03 May 2017

How Does Lucas Differ From Traditional Keynesian Stories on “Money Illusion”?

Economics 11 Comments

I sent an email to an expert but thought I’d also post my issue here:

For a paper I’m doing, I had to go back and re-read Lucas’ 1972 JET paper on the neutrality of money.
In it, he stresses that the agents in his model do not suffer from money illusion. He clarifies what this means in his conclusion:
“This paper has been at attempt to resolve the paradox [that money is a fluttering veil]. The resolution has been effected by postulating economic agents free of money illusion, so that the Ricardian hypothetical experiment of a fully announced, proportional monetary expansion will have no real consequences (that is, so that money is a veil). These rational agents are then placed in a setting in which the information conveyed by market prices…”
So here’s my question: In what sense do the traditional workers in a Keynesian theory behave differently from Lucas’ agents?
In the standard explanation, I think economists say something like: “The government can run the printing press and this allows employers to offer higher money wages to workers. At first the workers think they are earning a higher *real* wage rate; they think they are going to take those higher money balances and buy more real goods and services in the market place in the future. But when they get to store, they realize prices are higher than they expected. They regret having sold so much of their leisure time for money, because they didn’t realize that the high money wages was simply due to the monetary expansion.”
So, isn’t that exactly what happens in Lucas’ 1972 model? The young people see a high amount of money offered by the old people for their product, and so the young people decide to work more (selling more units of present leisure for what they think will be more units of future consumption). But then when 1 period passes and they become old, these people see higher prices than they expected. They regret having worked so much in the previous period, even though they made the ‘right decision’ at that time, based on the information they had.
Aren’t these compatible stories?
03 May 2017

“Slavery: A Global Investigation”

Slavery 25 Comments

I have been informed by some activists that many libertarians are either indifferent to, or are actively supporting, worldwide slavery. I have repeatedly asked them to write a guest blog post which I will host here, in which they point out specifically how libertarian attitudes and/or policy prescriptions are hurting the plight of those held in bondage around the world. They have declined my repeated offers (see here for example), but my offer stands.

In the meantime, they asked me to watch this documentary. I will do so by this weekend. If any of the activists (or regular readers of this blog) wants to highlight particular portions of the video they want me to address, please list them in the comments.

NOTE: I would ask libertarian readers of this blog to please bend over backwards in treating these activists with civility. I think they are incredibly misguided in viewing libertarians as supporting slavery, but you don’t help disabuse them of that view if you return their insults etc. in the comment section.

02 May 2017

Why Does Freedom Work?

Austrian School, Shameless Self-Promotion 2 Comments

This was my talk at the Independent Institute event in San Fransisco in April. What’s new here is my opening discussion of Carlos Lara.

02 May 2017

Catching Up on Contra Krugman

Contra Krugman 2 Comments

I think I’m way behind. (I went to Europe for a week.) Here you go:

==> In Episode 82 we talk about the cruise missile attacks on Syria. We have Dan McAdams from the Ron Paul Institute as a guest.

==> In Episode 83 we talk about Trump’s focus on bringing back manufacturing jobs. We kinda sorta agree with Krugman. The technological innovation in this episode is the audio clip from Obama. (Start around 12:20.)

==> In Episode 84 we talk about “voodoo economics.” Here’s a quick outline:

1:25 Tom and I talk about my European adventure.
3:10 We talk about public marriage proposals.
4:02 We note the irony of Krugman and zombies.
4:55 Tom summarizes the column. Krugman argues that the Trump Administration’s tax plan relies on the same old voodoo Laffer curve scam.
9:05 Tom points out that the Reagan Administration never claimed the original tax cut would “pay for itself” via growth. (Their point was merely that a dynamic analysis was more optimistic than a static one.)
11:00 I point out that the Laffer Curve by its very nature doesn’t claim that all tax cuts pay for themselves. So clearly it can’t be the case that Arthur Laffer doesn’t know how to read his own curve!!
13:25 A really important point from Laffer is that the term “tax cut” is ambiguous; it’s better to refer to “tax rate reductions” or “reductions in tax receipts.”
15:08 Tom is optimistic about the details (such as they are) of the Trump tax plan.
18:15 I point out that many libertarians won’t tax “yes” for an answer when it comes to Trump’s policies.
19:15 I give some stats on how much “the top 1%” pay in income tax. This is why tax rate reductions “go to the wealthy.”
20:23 I show how odd Krugman’s argument is when he claims that the supply side doctrine has “been tested time and again and has failed every time.”
21:20 I give the stats on federal tax revenues in the 1980s, showing that on a naive level, Reagan’s “tax cuts for the rich” really did “pay for themselves.”
22:10 I point out that tax cuts boosting the economy is consistent with Keynesianism too! We have another sound clip, this one from Krugman.

01 May 2017

Carlin on Civil War

Humor 8 Comments

I would much rather listen to him than a bunch of progressives on Twitter pretending that they knew yesterday when Andrew Jackson died.

01 May 2017

Trump on Andrew Jackson and Civil War

Trump 25 Comments

Here’s how CBS News reports the latest outrage:

President Donald Trump appeared to misremember some history about President Andrew Jackson before implying that the Civil War may have been unnecessary.

