Friday, May 31, 2013

"Economics is a motherf*****g war, and I'm a motherf*****g soldier." Plus peeing on teddy bears.


HT - Bob Murphy who tells me he is too professional to post such things. Readers know you'll never run into that problem here.

Thursday, May 30, 2013

Why is short-run macro so much more argumentative than long-run macro?

So my macro comp is on Monday - I've been studying for weeks and of course now it's really kicking into high gear. The test covers Macro Political Economy (which is all short-run), and Macro II (which is growth theory). Looking at both of these side-by-side for the last several weeks it's striking to me how much more argumentative the history of short-run macro has been than the history of long-run macro.

Formal growth theory (we're talking about formal theory in all of these cases of course) has progressed in a fairly straightforward way. You started with a pretty crude but sensible model. A major reason why it was crude was that a lot was exogenous and nothing was micro-founded. So that's basically been the research agenda for sixty years. In the 60s we endogenized savings. In the 70s we got distracted. In the 80s we endogenized technological change. In the 90s we endogenized fertility. The last decade has actually been a little more free-wheeling. There's been work integrating and expanding on the earlier endogenization projects and there has also been a lot of work on formalizing our understanding of institutions. I'm not in this world as much and maybe that gets somewhat argumentative.

Empirics are a different matter, but that's generally been a story of steady progress. The argument was "we think this way of doing the empirical work is better than that way", and the effort was in making the most out of limited data.

Contrast this with short-run macro. The general public perceives the epic battles of short-run macro as definitive of economics. Issues like microfounding old models don't just introduce new research agendas like they do in growth theory - they generate huge schisms and lead people to totally reject old ideas. Think of all the cases you know of of one macroeconomist talking about another macroeconomist and being a complete asshole about it. They were all short-run macroeconomists, right?

So why is this?

To cite politics is a little tautological. Both long-run and short-run macro have big political questions at their heart - it's not like politics is just in short-run macro. You could say "but the politics of short-run macro is where the mudslinging is", but that only begs the question - why there? Part of the problem of short-run macro is empirical obviously. Identifying these models and getting good data has been tough. But that doesn't seem like an answer because that's true of long-run macro too.

I think one reason might be that our attention is focused on the short-run by construction. Growth is a big deal ("once you start thinking about growth..."), but growth is an epic novel whereas the business cycle is like a short story. Things unfold fast in the short run by definition, so it focuses the attention of economists on what is happening right now. Let's assume the story is complicated, there are many causal mechanisms at work, constructing theories and evaluating claims takes a lot of time, and any theory is necessarily incomplete and will only explain part of the picture. If you apply all that to a situation where you're looking at a single event and really wanting an answer to your questions versus looking at a long stream of events and willing to dedicate a career to getting an answer to your question, it's clear that in the former case your answers are going to be erratic. That does not mean that the ultimate answer has to be erratic. Indeed we've come up with a consensus model that seems to do a good job answering a lot of different questions. But before we had that, in the heat of the moment, things were less stable. We're still improving. As Noah Smith discussed at length the other day, we're now adding finance to the short-run mix and it seems to be paying dividends. But the road that got us here has been a lot more winding and argumentative than the road that got us to some of the modern growth models.

If this diagnosis of the issues and this account of the consensus models is right, then it would suggest things are going to start calming down in macro. The warring camps will probably turn into more detailed accounts of special cases or specific causal mechanisms, but things will coalesce around a basic model that is going to plod along until there is some kind of major paradigm shift.

Wednesday, May 29, 2013

How to use wage data in thinking about immigration policy

Tyler Cowen recently introduced a post with this: "Here is a point which I think the anti-immigration forces are getting wrong, mostly on the side of economics. It can be pointed out that low-skilled (native) labor in the United States has not seen strong income gains for some time. You might then wonder whether it makes sense to bring more unskilled labor into the country."

He goes on to give a lot of reasons why that's not necessarily a good inference.

I think he's essentially right, but I've recently had a paper published about immigration that has been making waves using stagnant wage data to make some points about high skill immigration, so I wanted to clarify my view on what that sort of data tells us.

I don't think the U.S. government should make immigration policy to move labor markets in a particular direction (say, boosting the wages of low wage workers). Tyler gives some good reasons to think limiting low wage immigration wouldn't have that effect anyway, but even if it would my own policy view is that that's not the purpose of immigration policy.

What wages (along with other indicators) can tell us is if there's something wrong in the labor market causing a shortage. A labor shortage might give us reason to target a specific type of migrant with immigration policy. Stagnant wages and other signs that there's no labor shortage going on seem to me to suggest that there's no reason to target immigration policy toward that class of worker (if we were even inclined to do that in the first place).

In other words, my prior is that immigration policy is about welcoming new Americans not shaping the labor market. Before taking labor market issues into account when making immigration policy we need to look at labor market data to see if that is even justified. If it's not then we probably shouldn't use labor market tests (like targeting high skill immigrants) when we let people in.

Protectionism shouldn't be our policy tool of choice. If we're concerned about low wages for low skill workers we ought to have policies that help them out of that situation, not that keep them in that situation and insulate them from competitive pressures. And as a last resort we should have safety nets, not walls. But labor protectionism is a very commonly held view, and it's one I've regularly had to grapple with, deal with, and clarify my position on in pursuing these high skill immigration issues.

Don't be evil

They're keeping up with their motto it seems.

I would say "jk", but let's be honest with ourselves - I'm not.

A thought on Minsky and Rothbard that would probably make neither happy

It seems to me that they are two sides of the same coin - one seeing inherent instability in the propensity of suppliers of credit to overextend themselves and one seeing inherent instability in the propensity of demanders of credit to overextend themselves. Minsky, I think, was on much firmer grounds I think in that he didn't go as far as Rothbard. He recognized that the optimal level of risk associated with leverage is not zero and never called for 100 percent reserves.

But the structure of their concerns are actually quite similar, just on opposite sides of the market (and of course Minsky is thinking more broadly than Rothbard about finance in general rather than just money).

This is just a musing by a guy that hasn't read that much of either of them so I'm curious what you think.

Thoughts on a cool data project

A friend on facebook asked my thoughts on SwayWhat, a new social site that aspires to be the youtube of graphs, particularly on social or political issues. It's sort of like FRED, but for non-economists and with more social media attributes. For example, anyone can upload charts with a short summary. You can "follow" and "trust" certain users (two different things that are important to distinguish when dealing with data). Ultimately the hope is that it will be an easy place to go and grab data to help you make your point. The creators are asking for feedback, and I've got one major thought but feel free to add thoughts of your own in the comments.

The creators spend a lot of effort talking about the potential problem of fabricated data being posted. That's potentially an issue, but since you are expected to source the data I doubt it'll be a big problem. A much bigger issue, I think, is presenting data that is accurate but may be misleading by virtue of its framing. Or maybe not even misleading but that unintentionally presents less than the whole story. Take this chart posted by Eric S. (it says "Obama's Economy: Recovery for the Rich"):

The text with it reads: "The post 2008 policies coming from Washington DC under the Obama administration have not helped working class Americans recover, but they have helped the top 7% grow. There's nothing un-American about the wealthy prospering, but our politicians seem to be helping only those who can fund their campaigns."

So a big problem with this is that it doesn't even say what the variable is in the summary (it does on the vertical axis) - it's net worth. I'd think the net worth of the lowest 93% has not recovered as well as the top 7% because almost all of the lowest 93%'s net worth comes from housing, and in case you live under a rock, house prices haven't done so great (recent Case-Shiller data notwithstanding - note this goes to 2011!). The wealthiest aren't doing better because Obama's Washington is pro-rich (although they may be), they're primarily doing better because their portfolios are different and this financial crisis happened to have had a lot to do with the housing market. So to me this data is framed with an extremely political summary that isn't obviously supported by the data presented. This one on the federal debt is also just awful.

I'd worry that this is going to come to dominate the site. There are two options in social media for this sort of thing: have it heavily moderated/policed or let it evolve naturally. Both have their merits but if SwayWhat opts for the latter I'd expect that you're going to have people with different political views creating echo-chambers and there will be a lot of worthless charts drowning out the good ones.

So far Eric S. seems to be the only user with problems with this and the only one that tries to offer much of an interpretation in the summary. However, if the site grows I imagine there will be many more.

