette var noe av det mer interessante i artikkelen, og det skal bli spennende å se hva som skjer med valutakursene etter at sentralbanken avslutter sitt ‘alternative’ lettelsesprosjekt.

La oss gå tilbake til ‘hjalp’. Overskriften i Aftenposten kunne like gjerne lest ‘Det hjelp ikke å trykke 2600 milliarder dollar’. Når sentralbanken setter igjang tiltak for å ‘hjelpe’ økonomien, mener den at tilstanden i økonomien må tilbake til det sentralbanken har satt som mål. Det vil si stabil inflasjon på ca. 2% og full sysselsetting. Den har satt igang inflasjonspress, men kjerneinflasjonen er fortsatt lav. Det som er viktigere er at USA har en arbeidsledighet på rundt 9% og det er milevis fra målet sentralbanken har for økonomien (nærmere 4%-5%). Derfor skulle overskriften kanskje vært ‘Det hjalp ikke, til tross for 2600 milliarder nytrykkede dollarsedler’

(Foto: Scanpix)

Merket med ,

Go forth and hunt, my journalistic friend.

Challenge excepted? Via kommunikasjonsavdeligen i Norad:

Merket med ,

Elizabeth Warren på The Daily Show og snakker Consumer Financial Protection Bureau.

Husker du de dagene hvor hvis noen skulle tilby deg en mobiltelefon til 1,-, måtte fullpris for tilbudet stå tydelig plassert på plakaten, brosjyren osv.?

Dette er nesten den samme diskusjonen, men i finansverden. Norske forbrukere og ‘TV2 Hjelper Deg’ sier: Velkommen etter USA.

Trodde du det skulle være så lett?

Merket med ,