“I mean, had Andrew Jackson been a little later you wouldn’t have had the Civil War,” Mr. Trump said in an interview with journalist Salena Zito on SiriusXM’s “Main Street Meets the Beltway,” which was released Monday. “He was a very tough person, but he had a big heart. He was really angry that he saw what was happening with regard to the Civil War – he said ‘there’s no reason for this.'”

Jackson died in 1845, which is 16 years before the Civil War began. Mr. Trump has often talked about the similarities between Jackson and himself, and keeps a portrait of the seventh president hanging in the Oval Office.

Mr. Trump then went on to suggest that the Civil War could have been avoided, and that had Jackson been in power he could have prevented it. “People don’t realize, you know, the Civil War, if you think about it, why?” Mr. Trump said.

“People don’t ask that question, but why was there the Civil War? Why could that one not have been worked out?”

So naturally, people on social media are OD’ing on smugness, pointing out that Trump apparently is cool with slavery. The irony here is that as they lecture Trump on not knowing basic history, they themselves are apparently ignorant of the fact that the US is just about the only country (plus Haiti?) where widespread violence was needed to end legal slavery.

However, there is a further oddity here, where other people are laughing that Trump apparently didn’t know Andrew Jackson died before the Civil War. On this point, I don’t get it. In the quotes I’ve seen, at first it seemed clear to me that Trump’s whole point is that IT’S TOO BAD ANDREW JACKSON DIDN’T LIVE TO PREVENT THE CIVIL WAR. And think the “he was really angry” line means, with the brewing hostilities between North and South that eventually (after Jackson died) led to the Civil War. That is certainly the charitable reading, and possibly the correct one to boot. (EDIT: The smug interpretation–that Trump meant it’s too bad Jackson wasn’t PRESIDENT during the Civil War, as he watched it unfold with horror–is also plausible, upon my re-reading. But initially I thought Trump meant, it’s too bad Jackson died.)

If anybody saw more of the interview, feel free to chime in.

22 Apr 2017

In Honor of the March for Science

Climate Change, Conspiracy 104 Comments

I think the progressives really have no sense of self-awareness or irony. For years, a standard talking point among climate skeptics was that government funding made it very lucrative to exaggerate the possible influence of humans on global temperatures. Naturally, the “pro-science” community recoiled in horror at the very suggestion at such a crass motivation. The only time funding matters is when it’s funding coming from Big Oil or Big Tobacco.

Yet when the Trump Administration proposes large cuts in government grants, NPR runs a story warning that researchers may now engage in “sloppy science” even fudging data to keep their labs open. OK fine, but if NPR is going to run this, I hope they don’t pooh pooh the idea that other scientists might exaggerate the danger of climate change to win grant money. Make up your minds, folks.

19 Apr 2017

Follow-Up From Pat Michaels on Jerry Taylor’s Climate Model Argument

Climate Change 45 Comments

In a recent post, I linked to a 2015 blog post from Jerry Taylor. I was concerned that his own chart showed the opposite of what he claimed. Specifically, it seemed that the climate models that were published in the 2007 IPCC report had overpredicted actual warming from 2007 forward. And since you can calibrate the models (by adjusting parameters such as the reflectivity of aerosols in the atmosphere), the fact that the models “match” the observations before 2007 is not so reassuring.

In a comment at my post, climate scientist (and Cato scholar, and my co-author) Pat Michaels wrote this:

Of course, because of the discrepancy between the models and surface average temperature, the difference between modeled and observed ocean-only readings is large, and post -1998 only matches the models during the recent El Nino (too bad this reply section will not accept an illustration).

There’s the further problem that Taylor tries to sweep away: The satellite/radiosonde comparisons with the IPCC model average show a huge error in the vertical in the tropics. Given that the vertical stratification is what determines tropical precipitation, that means the modeled rainfall is systematically wrong. Given that the presence of surface water dramatically alters the partitioning of incoming radiation (less sensible heating of wet surfaces), that means the daily thermal regime is also mis-specified, which will further screw up the rainfall etc…

At any rate, as shown by Hourdin et al. in the latest Bulletin of The American Meteorological Society, the models are tuned to match the 20th century surface history often with physically unrealistic adjustments, possibly a cause of the huge vertical error.

Because Pat said he wished he could post an image, I emailed him and offered him the option. He took me up. So below is the chart he wanted to post, along with his further commentary:

Pat Michaels

Many things to note. Even in the land-only, the CMIP model mean tends to be too warm post 1998. You will also see that by showing the real datapoints that the fit looks much less fortuitous than in Jerry’s post. And in the other 70%–the ocean surface—every post-1998 datapoint is below the model average, and it only gets close in the recent El Nino. The consequence of getting the ocean surface warming rate wrong is that means the flux of water vapor is being overestimated (it may be tuned in retrospective mode) for the near term and in the future. The calculated water vapor feeedbacks have to assume the forecast is correct, which it most clearly is not.

That leads to a further speculation: If the water vapor flux is wrong in the models (too high) that means that the models will consistently overpredict temperature, so I would surmise that the only way they can match is if they are tuned. I’m sure you have seen Hourdin et al. in BAMS. And that just scratches the surface, so to speak!

PJM

Pat then added in a final email: “[D]on’t forget to re-emphasize that the models were tuned to match the past which is why they fit El Chichon and Pinatubo.”