The solution, I think, is to not have much in the way of interpretation in the summaries - mainly reserve that for description of the data and let readers do their own interpretation. A wiki approach is another option, but without dedicated editors that could just turn into a flame war. Perhaps the best approach is to have comments on the graphs so that people can make these sorts of criticisms and suggest something better. This may result in echo-chambers too, of course - but perhaps there's a way to deal with that. Separate comments agreeing or disagreeing? Only allow registered users who do not "trust" the author to comment? Designate registered users to post these comments but not necessarily to act as full blown editors?

I think this sort of issue could make the site pretty useless if it got out of hand, so it's important to think about.

Tuesday, May 28, 2013

A fascinating Furman narrative developing

Earlier today Kate sent me this post by James Pethokoukis on Jason Furman's likely new CEA position. Lots of people not on the left have picked it up since then, marveling at Furman's non-hate of Wal-Mart and free trade as well as the prospect of a "Clinton Democrat" in the White House.

I've followed Furman for years now, I think it's an awesome pick, and of course I like a lot of the things about him that Pethokoukis has remarked on - but I find this whole narrative developing around Furman really odd.

Do people honestly think that Christina Romer or Alan Krueger disagree with him at all on these issues? Maybe someone will dig up some evidence and I'll have egg on my face, but I would be truly shocked if they did. There's nothing particularly notable about Furman on any of these issues. He's an economist - of course he thinks all those things. Someone like Paul Krugman is probably too outspokenly liberal to be CEA chair of this president (maybe another president that conservatives haven't done quite as good a job branding as a liberal), and he agrees with Furman on this stuff.

So why is everyone so excited about this?

I think it's just a lesson in the way narratives get momentum and develop. Pethokoukis reported the facts on Furman plus some analysis that offered an appealing narrative to people and it took off.

One of the stories that is making the rounds is an exchange between Furman and Barbara Ehrenreich on these sorts of issues.

I think a lot of people walk around with it in their heads that the White House, the Democratic Party, or really anyone that doesn't self-identify as a conservative or libertarian is more or less the equivalent of Barbara Ehrenreich. It's simply not true. She probably does some good in the world - brings attention to important issues, etc. But she's a socialist for crying out loud.

It seems to me to be a very low bar to be excited that a presumptive CEA chair disagrees with an avowed socialist!

Glenn Greenwald is an ideologue that often struggles with reality


Excellent illustration of the labor supply impact of public benefits

Featuring the Urban Institute's Olivia Golden (who I've had the privilege to work with on several occasions) at about 2:45.

If you think the answer to these problems is to take away benefits, I disagree with you.

If you don't take "it felt like I was standing at the edge of a cliff and I was going to get pushed off" (2:23) kind of reactions to personal situations into account when thinking about what to do about these problems, I don't consider you to be taking a very serious position.

Visit for breaking news, world news, and news about the economy

Google "GDP of the West Bank"

This is the Marshall Plan on steroids.

Done right, this could do a lot of good.

I know foreign aid is a dicey thing. I know, I know, I know.

But with Great Depression levels of unemployment I feel like the chances that this would not do a whole lot of good in a very volatile part of the world is very, very low.

Memorial Day cheap talk

One of the things about moving in libertarian circles is that on Memorial Day (and the Fourth of July, and Veteran's Day), you get treated to lots of very emotive criticism of the U.S. military and its missions. I'm not just talking about "I don't agree with all the U.S.'s policies". Practically every American would say that and the ones that wouldn't say that are too brain-dead to spend much time discussing here. A good, pithy example that I saw on facebook today went something like:
"To the American military on Memorial Day, thanks, but no thanks"
Another, showing a widely publicized bombing victim of the Iraq War said:
"If this is what must [be] done to 'protect my freedoms,' I greatly prefer that my freedoms be left for me to protect."
I want to make two observations about the deluge of these sorts of things that I see.

First, I think it's really demonstrative of the very low quality of thinking on these issues by the people that post this sort of thing that they can't simply say "The Iraq War and some other stuff was a really shitty decision that should never have been made". It's not that hard to stick to that. I've been saying that since 2003 and I've had no trouble being clear about what I think without trying to wrap up the entire enterprise of American military force into one tragic picture of a badly wounded Iraqi. It shows intellectual laziness on your part that you can't make a coherent argument against the American military writ large and instead have to rely on an emotional reference to a single war that is widely disapproved of in your attempt to make the broader argument. It also bothers me that they use this boy as a prop for a political agenda that goes well beyond their view of the Iraq war. That's pretty sick.

My second observation is that most of this is cheap talk. I'm not going to make a "well if you don't like it than you can leave" case, but I am going to observe that people who dismiss the American military in toto as I've seen many people do today are just serving up "cheap talk". It's very easy for residents of a planetary superpower to be pacifists. What the hell do they have to lose. They don't even need to worry about the ramifications of being even modestly convincing because they know they'll never be convincing enough to ever have to bear the costs of actual pacifism. This is a problem with anarchism in general (Gene Callahan often makes related arguments in the case of anarchism) - it's very easy to sing the praises of anarchism when you live comfortably in a liberal society governed by a reasonably well functioning state. Anarchists don't spend a lot of time considering the problems that would come up in actual anarchy because they're never faced with it, and they're never faced with it because over the millennia humans have come to realize it's a really shitty idea. The ones that do try to explain these hard issues tend to be unconvincing. And when I say they are "unconvincing" I'm not just stating my opinion. That's an objective assessment of the arguments presented, Exhibit A being the embarrassingly low number of people that have been convinced. I can't think of a better definition of "unconvincing" than "an argument that fails to convince". Anarchists on the Fourth of July, like pacifists on Memorial Day, engage in lots and lots of cheap talk.

If you want to tell me that American military power has been badly misused over the years, I'm right there with you brother. If you want to say we should never have gone into Iraq I agree completely. If you want to criticize the use of force in the war on terrorism we can have a very civil discussion about that and I might even agree with certain elements of your case. But if you are going to make a broad-brush statement about how you'd rather not have the American military around to guarantee your freedom then I'm telling you right now that I think you sound like an idiot. And if you plaster a picture of a suffering kid on your wall to distract people from your weak arguments, I think you're either impressionable (maybe you're sharing it) or you're an opportunistic asshole.


Monday, May 27, 2013

Some Memorial Day Links

- This is an interesting article from last year on the competing origin stories for Memorial Day.

- I wanted to write something about drones and Memorial Day but did a little googling to see if anyone did my work for me. This one did nicely, with the accompanying cartoon:

Memorial day-Drones-Darcy.jpg

- Here's David Henderson's response to my previous call for appreciation of veterans on Memorial Day. I don't always agree with him on this sort of thing, but he's always thoughtful.

- Here are Kieran Healy's thoughts from several years ago (HT Brad DeLong, today).

- One of the nice things about living in the D.C. area around Memorial Day is Rolling Thunder. I've only been through the city during it a couple times, but it's still great to see the bikers swarming in throughout the weekend to commemorate the holiday. Our apartment used to overlook the Pentagon parking lot, where they all gather. The house now is a little farther out, which is probably for the best. It got pretty crowded down by the Pentagon itself. We're actually going to meet a friend down there for breakfast in a few minutes, but they started about an hour ago and headed into town so hopefully it won't be as bad. For those of you not in the area, here's a taste of what you're missing:

That's Arlington House (Robert E. Lee's mansion), on my side of the river, in the distance.

Interesting paper from a commenter numero tres

Also in an attempt to relieve my agony about macroeconomic endogeneity, Grant McDermott shares this interview with Tom Sargent that appears in Macroeconomic Dynamics in 2005. Grant especially likes this passage:
"My recollection is that Bob Lucas and Ed Prescott were initially very enthusiastic about rational expectations econometrics. After all, it simply involved imposing on ourselves the same high standards we had criticized the Keynesians for failing to live up to. But after about five years of doing likelihood ratio tests on rational expectations models, I recall Bob Lucas and Ed Prescott both telling me that those tests were rejecting too many good models."
I believe he made a similar point in this interview, which I linked when he got the Nobel.

