Good news on American University

I got tuition remission and a 19.2K assistantship for four years. I'm told the assistantships are officially teaching assistantships "which can involve anything from grading, to running discussion sections to (in 3rd or 4th years, but only if the student wants to do this) teaching their own classes," and that sometimes profs use TAs as RAs too. I'm managing my expectations about the other schools - not super optimistic. But I'm very happy for this great deal with American. Teaching in the third and fourth year? Maybe I'm being naive, but it seems like it would be a great advantage in the job market to have that. There are a few summer fellowships and some dissertation funding I'm looking into as well, but that'll be something to worry about in a little while - not now.

Still crossing my fingers on the others, but I think American University would be very good environment - lots of good history of thought, lots of good economic history, and still a place I can do the macro, labor, and monetary work I'm interested in.

Did you say usury!

- Mark Thoma links to Ken Rogoff's measured embrace of the idea of usury laws. He also mentions Islamic finance. It's interesting - the right has gone bananas over whispers of sharia law, but they don't seem to have latched on to the discussion of Islamic finance that has been going on in economics for a while now.

- A couple days ago we had an event at the Urban Institute on refund anticipation loans (RALs). We just released several reports on RALs and several other high-price, small-dollar credit products (pawnshop loans, payday loans, etc.) - I co-authored a couple of them. Anyway, in this talk Chi Chi Wu - one of the panelists (not from the Urban Institute) - mentioned usury laws. Keynes argued that usury laws are generally considered ill advised, but they do have at least something to them if you have a liquidity preference (rather than a pure loanable funds) theory of the interest rate. I'm not saying "let's cap interest rates". I'm saying, with the proper historical context, this body of thought is not as goofy as it first sounds. I leaned more towards Bob Weinberger and especially Melissa Koide's position during this talk than I did towards Chi Chi Wu and even my colleague Brett (although he mostly stuck to the numbers). The video for the event is here:




Video streaming by Ustream

By the way - that's me in the front row to the right of the woman in the black and white plaid jacket. That's Nancy Pindus, another Urban Institute researcher and a co-author on one of the reports that came out of this project.

Discussion on the Constitution at ThinkMarkets

Troy Camplin and I have been discussing more of the Constitution this morning at ThinkMarkets, and rather than continue to clog up that venue, I thought I'd move the most recent comments over here for thoughts.

Troy blogs here and here (take a look at Troy's recent post on the General Theory at the second link I provided and see if you can catch his mistake on Keynes's use of the savings identity).

Troy Camplin Says: ...Sorry, but the 9th and 10th amendments make it clear that any powers not explicitly given to the federal government are not to be held by the federal government at all, but by the people (note that “people” is first in the 10th amendment) and the states, respectively.

Words mean things. It’s not a postmodernist free-for-all.

Daniel Kuehn Says: Troy – traditionally the disputes are over interpretations of Article 1, not the eighth and ninth amendment. I don’t know anyone that disputes the idea that rights not stated are reserved to the people and the states (the 14th clouds the picture a little of course).

I’ve seen this “words mean things” line come up several times now, and I’m not sure why you (and Daniel and others) act like this is some sort of point in your favor. The alternative argument is not that we get to make up what’s in the Constitution – it’s that word’s mean something and originalists ignore the plain meaning of the words. Why do you take “disagreeing with Troy” to mean “postmodernist free for all”?

Troy Camplin Says: That’s your interpretation, Daniel, and not a very mature one, at that. Try reading in context.

There are plenty of things in the Constitution I disagree with, but that I’m not going to bend with a postmodernist reading that allows words to mean “exactly what I want it to mean, no more, no less,” as the postmodernists insist. Words DO mean things. They don’t get to mean whatever you want them to so that you can get whatever reading you want. Which is clearly what you want. It is of course easier than actually following the law of the land and making changes according to the way the Constitution allows.

On the other hand, your argument seems to be that whatever you happen to disagree with is unconstitutional, but all the rest our government does is clearly constitutional. Project much?

But you are right — nobody debates the 9th and 10th (the two I was talking about) amendments. They just ignore them completely, pretending they are not there.

Daniel Kuehn Says: Troy - It’s fine that you and I disagree on the plain meaning, and I’m not immature for it. I don’t think you’re a postmodernist because you’re wrong – I just think you’re wrong. I find it odd that so many on your side think that because we’re wrong we’re also loosey-goosey with language.

re: “They don’t get to mean whatever you want them to so that you can get whatever reading you want. Which is clearly what you want.”

That’s the last thing I want. The Constitution provides no constraint on federal power and no structure to American governance if you can get whatever reading you want out of it.

Troy Camplin Says: Your last statement is immature. That’s what I was refering to. I did not say you said I was a postmodernist. I said that those who essentially argue that words can mean whatever they want them to mean, so the Constitution means whatever they want it to mean are postmodernists. They do violence to all sorts of texts, not just law.

The ones who are wrong have typically used loosy-goosy language. Thus the accusation.

You can make no argument from the Constitution that allows for government bailouts for companies any more than it allows for farm subsidies [I had earlier argued that farm subsidies probably don't pass constitutional muster].

