Sunday, July 7, 2013

Assault of Thoughts - 7/7/2013

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

- Brad DeLong on examples of good and bad form when commenting on the work of other economists. He also highlights two contributions of Hayek that he (in this case, allowing Keynes and Samuelson to speak for him) has always found value in (which should be nice for you guys chafing from the recent reemergence of Corey Robin)

- Bob Murphy poses a good question about the liquidity trap that relates to my post the other day. He's wondering at exactly what maturity the liquidity trap is relevant. I think they all are, the shorter maturities are obviously the most relevant because they're closer to cash. But as J.P. Koning likes to point out what we're really talking about is "moneyness" - which is a set of qualities and not necessarily an either/or. Bob does ask an odd question at the end ("then why can't we work through long maturities?"). I would have thought the answer through the whole crisis has been "we can". There are qualifiers, of course. The Fed has much firmer control over shorter maturities, for example. Long term interest rates are just expected values of short-term interest rates which means the Fed is working on expectations which may or may not be easy to do (particularly when it's spent two decades anchoring expectations). That's why the first resort is the shorter maturities, but I think most Keynesians have been pretty enthusiastic about trying the unconventional stuff.

- If you're curious about how Krugman approaches his work, this is an interesting post.

- Cowen on the Navigation Acts. He notes that the concentrated costs of the Acts are what really drove American opposition. I'd also add that its the principle of taxation without representation. You don't have to be particularly oppressed to be pissed off that you don't have a say in things.

- Gene Callahan seems to think that "history" amounts to looking at anything that happened in the past... which means basically any time we do anything we're doing "history". I don't agree. I think he just wants Noah Smith to be wrong and is floundering through whatever bad reasons he can grab to argue that. Look, if you're trying to nail down a causal mechanism you have to parse cause out from correlation. Methods specifically designed for that task are going to be better at accomplishing that task than just thinking deeply about observational evidence which is what Noah was talking about. Sorry. Plenty of excellent history uses scientific methods, by the way. Noah's position, and I would agree, is that that analysis is better at identifying causal relations than other types of history (what you might call narrative history). That's a ranking on the specific tasks of science. Narrative history is ranked more highly than experiment in other respects, of course.


  1. "I think he just wants Noah Smith to be wrong and is floundering through whatever bad reasons he can grab to argue that."

    No: he KNOWS Noah Smith is wrong, and is making a point made 80 years ago by Collingwood, long before Noah Smith existed, to demonstrate that.

  2. I refute you thus.

    As Sudha Shenoy said to me once, "The real world is historical, not theoretical."

  3. Let us go a step further: we need models not to get at the "real causal mechanisms," but because full historical explanations exceed our grasp the vast majority of the time.

  4. Part of the problem here is terms.... Is the question "Was Napoleon bald?" a question about history or a question about empirical facts. Some people would reserve the term "history" for more grand forms of narrative.

    1. Precisely. That's the point I was making in the first two sentences. The definition of history Gene has to use to be coherent envelopes every aspect of human activity (the work of psychics and fortune tellers accepted, of course). I did history just now when I was making sure I had everything for dinner tonight by recalling whether I had defrosted the sausage.

      Needless to say an explanation that relies on this understanding of history is not a very persuasive one (even if another person happened to make it 80 years ago).

      History as most people understand it is distinct from this. This is why I offered a more specific term for what Noah was getting at - "narrative history" (I'm sure there are better terms out there, but that's the one I'm putting out there). It's what most people are thinking of, not just the recovery of any information from the past.

    2. Yes, now I look at it I wasn't saying anything you hadn't said.

      I'll add a bit more though.... It could be argued that the question "Was Napoleon Bald?" is complicated because it relies on a set of accounts about a man who died nearly 200 year ago. If I were to ask a similar sort of question, such as "Was Cleopatra beautiful?" or "Did Socrates have a big nose?" then things would be much trickier. There may be little evidence one way or the other. So, to an extent those are historical questions just like "Why did Germany lose WWI?"

      The questions "Did I have four pints of beer today" and "Does the new synthesizer chip I'm testing have a phase-noise of less than 600milli-degrees at 2GHz?" could be crammed into the same conceptual framework. At the highest level we have to do that, they're all empirical questions. But, the likely failure points in answers to these questions are different to those in historical questions.

      In all cases there's the possibility that people are using different definitions. The definition of beer may vary for example. In all cases there's the possibility that people are lying or have made mistakes. But, after that the other issues are different. For an experimental question the question is whether the testing was done correctly, what "correctly" constitutes is complicated. For the historical questions the problem is meshing together many sources, assessing their reliability and building an overall picture.

  5. Daniel, I think you probably know this, but just to make sure:

    What I meant was that today's famous Keynesians frame the issue as the central bank losing traction with conventional policy, because they've pushed nominal rates to zero. So in that formulation, it's a given that the "rate" in question is a maturity of less than a year, since those are the only rates that are basically zero.

    If you're saying the rest of the framework is that, "Yes, we'd like the central bank to push down 2-year rates too, but simple bond buying won't necessarily work at that maturity," OK fine, but you hardly ever see that spelled out. In fact I've just seen Sumner say stuff like that; Krugman you'd have to back that out of his other statements, when he says that stopping QE2 won't make yields go up etc.


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