Interesting paper from a commenter numero dos

An anonymous commenter on my post agonizing over the problems that expectations pose for dealing with endogeneity in macroeconomic empirical work shared "Causal Effects of Monetary Shocks: Semiparametric Conditional Independence Tests with a Multinomial Propensity Score" by Joshua Angrist and Guido Kuersteiner (forthcoming in RESTAT). Two things ought to jump out at you from that: "propensity score" and "monetary shocks" don't often appear together, and "Joshua Angrist" and "monetary shocks" don't often appear together (Angrist and "propensity score" would be less surprising).

The authors are struggling with identifying an empirical model of the impact of monetary policy and they end up doing it a lot like an impact analysis that a labor economist might perform. They categorize a series of monetary responses so that they can predict these responses with a multinomial logit model, but then they generate propensity scores from the predicted probabilities in that multinomial logit. A propensity score is basically a probability, based on observable characteristics, that an observation receives a treatment. Propensity score matching techniques rely on taking an observation that did receive treatment and comparing it to an observation that did not receive treatment but that has the same propensity score. In effect this process takes all the data in your control group and generates an artificial control group that is identical to your treatment group in terms of its observable characteristics. If selection intro treatment is principally on observable variables (or variables that those observables proxy), then you are effectively getting a randomized trial from your non-random data.

If there is substantial selection on unobservable characteristics, these methods aren't so good.

So this paper assigns propensity scores to monetary policy decisions because observable characteristics of the economy at the time of a policy decision ought to be the principle determinant of monetary policy.

Complications arise in doing this in a time-series setting so much of the contribution of this paper is discussing how you actually do that.

The appendix makes me feel stupid. If you suspect this might be the case for you, I suggest for the sake of your self-confidence you skip it. But do read their findings. They come up with similar conclusions to earlier work by Romer, and have bigger monetary policy effects than the VAR literature. They suggest that this is likely because of the endogeneity bias, which seems sensible to me.

Interesting paper from a commenter numero uno

I don't always get to respond to commenters - perversely some of the comments that require the most in depth response are harder to get around to responding to than the quick responses. But I do read all of them and often commenters bring really great material to my attention. There's a backlog of a few of those so I wanted to make sure I shared before I forgot.


First, from Hume, a new paper (a chapter actually) on drones by a former professor of his and a co-author titled "Drones and the Dilemma of Modern Warfare". I haven't read it but the summary sounds like it hits some themes that I have here (particularly in this post). They suggest that some issues around drones are plagued with misconceptions and not as important as many people suppose, including questions about targeting individuals, humanitarian concerns, or that drones make war "too easy" (that nasty old "we need to make sure young men suffer and die so that old men can make good decisions" argument). Instead, the authors argue that the central questions around drones are the questions about what actions justify the use of military force in an age when technology focuses us on the "individuation of personal responsibility". In other words, its not the headline questions that people bicker about - it's the more fundamental question of whether it is a good idea or not to go to war with these machines. This is the question that Obama publicly considered this past week (although I'm sure he's been thinking about it for years now). I tried to focus on this sort of question in my discussion of the Rand Paul filibuster (linked above) when I wrote: "People freaked out about airplanes when they were developed for war too. A decade from now this allegedly valiant Constitutional stand will look stupid and we'll just be arguing about the important stuff - good and bad uses of a very lethal tool." (emphasis added). Whether we ought to use lethal force is really the important question here (and it is a question).

Sunday, May 26, 2013

A mostly good (some bad) criticism of Krugman and a bad criticism of Krugman

The good one is the Reinhart and Rogoff response. I think the Herndon, Ash, and Pollin paper was an important contribution to the discussion but I think the criticism of R&R needs to focus on (1.) empirical assumptions they made, (2.) the disproportional focus on the 90% figure that was not the watershed it was purported to be, and (3.) the monotone public discussion of the direction of causality (which has not matched their writing on the subject). These are three valid areas of criticism of R&R, the last one especially. Krugman's gone substantially beyond these criticisms (although he's regularly pointed out how good Rogoff's work is). The worst is when Krugman treats them like eager accomplices of politicians that support austerity, like they've been hiding data, or that the debate has turned on their paper. The last one may only be rhetorical flourish (it's pretty absurd), but it's still unfair to R&R. Reinhart and Rogoff have addressed each of these in their letter.

It does get goofy in parts, though. Take this:
"Your recent April 29, 2013 NY Times blog The Italian Miracle is meant to highlight how in high-debt Italy, interest rates have come down since the European Central Bank’s well-placed efforts to act more as a lender of last resort to periphery countries. No disagreement there. However, this positive development is meant to re-enforce your strongly held view that high debt is not a problem (even for Italy) and that causality runs exclusively from slow growth to debt... Indeed, your repeatedly-expressed view that slow growth causes high debt but not visa-versa, is hardly supported by the recent literature on the subject... Of course, it is well known that the economic cycle impacts government finances and therefore debt (causation from growth to debt). Cyclically adjusted budgets have been around for decades, your shallow characterization of the growth-debt connection." [emphasis is mine]
It's stuff like this that makes it hard for an objective reader to take them seriously. This obviously has nothing at all to do with Krugman's position - he's never said causality runs exclusively from slow growth to debt. He's gone out of his way to present the alternative. This is common across people that go nuts over Krugman -  straw-manning comes with the territory in blogs, but Krugman gets more straw-manning than almost any other economist on the internet right now.

The bad criticism is from Scott Sumner and really isn't worth saying much about. He gets worked up that there are things Krugman doesn't like about conservative narratives and concludes that Krugman thinks that it describes all conservatives to a tee (when he actually names alternatives in the post and complains about conservatives disowning them!). Anyway, I really don't want to draw more attention to Scott Sumner. I'm not even sure his blog is going to survive my transition out of Google Reader. But I did want to highlight the post for these two responses from Aidan (who comments here too sometimes):

"I actually have no idea what issue you have with Krugman’s piece, as you seem to agree with the individual points he raises in a way that today’s Republican Party does not. Are you confusing right-leaning economists with the right in general? Yes, some conservative intellectuals believe in anthropomorphic climate, expansionary monetary policy in a recession, etc., but they are so noteworthy that there are features written about the fact that they exist. Are there any prominent conservative politicians that hold these views? Any influential members of the conservative movement?"
But ESPECIALLY this (which is a point I make a lot too):
"I think it’d be a much better use of your time if you spent half the energy you spend bickering with Keynesians who are roughly in full agreement about our current monetary policy needs on trying to convince prominent conservative politicians and thinkers that their views on inflation and monetary easing are dangerous and wrong. Krugman wrote that spending too much time focusing on his differences with MMT is a waste of time because those disagreements aren’t particularly important right now. I think it’s similarly more important that you spend more time focusing on the people who are loudly and actively opposed to monetary easing. I’ll give you a hint: they aren’t the Keynesians!"
Why is there so little high quality critiques of Krugman out there and so much crap? Maybe the question answers itself. Actually the best place for high quality Krugman criticism is Bob Murphy, but this may just be the law of large numbers (if you figure 95% of his criticism misses the mark given the volume of it of course you're going to get some really piercing critiques every couple of weeks). Krugmania is one of the weirdest things in the economics blogosphere, IMO. I don't know why people don't just say "well he gets a little liberal and a little shrill for me sometimes and I don't like that" and leave it at that. Instead they put out some really nutty criticisms.

Friday, May 24, 2013

Assault of Thoughts - 5/24/2013

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- The Nation reports on secret/corporate donors and their impact on liberal think tanks. This highlights the problem with soft-money research type organizations, where a lot of money is raised and put in an endowment or fund to push a broad research agenda. Although the constraints placed by competing for grants and contracts on doing the research you want to do can be frustrating, the advantage is that you avoid stuff like this. It can be useful to take the big pot 'o money (a technical term, of course) approach to financing research. Often research grants and contracts can't really focus on the interesting scientific question. But there are major risks as well, particularly when that's how the whole organization is financed.

- We have a demand problem, not a skills problem.

- Gene on Plato on radical ideologies.

- Bryan Caplan has an interesting discussion of IVs. My skepticism of IVs should be familiar to most readers here. I have a comment on the post that repeats the skepticism. They persist because the problem that motivates IVs is very real and it's substantial. The way to proceed, I think, is (1.) to be more critical of IV choices, (2.) to look for discontinuities and natural experiments that provide a much clearer identification of the model, and (3.) to look at a lot of different studies - think of any given IV more as a sensitivity analysis than a solution to an endogeneity problem.

