Thoughts on Ostrom’s Nobel Prize
Steve Horwitz looks at the reactions to Elinor Ostrom’s Nobel posted by job-seeking economics PhDs at this site, and says:
Warning: sexist, foul-mouthed, arrogant, ignorant little boys at their worst. Thank God for GMU. I weep for the future of the rest of my discipline.
This prompts several reflections:
(1) Steve has apparently not gone drinking with the PhD econ students at GMU. You can throw out “ignorant” and “little” (in some cases), but otherwise…
(2) I have nothing to hide; I will admit that I didn’t know who Ostrom was when the announcement came. I think I’ve seen her work referenced in the past, especially regarding elephants in Africa, but if a reporter asked me to describe “Ostrom’s work” right after the announcement, I probably would have said, “Well I haven’t read him in a while, but most economists would agree that he has made important contributions to the field with several key insights regarding resource allocation and issues of equity.”
(3) It’s not like people at NYU (where I got my degree) sat around playing Tecmo Bowl. The first year there was a stretch of several months where I literally stayed in the library working until midnight or later, 5 nights a week, because I thought I was going to flunk out. But rather than reading different theories of macro, or (say) reading the work of Ostrom, we had to learn a bunch of math. (I took a master’s level class in Law & Economics with David Harper, and there we did read a bunch of Williamson’s stuff.) I remember once helping Dan D’Amico prepare for his macro qualifier (or whatever it was) for GMU, and I was really impressed with how much they studied different schools of thought, as in, “This is what the Real Business Cycle people think. This is what the New Keynesians think.” On the other hand–and this part isn’t a joke–if I hadn’t gone through NYU, I wouldn’t have been able to write my Journal of the History of Economic Thought papers on Samuelson and capital theory. And if I may speak for the 8 Earthlings who read and understood those two papers–they were pretty important.
(4) The “Economists Do It With Models” girl (if she has a blog title like that then yes I am calling her a girl and she can’t take offense) showed up at Steve’s post and possibly didn’t get that I was kidding. I had said to him: “Steve, I am offended that you just assumed the posters were boys. Are you saying women can’t swear, or theorize about affirmative action for female Nobelists? Shame on you.” So Free Advice readers surely detect the joking, but innocent newcomers may have thought I was serious. Just to clarify, I thought it was funny that Steve was making “sexist” assumptions in his finger-wagging about others’ sexism. It reminded me of when Richard Feynman had angry feminists protesting during one of his talks, because somewhere he had written a funny dialog between a woman driver and a traffic cop. (The woman is arguing about her ticket by bringing up relativistic questions about velocity etc.) So the feminists are all mad and have signs saying “Feynman Sexist Pig” and so forth. But Feynman tells them, “You just assumed the cop in the story was a man. I never said that.”
(5) Last and most important, fully 90% of the sentences in this post are intended to be humorous. In particular, I agree with Steve that those guys were idiots, and no I would not have bluffed like that to a reporter.
Is Krugman Chiseling Out His Escape Chute?
In late August I was glad that Krugman had definitively said we were in a recovery. That way, if I turn out to be right and we are currently in the analog of 1931, then Krugman will be demonstrably wrong. (In much of his posts he has wiggle room, so even if things turn out the opposite of what everyone thought he was saying, he can parse it to death.)
So it was with great interest that I read his latest post:
Michael Shedlock has an awesome takedown of ECRI’s claim that its indicators (a) have successfully predicted turning points in the past (b) point to a sold [sic] recovery now. I’d add that this is a really, really bad time to be relying on conventional indicators.
Why? Basically, because in a zero-interest rate world — the three-month rate was .066% last I looked — especially one that’s suffered from a collapse of the shadow banking system, conventional indicators don’t mean what they usually mean. Increases in the monetary base aren’t especially expansionary. The yield curve more or less has to slope up, even if no recovery is expected. And so on.
So historical correlations, to the extent that they exist — and as Shedlock points out, ECRI is claiming a much better record than it really has — can’t be counted on to prevail. There’s really no alternative to making fundamental analyses of the macro situation.
More Chauncey-ism from Krugman–and yes I picked that comparison for irony. If the economy is in the tank for the next eight years, he will say: “See, I told you so. Real GDP kicked up by 2q2009, so that technically was a recovery. But I knew it was feeble, because the stimulus hadn’t been big enough. Why, I even called it as not a solid recovery as early as October 2009–when plenty of other ‘experts’ were assuring the world that everything was fine, much to the delight of the deficit hawks.”
But even if it’s smooth sailing from here on out, Krugman can say, “See, I told you so. The ECRI people were wrong to look at past correlations, which are irrelevant. In a sense, they got lucky. But what their correlations didn’t tell them–while my Keynesian models did–was that the recovery would be a jobless one, because the stimulus wasn’t big enough. Even though unemployment fell much more quickly than most other people thought possible–especially those Republicans who aren’t afraid of global warming but are afraid of deficits–we still had a period of prolonged misery, due to misguided fiscal fears and simple callousness. For those of us who saw all this coming, it wasn’t much comfort to be proven right, amidst such hopelessness.”
I’m actually pleased with the above. I think I could ghostwrite a Krugman column if he ever gets in a pinch.
More Free Advice
Yes I have a bunch of work to do, which is why I’m reading mass emails that my friends send me. Notwithstanding the below video, my advice to you is this: When a lioness is going to feed her newborn cubs, get the frick outta there.
