22 Sep 2017


Shameless Self-Promotion 7 Comments

There are some old links on here, because Internet pages accrue on my iPhone when I’m traveling, and then I forget to post them on the blog when I’m at a computer. So this is a house-cleaning of sorts…

==> Obviously I’m biased, but something doesn’t sit right with me regarding Scott Sumner’s “I told you so” post regarding the Swiss franc. In general, take any government that is pegging its currency at a rate the market thinks is wrong. (Typically we imagine the government overvaluing the currency, but in this odd case the Swiss authorities were trying to undervalue the franc.) Some outsider could always take the position of, “If you throw in the towel, that will just make things worse. Trust me, just stick to the peg come hell or high water, and eventually speculators will back off.” Right? There’s no way to prove such an outsider wrong. Even if the government throws in the towel because of mounting concerns about the obvious downsides of the peg, the outsider could say, “You should’ve trusted me.”

I realize there is a subtlety with Scott’s discussion of the Swiss case in that he thinks he has another country (Denmark) that followed his advice, but it’s hard to know the relevant counterfactual. One might plausibly say to Scott, “The fact that our balance sheet is still growing even after we revalued, shows how insane it would have been to follow your advice.”

In other words, I think Scott is pulling a Krugman here, saying, “The stimulus would’ve worked if it had been bigger.” And since the authorities didn’t follow his advice, there’s no way to prove him wrong, but I think the evidence prima facie lines up with the people saying the original policy was unsustainable and risky.


==> David R. Henderson “reprints” a very prescient pre-9/11 column.

==> Back to Sumner: Again, something doesn’t sit right with me, in his discussion of Bitcoin and bubbles. I don’t think he packs it all into this post, but in conjunction with his other posts on this exact topic over the last year, I am pretty sure Scott’s position is this (paraphrasing of course): “Bitcoin was $300 at the end of 2014. A lot of people back then claimed it was in a bubble. Now, from that point to now, whether Bitcoin went up by a factor of ten, or crashed by 90%, all of that is consistent with the EMH.” OK fine. But Scott is also posting stuff along the lines of (paraphrasing): “A lot of EMH critics said Bitcoin was in a bubble. Let me look at the evidence…Nope! Turns out they were wrong. EMH is empirically validated yet again. Man I’m getting sick of winning. Don’t thank me, thank Fama.”

==> Someone on Twitter told me Dean Baker blew up the Austrian claim that easy money caused the housing bubble. Haven’t read it yet but I am curious to see the argument.

==> Don Boudreaux has a great point about the Hotelling model of businesses locating on a beach, and how that analogy is routinely applied to politics (median voter theorem). It’s a straightforward enough point but I never heard it before. (Fair warning Don, if you’re reading this, I stumbled on your old post because when I get the time I’m doing a quibbling critique of one of your anti-Trump trade posts.)

==> Another tour de force from Scott Alexander, this time on a viral article (posted after the Google employee controversy) claiming the differences between men and women have been exaggerated. A good excerpt:

Suppose I wanted to convince you that men and women had physically identical bodies. I run studies on things like number of arms, number of kidneys, size of the pancreas, caliber of the aorta, whether the brain is in the head or the chest, et cetera. 90% of these come back identical – in fact, the only ones that don’t are a few outliers like “breast size” or “number of penises”. I conclude that men and women are mostly physically similar. I can even make a statistic like “men and women are physically the same in 78% of traits”.

Then I go back to the person who says women have larger breasts and men are more likely to have penises, and I say “Ha, actually studies prove men and women are mostly physically identical! I sure showed you, you sexist!”

7 Responses to “Potpourri”

  1. David R Henderson says:

    Thanks for the shoutout.
    RE Don Boudreaux’s piece, I’m glad you highlighted it. Somehow I had missed it, even though I read him every day. It’s subtly insightful.

  2. baconbacon says:

    The Bordeaux piece is uninformative, as the model assumes that customers buy the same number of drinks as costs rise. Cost for buying a drink include the price of the drink, and walking to (and standing in line for) the drink. There is a push toward the center which is countered by customers no longer buying drinks at all.

    • Harold says:

      I spot the work of the demon auto-correct in action.

  3. Harold says:

    Very thought provoking article from Scott Alexander. His evidence on computer studies looks quite convincing.

  4. guest says:

    “Someone on Twitter told me Dean Baker blew up the Austrian claim that easy money caused the housing bubble.”

    I’ve read the first three (up to the first part of the third) arguments, and they all seem to rely on the fact that there’s not a tight relationship between how low the interest rate goes to how high housing prices go.

    He misunderstands our argument. There’s no direct correlation – X percent interest rates does not equal housing prices that are Y dollars.

    There could be otherwise legitimate increases in demand with artificially low rates that are relatively higher in one place and time than another, for example.

    So how do we know artificially lower rates cause bubbles? Because the new demand (and resulting lower interest rates) that comes with printed money is coming from those who weren’t already buying houses with the wealth they had. And since printing money doesn’t create wealth, the new demand constitutes a bidding war for the otherwise unchanged amount and configuration of resources, given consumer demand at the time as against producer-consumer demand.

    Take away the printed money/lower interest rates and the bidding stops, causing a crash (rather, a correction)

    Keep the printing/lower interest rates, and logically the currency will be destroyed because the lower rates aren’t saving the economy from crashing to begin with.

    In either case, consumer demand is continually exerting itself to cause the crash/correction of the malinvested resources caused by printing/artificially low interest rates.

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