- Paul Krugman and Brad DeLong on Charles Lane.

Interesting event yesterday - different worlds colliding (which is usually good to experience every once in a while)

I went to a STEM/high skill visa event at the Capitol yesterday that was interesting simply in how many different worlds it brought together. The audience was primarily Congressional staffers and journalists. Hal Salzman was the only academic on the panel. There was an immigration lawyer, government relations or human resources people from TI and Intel, as well as two industry associations, and a representative of historically black colleges and universities (HBCU) science programs. The group that organized the event deals a lot with diversity in STEM and getting underrepresented minorities interested and active in STEM.

Diversity vs. Immigration: With all the industry people there, the diversity angle was nice because they were agreeing a lot with Hal - suggesting that they were graduating a lot of domestic students that were having trouble getting jobs and the idea of a shortage sounded odd to them. Usually you don't see the diversity in STEM/STEM immigrants discussion coming together in this way but that was very productive I thought.

Scholarly vs. Popular Literature: It was also interesting to see the research and industry worlds collide. One of the guys from an industry association said that Hal sounded like "climate change denialists" because ours was the only study out there saying there were no shortages. This was shocking to me. I know a lot of economists that support high skill visas but I don't know any off-hand that think we have a high skill labor shortage. Certainly none of the big names in the high-skill labor literature. All of the major economic studies on the question since the 1950s that I know of are skeptical of the labor shortage claim. But of course, this guy isn't thinking of the economic literature when he said Hal was like a climate change denialist. He's thinking of the studies he's seen from trade associations and think tanks. I pretty much ignore the trade association studies and have a very discriminating eye when it comes to think tank studies (I think for good reason!), but that seems to be all he has in mind.

Politics vs. Policy: Our group was talking to a journalist we know that covers these issues afterwards - he was asking us some questions and we were trying to get feedback from him. What struck me about that conversation was how focused most people were on the politics driving the immigration bill, specifically how the high-skill provisions were being structured to get Republican support for a bill many would rather not support. I'm very much a "politics without romance" guy and that sort of thing isn't news to me. But it's also not the interesting question for me at all. The interesting question is the policy question - what conditions would justify these policies and do those conditions exist? But a lot of people are not really focusing on that.

Thursday, May 23, 2013


Here today.

Here Tuesday/Wednesday.

Studying macro and a little nursery painting in between.

Tuesday, May 21, 2013

Robert Solow contrasting Keynes and Friedman

"After all, why should there be another Milton Friedman in the future when none had appeared before him? I suppose the likeliest candidate for that role in the past was J. M. Keynes. He, too, had an extraordinarily sharp and quick mind, according to all reports of contemporaries, and appears to have had the same facility—and joy—in debate. But there is a vital difference: Keynes was not an ideologue. Of course he took strong positions, and had no lack of self-confidence. But Keynes avoided extremes, and changed his mind often. The usual complaint was that he was too flexible. There was a joke that a group of 12 economists would have 13 opinions on any significant issue, because Keynes would have two. You would never read Friedman’s name into that sentence."

- Robert Solow, May 2013, "Why is there no Milton Friedman today?"

Is there any hope of exogenous variation in the sort of fiscal or monetary policy that matters?

I was talking with Bob Murphy last night about some of Scott Sumner's more strenuous claims. I for one have serious doubts about really declarative empirical claims about monetary or fiscal policy as it relates to the current depression (and I'm skeptical of a lot of historical empirical claims as well!). That goes for Konczal declaring a "natural experiment" as well as Sumner latching on every jobs report that comes out.

My point to Bob was that we need exogenous variation to get a handle on this. There is something of a case for exogenous cross-sectional variation. It's probably weak but it's probably there for a bright person to pull out (and many have tried). We don't have exogenous longitudinal variation in this crisis. That got me thinking about the exogenous variation we've used in the past to estimate multiplier, and that started to depress me about empirical macro.

The distinction between cross-sectional and longitudinal variation is a distinction between different data structures.

But an arguably more important distinction is between what we might call exogenous static and exogenous dynamic policy. In the New Keynesian (vs. the Old Keynesian) and the Market Monetarist (vs. the old Monetarist) or really just in the post-rational-expectations world a lot of the interesting policy effects are in the dynamics and in the impact of policy on expectations. So really if you want a meaningful policy multiplier you want not just to find exogenous policy variation - you want exogenous variation in peoples' expectations about future policy.

That is a very tall order, if you think about it. We usually think that peoples' expectations are affected because they know there is an intention on the part of policymakers to continue a particular policy. But the only reason why there would be such an intention is if there was cause for it (i.e., if the policy was not exogenous). This seems by its very nature a lot harder to me.

It's not impossible. One obvious example of trying to do this that comes to mind is Valerie Ramey's use of the "war news" variable in her work precisely to get at military spending that people expect to persist (I can't think of anyone that has been as explicit about the need for making this distinction as Ramey). If you think about the Romers' work on tax policy, these too are policies that people expect to persist (although I don't think they consider the distinction I make here quite so explicitly). So it's not hopeless, but it's a lot harder. Policy that changes easily (the spending side of fiscal policy or monetary policy) is going to be particularly hard to find exogenous dynamic variation, even though you may find creative ways to pick out exogenous static variation.

Maybe the way to go is to look for natural experiments, but of course natural experiments bring special circumstances. The Depression provides some good ones: FDR and gold for monetary policy and WWII for fiscal policy.

An email to Charles Lane of the Washington Post

Regarding this article.

To: Charles Lane

Perhaps I'm missing something, but isn't your "compromise" option precisely Krugman's position? I think it's the right idea, but I think that's exactly where Keynesians are. The tough part is figuring out how to get the pro-austerity crowd to that point.

Keynes actually advocated separating the current budget from the capital budget, and it was the current budget that was supposed to be balanced, not necessarily the two together. Most economists agree that you can run perpetual budgets and still maintain a stable debt ratio as long as the deficits aren't too large.

Daniel Kuehn
Doctoral student, Department of Economics
American University

Monday, May 20, 2013

Death Norms

Someone died across the street from us on Saturday. They haven't been well for awhile - I actually don't know who it was (never met the deceased, in other words - my impression was they didn't get out much at all). But I'm acquainted with the other people in the household and they've had ambulances come by every couple weeks for the last several months, so it wasn't a surprise that their health was starting to fail. The street has been packed with various cars from visiting family the last two days.

In the next day or two (once things settle down) I want to bring over flowers and some food. My question is, what is a good food gift on an occasion like this? The stereotypical thing seems like casserole but that seems stupid and... stereotypical. What about something like banana bread? That's got a homey feel to it but not quite so cliché. Or should I just bring flowers and a card and forget the food?

This is the sort of thing you don't really see in the same way in an anonymous apartment where neighbors aren't really neighbors in the same way, but it's the sort of thing that I never personally dealt with on my own growing up before apartment living.

I guess I'm also just curious about death norms of readers in general and experience offering comfort to someone that you sort of know but have only been living near for a year.

Assault of Thoughts - 5/20/2013

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Chris Lewis has a great article up at Campus Progress based on an interview with me about why we need to be thinking about demand-side rather than supply-side science policies. Given the brevity and the audience, it's necessarily a textbooky treatment of the economics of science - I obviously recognize there's more to be discussed - but I feel like even given the format it gets more in depth than most treatments of externalities in research.

- In the NBER working papers, there's some skepticism about strong labor supply effects of unemployment insurance from Farber and Valetta.

- Also in the NBER working papers, Morris Kleiner finds smaller wage effects of licensing than unionization. This seems natural to me, but apparently it's in contrast with other studies.

- My response gets cited in Bryan Caplan's list of the best answers to his what to do with a billion dollars post. He neglected my preferred response, though.

- Ryan Murphy successfully defended his dissertation! Congratulations! He has so far not tooted his own horn on his blog for me to link to, so I'll just link to his CV.