Potpourri
I’m still way behind on my “real work” so blogging will be sparse this week… But here are some links:
* Speaking of gold prices, Robert Wenzel reproduces a great speech by GATA’s Chris Powell. Powell’s tone is great; he acknowledges that people think GATA is a bunch of black-helicopter kooks, and documents the government sources for all of their breaking stories. Basically, if you are willing to read what is (now) publicly available, the US government frankly admits that it has arrangements with other central banks to suppress gold prices.
* Ralph Raico passes along this story about a daughter rescuing her mother from a death panel in the UK. This isn’t taken from Glenn Beck’s nightmare; this is real news.
* David R. Henderson talks about Williamson’s Nobel in the WSJ. OK, why the heck do all of my colleagues get op eds in the WSJ but not me? Does it have to do with expertise and credibility–two things that are highly overrated in our culture? If someone wins a Nobel for sarcastic Irish blog posts, I had darn well better get my digs in.
Glenn Greenwald Defends Republicans
GG is awesome. After Obama won the Nobel Peace Prize, and of course conservative pundits rolled their eyes, some Democratic honchos actually accused the critics of “siding with the Taliban” etc. (Naturally enough, the Taliban and others who are being targeted with Darth death drones don’t want to give Barack a high-five on his pacifism.) So here’s GG:
If George W. Bush had won the Nobel Peace Prize as [Joe] Klein suggested he might deserve [in 2005], would it have been the solemn obligation of every American — including liberals — to stand up and cheer, to hold a “national celebration,” to congratulate and express support, happiness and patriotic pride? Or would it have been appropriate even for Americans to make arguments about why that Prize was wrongly awarded? If Bush had won, surely the Taliban and Hamas would have objected, just like they did yesterday with Obama. Would Bush critics have been guilty of “casting their lot with the terrorists” if they echoed those objections? Karl Rove and Fox News would have done so, but would Media Matters have condemned liberals who questioned Bush’s Nobel Peace Prize as “unseemly and downright unpatriotic.” Please.
…
The difference between 2003 and now, of course, is that Democrats are in power and thus benefit from the rule that it’s unpatriotic and Terrorist-embracing to do anything but praise the President like some sort of college cheerleader. But that isn’t always going to be true. And there are many times when it is progressives who are making arguments similar to The Terrorists and Other Bad People; after all, there are only so many sides of an issue, and that is inevitable. Calling people unpatriotic and comparing them to Terrorists for failing to fulfill their solemn duty to praise the President on his Special Day and mindlessly support his accolades isn’t clever or tough politics. It’s weak, counter-productive, unprincipled, dumb and dangerous.
Hope We Can Believe In?
The first sentence of a CNBC article: “Bank failures are going to continue at a fairly strong rate but taxpayers hopefully won’t be asked to foot the bill, FDIC Chair Sheila Bair told CNBC.”
Free Advice
Sometimes on this blog I literally give you free advice. Today’s bit of wisdom: Just because you turn off the switch for your garbage disposal, doesn’t mean the blades stop turning. I didn’t draw blood or anything, but I wish I’d paid more attention to the rotational inertia lecture in my high school physics class.
Scary CBO Chart
You know those CBO projections getting bounced around, saying the debt as a share of GDP is supposed to double in the next ten years? Well, things don’t exactly turn around after that. (That’s one of the reasons that Krugman’s “Why worry?” posts on the deficit projections are misleading. He does show that it wasn’t simply a cut in WW2 expenditures that allowed that figure to fall, but right now Medicare etc. are runaway trains. The economy isn’t going to simply outgrow them, unless Ron Paul becomes president in any event.) Here is the CBO’s long-term budget outlook, as of June:
Here’s the CBO’s explanation of the two different scenarios:
The figure on the cover shows federal debt held by the public under the Congressional Budget Office’s alternative fiscal scenario and its extended-baseline scenario. The former incorporates some changes in policy that are widely expected to occur and that policymakers have regularly made in the past; the latter adheres closely to current law, following the agency’s baseline budget projections for the first 10 years and then extending the baseline concept for the rest of the projection period.
And keep in mind that government forecasts typically underestimate how much tax hikes and other interventions will kill revenue collection. If I’m right, and the economy has not yet begun to recess, then I don’t even want to think about how high the dotted line should be…
That’s why Obama is going to legalize–and tax the heck out of–marijuana.
UPDATE: Sorry, the above is ambiguous. (The CBO description on the inside is better, and I didn’t realize pasting in the explanation for the front cover wasn’t as clear.) The line referring to the Obama administration’s plans is the top (scary) line! To see this, look at the forecast for 2019. The top line is the one hitting 80% or so; that’s the number the press is reporting, when they say, “CBO says Obama will double debt in a decade.” The bottom line means, if Congress does nothing ever again, and let’s stuff run on autopilot. So that means no health care (which adds trillions in expenditures over a few decades), no cap and trade (which CBO says will shave off GDP growth), expiration of Alternative Minimum Tax exemptions on the middle class, expiration of Bush tax cuts, etc. Note that this is my quick explanation, and I leave open the possibility that I am wrong about the different things going into the assumptions. But I’m pretty sure that if you ask, “Where is the Obama administration taking us?” then the CBO points you to the bigger debt line.
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