Saturday, May 18, 2013


"Loose coupling" and seminary education

Our Sloan Foundation grant is titled "Loose Coupling in the Science and Engineering Workforce", and while we're working on a lot of stuff under the auspices of the grant, the major project is to look at science and engineering (S&E) course-taking pathways in school and how they relate to occupational choice and ultimate labor market performance. You often hear about a "leaky pipeline" when it comes to S&E where you have an initial set of promising students that we lose to attrition over the course of high school, college, grad school, and the workforce. It's a great metaphor for calling people to action (everyone wants to fix a leaky pipeline!). Our project is in a lot of ways a less alarmist look at this apparent "loose coupling" between the different stages in the development of the S&E workforce to understand the choices that are made and the potential benefits provided by this loose coupling.

What's interesting is that this is not just a phenomenon going on in the S&E workforce, although that's primarily where you hear about it.

The Washington Post reports today that 42 percent of seminary graduates are working directly in ministry. A seminary degree is in a lot of ways a professional degree like a law degree or a medical degree (probably less so than those examples but more than a lot of other degrees), so these numbers are quite notable - and they were not the norm several decades ago.

Clearly this is a phenomenon that goes beyond S&E education and work.

The most obvious answer for why we see this loose coupling is that the skills you obtain in a degree program are beneficial in a lot of different fields. Indeed being the guy with a seminary degree in some settings can give you unique insights that other people at your place of work wouldn't have. This is usually the explanation that you hear most, and I think that's for good reason - it's probably an important factor in most cases. In the case of seminary students there are other pressures, primarily that it's getting harder to make a living at a church as people become less attached (and therefore less financially attached) to their churches.

Another explanation I'm going to be exploring in my dissertation is the real option value of degree for getting a job in a particular field. If you get a degree in an S&E field you are not guaranteed to get a high paying job in that field, but the likelihood of getting one goes up. Instead of applying to that S&E job with probability A of getting the job, you can exercise the option of applying with probability B - an option that is only available to people with an S&E degree (all others apply with a lower probability A). Ex ante, the availability of that S&E job and its pay relative to the available outside opportunities is uncertain, but an S&E degree offers the opportunity to exercise certain options if the circumstances are right.

Another explanation not particularly appealing to economists (not because it's unrealistic but because it's not an "economic" explanation) is that students just get things wrong. They think they want to do something and then it turns out they don't. None of our economic explanations should be construed to exclude this possibility, but you're also not going to get many economists interested in this.

Are there any other good reasons for "loose coupling" between major choice and occupational choice?

Friday, May 17, 2013

"Give them our huddled masses" and my witty wife

Kate sends me a Foreign Policy article with that title (here) and the subtitle "Why America should swap its retirees, patients, and students for skilled immigrant labor." The article is much better than the subtitle suggests and talks a lot about studying, retiring, and getting medical care abroad where our dollars go farther (along with the usual high skill immigration pitch). That's all great stuff. I wasn't sure about it at first glance, though. Here's our email exchange...she's a funny gal:

Daniel: "holy shit - do I want to read past the headline and subtitle?

thank god our families got in back when immigration policy didn't pick and choose "desirables" so much. mine sure weren't all that skilled when they came over.

[a little later]

OK reading the first paragraph it's a little better than it sounds :) going to school abroad, retiring in sunny latin america, etc.

still... I hate this "lets accept only the best and brightest" narrative

Kate: mine were obviously geniuses. potatoes don't just grow themselves

Why, for their own santiy, economists should pretend the 1930s never happened

HT John Strong

Thursday, May 16, 2013

Quote of the day

"Concern for man and his fate must always form the chief interest of all technical endeavors. Never forget this in the midst of your diagrams and equations."

- Albert Einstein

I hate, hate, hate, hate, hate it when...

...people attack positive claims by asserting that the people who make those claims are driven by normative agendas (rather than supposing that normative agendas are set based on evidence from positive science).

And I also hate it when actual normative agendas are distorted to make people look like outlandish ideologues.

That's all.

How would you spend a billion federal dollars?

Bryan Caplan asks - what do you think?

I've got a few thoughts (some predictable I'm sure). No time to get into them now. They might change depending on whether we're restricting ourselves to a current depression or not.

Krugman cites Kalecki!


Razib Khan with good thoughts on why race as a biological construct matters


There seems to be a lot of dumb commentary on race and biology and a lot of equally dumb commentary on race as a social construct, and an odd sense among some people that the two ideas are at odds.

My training is principally on the "race as a social construct" side of the ledger. I've never had any professional social scientist tell me in the context of this discussion that there are no biological differences between groups identified as "races". The point is that racial identification is usually determined by some relatively superficial biological markers, and it is applied quite discretely in most cases to what is really a continuum. Social conventions like "one drop" rules typically make disadvantage relatively inclusive and advantage relatively exclusive when there is an intermediate case on these superficial markers (go figure! big surprise it would work out that way, huh?). The other point is that these social identities come with a boatload of privileges and obligations and that strongly shapes opportunity in a way that is ultimately (of course) largely socially constructed.

The other point about social construction is the naivete of being "post racial" or "ignoring race". It's precisely because race is reified that you can't just declare such a thing. That's not to say we might be "post racial" in some sense some day. We didn't always see race the way we do today and other countries today don't see race the same way we see race, after all. These things evolve. But it's a very real social category today.

None of that says "biology doesn't matter" or "we're all exactly the same except in the collection of physical identifiers". Social scientists that talk about the social construction of race generally - in my experience - don't speak to that because they don't study that. What they'll say is that genetic distributions are smooth distributions and the thing about the social construction of race is that they put discrete boundaries on those distributions. This is more of an issue in places like Brazil than the United States (as Khan points out the distribution is more discrete for blacks/whites in the United States simply because the category "black" is defined so widely... in Brazil it would be very different - you'd have the continuous genetic distribution chopped up much more haphazardly).

Low skill immigrant guestworker report

Kevin Drum shares a great graphic on how low skill immigrants do the work Americans quite literally don't want to do. This is the fraction of workers remaining in agricultural jobs in months after starting:


As a proud American I'd like to make one suggestion against this telling a "lazy American" story and instead just telling a comparative advantage story (which I am more comfortable with!). The Mexican workers stay for almost twelve months. From the perspective of agriculture I find this interesting: they're obviously doing a lot more than just harvesting. Is it possible that Americans come on during the harvest season, when potentially higher wages are offered, and then leave for other opportunities outside the harvest season? That wouldn't be quite the same as just dropping the job, of course. It would be a fairly natural division of labor. The other prospect is that a lot of these are high school or college students picking up summer work.

I don't know, and perhaps there are details in the report. That just came to mind when I looked at it. But it's a really great graphic.

Migrants do all sorts of productive work here. It's ugly that otherwise respectable people think some migrants (usually high skill migrants) are more desirable than others. That should have been a mindset that we left in the past, but apparently it isn't.

Post Keynesians vs. Keynesians on Unemployment

LK has this quote on the subject:
"It is hardly necessary to say that Post Keynesians reject the ‘old classical’, ‘Bastard Keynesian’ and ‘New Keynesian’ argument that unemployment is due to the existence of a real wage above the equilibrium or ‘market clearing’ level owing to the trade union or government interference in the operation of the free market for labour. They also dismiss the ‘New Classical’ notion that unemployment is the (voluntary) result of intertemporal income-leisure choices by individual workers. As was demonstrated above, neither claim is supported by micro foundations; and neither has any macro foundation whatsoever. A Post Keynesian theory of unemployment would instead start from the proposition that in aggregate the level of employment depends on the level of output, which is itself determined by aggregate demand and therefore heavily influenced by macroeconomic policy. Unemployment is simply the difference between the level of employment and the aggregate supply of labour, which may - as explained earlier - safely be regarded as invariant in the short run with respect to the real wage, but variable with respect to the number of job opportunities.” (King 2002: 84)."
I don't think I quite agree with King, at least on the New Keynesian part (or the Post Keynesian part, for that matter) - or at least I think it's misleading. I think the importance of price stickiness for New Keynesianism is often misunderstood. People have this image in their heads of a non-clearing labor market when they hear "sticky prices". The market's just broken for a little while and eventually it'll get back on track. Austrian types don't like the implication that the market's broken. Post Keynesian types don't like the implication that it's just a hiccup.

But actually the price stickiness point has little to do with labor market directly. As I've pointed out in the past, the principle function is to explain why the short run aggregate supply curve is upward sloping and not vertical (that's why it's called New Keynesian and not New Classical - emphasizing non-vertical aggregate supply is very non-Classical). You might know the short run aggregate supply curve in more modern models as the Phillips Curve. Just rearrange things, switch from prices to inflation, and tack on Okun's Law and you've got the Phillips Curve. So price stickiness gives us the Phillips Curve tradeoff which, with the IS curve, can pin down an output level below a full employment level of output. [This is related, btw, to why I think the substantive difference between New Keynesianism and Old Keynesianism (not to be confused with Post Keynesianism) is overblown... but that's another discussion].

This is a lot less neoliberalish than Post Keynesians often make it out to be. This sentence by King:  "A Post Keynesian theory of unemployment would instead start from the proposition that in aggregate the level of employment depends on the level of output, which is itself determined by aggregate demand" could just as accurately be said of unemployment in a New Keynesian model.

There are of course lingering questions about tendency to move to the natural rate of unemployment and the stability of the natural rate of unemployment. It is true that New Keynesians are more likely to suggest that there is a strong tendency towards a stable (albeit changing) natural rate of unemployment. And there's probably good reason to say that - outside of liquidity trap situations the economy has seemed to exhibit that sort of behavior (and we've got good liquidity trap models when it doesn't). There's great discussion by New Keynesians in good standing like Mankiw, Ball, Moffitt, Akerlof, etc. about less conventional NAIRUs too.

The lack of a (necessarily) stark difference between New Keynesians and Post Keynesians on all these points is made forcefully by Stockhammer (2011)*. Of course, not all Post Keynesians agree. LK, in his post, also cites Lavoie and Davidson. It just so happens that Lavoie and Davidson are two Post Keynesians that are NOT inclined to agree with Stockhammer on this sort of point. It would be a mistake, though, to conclude that they speak for all Post Keynesians. LK is just sharing one side of the Post Keynesian position.

OK, so I say there's no real difference between New Keynesians and Post Keynesians on this particular issue raised by King. But surely there are differences between them, so what are they?

Leaving aside the point that someone like Stockhammer might specify or derive the Phillips Curve/IS Curve/NAIRU/MP curve nexus differently than someone like Mankiw I would say that a principle difference is the other contraptions they have that are often completely neglected by New Keynesians. These include:

1. Mark up pricing
2. Dividing the population into classical classes (with rentiers replacing landowners)
3. Various conflict theories of inflation
4. Explicit modeling of capacity utilization for inclusion in the investment function (capacity utilization is of course not much different from an output gap - but the inclusion in the investment function introduces accelerator effects which is interesting and [I think?] dropped from most modern analyses)
5. Modeling it with wage shares front-and-center so we can talk about distributional issues

There's plenty of heterodoxy in all that, chiefly through the distributional facets and the departure from marginalism. That, it seems to me, distinguishes Post Keynesianism. It's less a matter of one side talking about inadequate demand and the other not. In other words, to the extent that I'm a Post Keynesian (and I do like a lot of what they do) I'm a Stockhammer and (I guess? I should be much better read:) Pollin/Blecker/Dutt sort of Post Keynesian. I am less of a Davidson/Lavoie sort.

* "The Macroeconomics of Unemployment" in A Modern Guide to Keynesian Macroeconomics and Economic Policies, ed. Eckhard Hein and Engelbert Stockhammer

Wednesday, May 15, 2013

Bob Murphy? Overreacting to the fact that people out there disagree with him? Never!

"You guys are falling into the very trap of which I warned. You’re totally wasting your time. This guy can claim Hayek is controlling John Boehner from the grave, and if you object, Daniel will go nuts on you for misrepresenting the position. Just stop." - Bob Murphy on Robin/Nietzsche/Hayek/me.

This is so absurd. People disagree (amazingly) on what "in the long run we're all dead" means. People disagree on Robin's contribution. People disagree on the value of Paul Krugman.

It's not "a trap" when people - in blogs which are meant to turn over these things - actually then go out and say that they think you're wrong any more than you thinking I'm wrong on Robin means you've laid "a trap" for me.

And if we disagree a lot it's not because I'm some sneaky trickster... it's because we disagree a lot! These things are pretty symmetric, after all! It takes two to tango. When you think "gee that Daniel is always throwing up disagreements with me", just remember from my angle it looks like you're always the one being cantankerous. It's probably just that we think about things differently.

Quote of the day

"It is a shame that people spend time attempting by a philosophical yank on the bootstrap to hurtle into a higher realm of truth."

- Deirdre McCloskey

Dolly Parton Singing "Wayfaring Stranger"

Just cuz. I've got a folk/bluegrass Pandora station I listen to a lot and this just came up as it has many times before. I think it really exhibits why she has received such critical acclaim.

[sorry for the video they slapped on it - it was the only version on youtube I could find]

More thoughts on the Corey Robin essay, with no particular structure

1. - First, I think a lot of the criticism is weak and I think it says more about people reacting to an outsider commenting on Austrian economics and reacting to Nietzsche himself than to the argument. Deirdre McCloskey makes connections between what advocates like to term "free market economics", subjectivism, and postmodernism all the time and she gets widely (and rightly) praised for making the tie. But when Corey Robin comes along and makes the same argument for a critical cornerstone of later postmodernism people lose it. I don't buy it, guys. Vallier's major criticism on these grounds boils down to the fact that Corey Robin didn't write the essay that Vallier wanted Corey Robin to write. OK. So what? But for some reason Vallier's rendition of Robin's thesis seems to be the one everyone is expecting Robin to have put forward. It's pretty clear from reading the essay that it's not.

2. - What's most interesting about Robin's argument is not just providing the broader philosophical context for the emergence of subjectivism - it's making the connection between that and the relentless anti-socialism of the Austrians. That's the real value-added. That's the point of the specific associations with Nietzsche that Austrians have that some others don't. This was the purpose of the Weiser quote where he said that the whole point of marginalism was to prove socialism false.

3. - Nietzsche obviously has other ideals wrapped up in his anti-socialism and subjectivism that sit uneasily with many Austrians and subjectivists generally. This is where the portion of the essay starting with the problem of "squaring Nietzsche's circle" comes in. Schumpeter does this through what Robin calls the "relocation of politics in the economic sphere" through his discussion of entrepreneurs. Entrepreneurs are the restless creative force behind real change - the sanitized Austrian ubermensch. This was a particularly good example from Schumpeter:
"There is the dream and the will to found a private kingdom, usually, though not necessarily, also a dynasty. The modern world really does not know any such positions, but what may be attained by industrial and commercial success is still the nearest approach to medieval lordship possible to modern man."
The version of this in Hayek is similarly entrepreneurial - dedicated to generating new frameworks rather than fitting into existing frameworks. This, for example, was fairly Nietzschean: "To do the bidding of others is for the employed the condition of achieving his purpose."

4. - Hayek's note to Salazar was... illuminating.

5. - The essay makes me want to know Corey Robin's view of "Why I Am Not a Conservative"


Tuesday, May 14, 2013

Assault of Thoughts - 5/14/2013

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- David Henderson asks an interesting question here. Click through and give him your thoughts. I've got several comments in there.

- Brookings had a short response to our EPI report last week. They get into the data more than many of the other responses, but there are a lot of problems with it. Hal and I have subsequent responses mostly drafted. Another take on the problems with the Brookings paper is provided by Ron Hira here. I think he overstates the issue of the proprietary data (other people could FOIA this and what else are they supposed to do - not use microdata they have available?). His other critiques are stronger.

- New efforts to address gender pay inequality in the federal government (HT - Kate).

- Paul Krugman on similarities between Japan and the UK in the 1930s.

- The green card lottery is threatened in the new immigration reform discussion. Fantastic. Cut the program that gives everyone in the world that wants to be here the same shot - the closest thing to "all men created equal" we've got in immigration policy - and replace it with programs that essentially say "this person is more desirable than that person so we'll take him". There are problems with the green card lottery, but the mindset behind this sort of move is not encouraging to me.


My tied-for-favorite psychologist comments on IQ in the Richwine thread

(I can't say "favorite" or I'd get in trouble with my sister-in-law)

Dr. J, a good friend with expertise in psychometrics commented on the Richwine thread. In broad strokes this was my impression, but she's got a lot more detail:
"A few points here (a little late, and also WRT your prior post on this issue):

If IQ is highly determined by genetics (I defer to the geneticists on this): I believe current research shows it's about 50% genetics, 50% environment (most of the latter being non-normative social experience, that is, not the parents)

IQ is messy, messy, messy. It is a pain to operationalize. Many times, IQ is defined as "general intelligence" -- but what is intelligence? Well, whatever intelligence tests measure.

Other hitches: IQ tests were primarily, if not entirely, developed in the Western world, America in particular. How can we -- unless we are narcissistic ego centrists -- assume that what our society considers is intelligence could really generalize across cultures? And indeed, cross-cultural research pretty routinely reveals that different cultures prioritize different aspects of the human experience; many cultures have words for concepts that are not prominent/discussed in American society. So we might expect cross-cultural differences in scores on IQ tests; that doesn't mean necessarily that people differ on "intelligence", broadly construed. That just means it's ridiculous to expect measurement invariance of a western concept across all cultures.

And also, often, IQ tests are standardized around 100. Constantly standardizing test scores makes it a little difficult to look at changes over time.

Finally, we know that tests -- especially IQ tests -- test both "intelligence", but, to a large extent, also the ability to take tests. This is why, even within the US, we have sub-group differences in IQ. Because different groups have different access to the experiences necessary to develop testing competence. Now, we are working to develop culturally-ungrounded IQ tests (such as the Hannon-Daneman test or the Siena reasoning test), and these tests do help mitigate/decrease sub-group differences in American samples. But, you can see . . . this is a hot mess.

I think IQ is one of the most tricky areas of inquiry in psychology, actually, because in normal everyday conversation we all think we have a sense of what it means, but psychometrically it's fairly problematic. Which does not mean we can ignore it -- it's a great concept and a lot of great work has been done on it! -- but it does mean we have to discuss it in as many forums as possible!"
I reiterate my advice to economists: by all means throw anything even resembling an intelligence test on the right hand side of the equation if you've got it. It's important heterogeneity worth controlling for. But then you're probably best served ignoring and leaving the interpretation to others because it's questionable whether we really have the chops to talk about it.

Monday, May 13, 2013

Corey Robins on Nietzsche and the Austrians


I've just read the beginning so far (and will unfortunately probably only get a chance to read bits at a time through the day today), but so far it's a really fascinating read. The Nietzsche/marginalism connection is interesting although of course by no means unique to Austrians. I'm anticipating that the latter portion on Nietzsche and Austrians "turning the market into the realm of great politics and morals" will be more convincing.

The expected set of people are crying bloody murder. That means one of two things: (1.) Robins has written something really bizarre, or (2.) Robins has written something very insightful and he's struck a nerve.

The former might be the case on the marginalism point although so far he doesn't seem to be claiming marginalism is just an Austrian thing. I'll let you know what I think on the rest of it later.

Sunday, May 12, 2013

A question for Quiggin on interstellar travel

He presents some inconvenient arithmetic here. This caught my eye:
"I’m going to assume (generously, I think) that the minimum size for a successful colony is 10 000. The only experience we have is the Apollo program, which transported 12 astronauts to the Moon (a distance of 1 light second) at a cost of $100 billion or so (current values). So, assuming linear scaling (again, very generously), that’s a cost of around $10 trillion per light-second for 10 000 people."
My question is - how in the world is linear scaling of pricing "very generous"?!?!

Apollo was the first time we transported people to another world. We usually think that the cost of doing something highly complex like sending people to another world drops precipitously as it is done over and over again. It's called "learning by doing". The average cost savings from going from a moon program to an interstellar program are going to be tremendous (although of course you need to do some "doing" to get "learning by doing" between now and then!).

It seems highly ironic that the author of Zombie Economics is using increasing marginal costs assumptions to call linear cost projections "very generous" when I thought we moved past that sort of thinking in these cases many, many decades ago.

I'm not saying we should be working on an interstellar trip right now. We should be working on Mars, and just pay a few theoretical physicists to bend the cost curve on interstellar travel for the time being. But nobody - certainly no economist - should be under the misapprehension that learning by doing isn't going to apply in space exploration.

Saturday, May 11, 2013

Ferguson made an awful argument about Keynes; he made an even worse argument about homosexuals

This point, I think, has slipped through the cracks in a lot of ways but it is made forcefully by Dave Churvis (a gay economics student and friend of this blog) here. This blog concerns itself a lot with Keynes, so I too slipped into pointing out what a dumb read of Keynes it was. I did call it offensive I think, but offensive doesn't quite cover it all. Offensive is something like "all gay people are pedophiles". Yes, it's offensive, but it doesn't even pretend to be a serious argument - so we can usually say "that's offensive and wrong" and be done with it. Dave is right to point out that Ferguson's argument went a lot further than that. There was actually an implicit argument he was making that was truly heinous not to mention complete nonsense. Most of us were caught up in the Keynes "argument" and not this "argument".

Here's Dave: 
"That’s not the part that’s upsetting to me, though, because Niall Ferguson is an asshole, and most of us already knew that. The upsetting part is how few people are even mentioning what a bigoted statement Mr. Ferguson made, and instead treating it as if it were a serious intellectual argument. People all over the world of economics, even when saying Mr. Ferguson was wrong, don’t seem to realize (or care) how incredibly offensive his remarks truly were.

I am a gay man. I am childfree. I am polyamorous. My legacy is mostly going to be my ideas, and any savings I manage to accumulate over my lifetime will not pass to the children I don’t have, but rather to various nonprofit foundations or schools or the like when I die.

Does this make me incapable of thinking about the long run? Of course not. Does this mean that I am predisposed to think only of the here and now? No. Does my relatively hedonistic lifestyle mean that I’m a carefree libertine, living only for today without a thought for tomorrow, incapable of designing policies for the long run? Not in the slightest.

And that’s because I’m a fucking economist. I’m an economist who thinks about the short run, the long run, and everything between. I’m a member of the Long Now Foundation who thinks that space exploration is a great idea for the future of mankind, despite its lack of direct benefit to humans right now. One of the fields I plan to specialize in is economic development, and you really can’t get much more long-run than that. It doesn’t matter that I’m white, overweight, gay, atheist, polyamorous, or, yes, even childfree.

So we can talk about how sodomy and usury were seen as sinful because of Aristotle [DK: an Alex Tabbarrok post - Alex of course wasn't advocating this idea], or about how Keynes’s quote was taken out of context [DK: lots of us, me included], or about how maybe Mr. Ferguson wasn’t entirely wrong [DK: Kurt Schuler - but I think Dave needs to read this closely. Kurt was not agreeing with Ferguson's point at all - he was making a far more reasonable point about the potential relevance of Keynes's homosexuality {really bisexuality - why do we keep saying homosexuality??}] (and seriously? Fuck that guy). But the point everyone is missing here is that Mr. Ferguson has impugned the abilities of every bright, motivated gay kid who might want to go into economics. And this is not the first time someone has made this argument, and nobody seems to be stepping up and saying “that argument is bullshit - being gay doesn’t make someone a totally shortsighted hedonist, and saying so is offensive“.

That failure to call him out is going to discourage entry of gay students into the field. It’s going to keep economics a club mostly for straight white males, and as a result the field will rot and die as it loses relevance to anyone else. How’s that for considering long-run outcomes?

Friday, May 10, 2013

Apprenticeship links

OK - one last thing today.

I was just talking with Bob Lerman and he informed me that a lot of new stuff for his American Institute for Innovative Apprenticeship is up and running.

Here is the institute's website.
The blog.
The facebook page.

And here is Bob talking on the Diane Rehm show about apprenticeship.

What did I tell ya?

Intelligence is real. It does vary across the population. It has consequences.

If you see a psychologist studying intelligence, be interested in it, by all means! This is one of the things they often speak to thoughtfully.

If you see any non-psychologist take a deep interest in measuring the differences in intelligence between socially constructed groups, particularly visibly identifiable and historically oppressed socially constructed groups - be very suspicious.

This is what I propose: economists should, as a general rule, throw intelligence tests on the right hand side of their models when they have the opportunity to because God knows we need to control for any heterogeneity we can. But then economists should, as a general rule, basically ignore it.

Generally speaking we are not qualified to talk all that much about it.

Dissertation Plan - let me know any thoughts you've got

I've drafted a dissertation plan on my more-buttoned-down-and-professional-than-this-absurd-blog website here. I'm curious about any thoughts you may have. I'm taking the doctoral dissertation seminar in the fall which is the first step towards pulling all this together and the proposal defense so I thought I'd write all this up rather than just carrying it around in my brain.

I'm taking the "Three Essays on X" approach that is pretty common in economics. I could do one long one but this enables me to work on a couple different things, and it's naturally set up to get some publications out. My current title is Three Essays on the Economics of Skilled Labor. The first two essays have been gestating for a while (I've done some work along the lines of the first essay already for a class). The third essay is a macroeconomic one, which I had always planned on doing, but the specifics came together more this semester (for that reason it might also be more likely to change).

Sodomy, Usury, and Keynes

Alex Tabarrok talks about old associations between sodomy and usury (both non-pro-creative activities apparently). He's talking about Aquinas, Smith, and Bentham.

This is also interesting from the Keynes/Ferguson angle, though. Keynes - who was sympathetic to if not in literal agreement with the Scholastic position on usury - completely breaks Aquinas's framework!

Mars is dusty, weird bio-film grows in the filters of the space station...

...and other real-life space exploration points here.

A lot of people rightly ridicule sci-fi inspired space enthusiasm. Space exploration within our lifetimes is actually going to be dirty, uncomfortable, boring, and bloody. Once it really gets underway, lots of people are going to die - some in very horrific ways.

The frontier is always messy.

Hopefully we can plan enough in order to avoid cannibalism on this frontier, but there might be cannibalism. Who knows? When the Jamestown cannibalism story came out a regular blog reader emailed me and asked if I still wanted to be in the first wave to Mars. Nope, I replied. That's exactly why I personally am waiting until the 1650s or so (Jamestown was settled in 1607). I'll let someone else work out the bugs.

I was not really a sci-fi fan growing up. Never watched much Star Trek. I did like Star Wars but I wasn't an obsessive fan. I'm more inclined toward sci-fi these days (on TV or in movies - I still don't read it), but I'm still not a Comic-Con level of fan. I get into this stuff because of my interest in the economics of long-run growth and the potential it holds for human flourishing. That - I think - inoculates one a little to these misconceptions about the degree to which space exploration is a messy, bloody business. After all - economic development here on Earth has been a messy, bloody business.

Data question

Does anyone know of survey data out there that collects information on programming skills as well as labor market information? Or would a new survey have to be done for something like that?

If you like "merit-based" immigration policy then you're in the DeMint/Richwine/Heritage camp

Sorry. The truth hurts sometimes.

DeMint writes that: "A properly structured lawful immigration system would help our economy. This is why Heritage and conservatives have long argued for reforming the legal immigration system to make the process more efficient, more merit-based. We need an immigration process that attracts high-skilled workers and encourages patriotic assimilation to unite new immigrants with America’s vibrant civil society."

Commenter Hume argues that there's a cognitive difference between people who say "I don't want the people I think are dumber" (Richwine, for example) and the people who say "I only want the people I think are smarter" (DeMint, for example). I think in a lot of this cases this is probably right. When Noah Smith takes this position, for example, I do not think there are any underlying Richwinesque sentiments driving it. That's just my impression from what I know of Noah. But in a lot of cases I think the DeMint position is just a more politically aware version of the Richwine position.

And when people say they want to grease the tracks for high skill immigrants because that's what they can get done, they're basically taking the same negotiating position with guys like Jim DeMint that Obama took with the GOP on the budget - in other words, trying to meet them halfway but ending up meeting them 95% of the way because you know DeMint isn't going to budge.


We shouldn't just assume that we should make decisions on the basis of national borders. The people on the other side of the border are just as human as the people on this side. But if national borders mean anything, they identify a community of people that have built a set of national institutions together - which is not a minor point. If we want to make policy to maintain the fundamental composition of that institution-building community we might want to regulate inflow across the border: we might want to make immigration policy, in other words. That's not an entirely unreasonable position. But when we make immigration policy, it seems to me the question should be "do the migrants want to be a part of this institution-building community?", not "what is their IQ?" or "can they program in Java?".

You say X <-->Y? Well what about not-X! What then!

Well, then not-Y, right? Isn't that obvious?

Very odd criticism of my Richwine post from commenter on Brad DeLong's blog:
"Having gone to the link you supplied, I can firmly answer, yes, it seems completely off-base. For example: What If there is positive migrant selection? What if factors others than you mentioned can raise IQ, and those factors are more likely to be present in immigrant families in their new environments? What if statistically the positive or negative effects on countries both sending and receiving are negligible?

Were the populations of countries from which waves of immigrants previously came to the U.S. noticeably smarter and the U.S. population noticeably dumber after these waves?

I can't imagine, Mr. Kuehn, what motivated you to get into this issue from the angle you did. Perhaps you suffered from Blogger's Disease, which is characterized by writing the first thing that pops into your head and then publishing it rather than reconsidering before publication."
If there's positive selection then Latino immigrants ought to have higher IQ than the native white population. Isn't that the obvious conclusion?

If other factors raise IQ then IQ will be raised.

If the effects are negligible then it's negligible.

I'm having a hard time understanding what Fred thinks is off-base. I would guess he agrees that if there is positive migrant selection Latino immigrants will have higher IQs than natives (assuming there's no real racial differences in IQ - which I think is plausible), right? If he thinks that, then what is so off-base about noting that if there is negative selection immigrants will have lower IQs than natives? It's an empirical question at that point.

He asks why I posted it. I posted it because I see a lot of bad reasoning in the critics of Richwine when the criticism ought to be "we should not be so obsessed with IQ or with classifying groups and making immigration policy on the basis of IQ".

Thursday, May 9, 2013

And another thing....

Why is it that people jump on Richwine when he says we should take intelligence into account and make it relatively harder for Latinos to get in the country but it's perfectly fine for people to say we should take intelligence into account and make it relatively easier for college graduates and programmers to get in the country?

Why do people jump on Richwine remorselessly and yet I actually get otherwise serious people telling me that if they can't have open borders they'd rather have the smart immigrants and nobody bats an eye????

Migrant selection, IQ, and Richwine

I am starting to dip my toes into the Richwine thing. I haven't read his dissertation or the Heritage paper yet. I really despise the big picture: closing the door to the United States because we find immigrants undesirable in some way, etc. Talking about the IQ differentials of different groups just makes me queasy too.

But I'm also concerned about how some people are going into this and making their arguments against Richwine.

Intelligence is a real thing, OK? It does vary across the population. I defer to the psychologists on what to think of any particular metric (paging my own favorite psychologist on this one - commenter Dr. J). But it's a real thing. It's not the only thing we ought to care about, of course, which is why I don't like making policy on the basis of a few qualities we find to be desirable. But it's a real thing.

One thing the IQ of an immigrant population relative to the native population is going to depend on is selection effects: is there negative or positive migrant selection? This is dictated by a lot of things including geopolitics and the specific immigration statutes - but it's also dictated by the comparative advantages of potential migrants.

Let's say Latinos in Central and South America have precisely the same IQ distribution as native Americans. Exactly the same. If there is negative migrant selection, Latino immigrants to the United States will have a lower IQ than natives. There's nothing racist or controversial about it - that's math. The U.S. average IQ will go down and the Central and South American average IQ will go up (because relatively lower IQ residents will migrate to the United States).

If IQ is highly determined by genetics (I defer to the geneticists on this) and marriage is highly determined by ethnic and immigration status (I defer to the sociologists on this), the differences will persist.

If IQ is highly determined by child nutrition (I defer to the child development people on this) and Latino immigrants remain relatively low income, the differences will persist.

This is just a fact of life people.

Now what bothers me about Richwine is I can't imagine what motivates a person to get into these questions. Maybe Latino immigrants are lower IQ. That is entirely plausible to me.

But I really don't care about that and that doesn't really register on my list of things that ought to guide immigration policy.

I guess some people do, but I am suspicious of people who have a deep interest in comparing the IQs of different populations.