Daniel Kuehn Says: Troy – you suggested that I interpret the Constitution to mean whatever I want to mean, and since I clearly don’t all I can conclude is that you just don’t like how I (and most others) have interpreted the plain words. There’s nothing immature about how I connected the dots there. I know better than to call you a post-modernist, but given the standards that you’ve set up for it you seem as much a post-modernist as I do.

On bailouts – it’s hard to get enthusiastic about them, but certainly the systemic benefits of the bailout qualify it as a potential promotion of the general welfare in a way that farm subsidies simply aren’t. Moreover, regulation of commerce between the states has long been interpreted to encompasses the ensuring the regularity of the channels of commerce, and attempts to maintain credit markets certainly seems to fall under this. In light of these obviously constitutional reasons for bank bailouts, and the limited time with which to respond, direct provision of funds could easily be justified as a necessary and a proper action for implementing policy. None of these elements are present with agricultural subsidies (although perhaps these were more systemic and plausibly Constitutional in the 20s and 30s).

It doesn’t mean bailouts are wise policy (that which is permissible is not always advisable), and it doesn’t mean we won’t deliberate over whether the methods are actually necessary and proper (that’s what legislatures and courts are for – to deliberate these disagreements), but it seems obvious that there’s Constitutional justification.

I don’t want to continue to crowd this blog – feel free to respond if you want, but I’m moving these last comments over to my blog so we don’t choke the discussion going on here.

Post Keynesian Blogs to Follow

I've had a couple recent posts highlighting distinctly (and sometimes, I argue, not so distinctly) Post Keynesian ideas that have drawn in commentary from self-identified Post Keynesians. I've followed a few of their links and blogrolls and have a couple blogs I haven't been following but that might be of interest to readers here:

- Robert Vienneau's blog
- Barkley Rosser's blog, which I've been meaning to add to my Google Reader for a while but haven't gotten around to it until now.
- John T. Harvey's (I think...) blog, Post Keynesian Observations
- The Levy Institute blog

I am following these now, and of course I'll share any interesting content here. Of course one that I've really enjoyed and have been linking to lately is Social Democracy for the 21st Century. That blog has two more posts on the Keynesian uncertainty point since I last discussed it, here and here.

I haven't invested the requisite amount of time reading the Post Keynesians, but my initial impression is that claims that "Keynes would have been a Post Keynesian" are somewhat weak. I think all branches of modern Keynesianism (with the exception of the few New Keynesians that pass off sticky wages as the entire story) are heirs to Keynes to a large extent. The strongest case that Keynes would not have embraced the neoclassical synthesis is that he himself rejected Hicks's formulation of joint determination of the interest rate in the loanable funds and money market while he was still alive. OK, so Keynes and Hicks are different. There was a time when I said "Hicks definitely had it right", but I'm not so sure how declarative we should be about that anymore. The point is, neither of them (and none of the neoclassical synthesis Keynesians) were strict Wicksellians on the interest rate. That's the salient point. I have no real interest in fixing Keynes in stone on this point an beating the neoclassical synthesis over the head with it. The other thing you hear Post Keynesians say to distinguish themselves is that they put special emphasis on uncertainty. This is weak too, I think. The absolute most important role that uncertainty played for Keynes was in driving liquidity preference and money demand. New Keynesians have not dropped this. They may say they embrace rational expectations, but as you all should know "rationality" is a very slippery term in economics. A rational optimizer that demands liquidity still provides a substantially Keynesian story. Do Post Keynesians talk about uncertainty more frequently? I wouldn't be surprised if they do. But as far as I know they are not unique in their consideration of liquidity preference, and that is the real significance and application of Keynesian uncertainty.

That's my take, but I am happy to admit that I am even less well read in Post Keynesianism than I am in, say, the Austrian School.

Texas Independence

Evan and I were born in Texas, so I have to mention this - 175 years ago, today, Texas declared itself a republic, independent from Mexico.

I went to the 2009 Southern Economic Association conference in San Antonio, and although I wasn't there long I made sure I stopped by the Alamo before I left. The Battle of the Alamo was raging when independence was declared. One thing that amazed me was how small the building was. It was not a place that I would like to be outnumbered ten-to-one. They've done a really nice job presenting it - a nice walk-way around the building, and good literature and presentation of the battle outside. I didn't even go in but I got a good view of a lot of the complex. It's definitely worth seeing.

Mulligan on the Stimulus

Can anyone provide me with a stimulus critic that actually tries to grapple with endogeneity issues when they look at the data?

I know it's just a blog post, but Casey Mulligan has a post up today that just looks at the raw data. His version of a counter-factual is to assume economic projections early in the downturn were right (hmmm...). He's not alone. John Taylor regulalry dumps some BEA numbers into excel and calls it a day. In a recent working paper by Cogan and Taylor, their counterfactual is that most of the stimulus spending to states went to reduce borrowing, and that purchases would not have changed at all in the absence of the stimulus (see page 13 and 14). Guess what - when you assume a "no effect" multiplier when designing your counter-factuals, you end up getting no effect in your results. Shocking! This is Stanford University and the University of Chicago being represented here.

I would be more open to these positions if any of these guys made any effort at all to even acknowledge the endogeneity problems and tried to objectively deal with them, rather than assuming their own conclusions and passing it off as economic science. I can think of one stimulus skeptic who has done this: Robert Barro. And he has a very interesting identification strategy. I like to highlight Barro's work whenever I criticize others' work because he actually makes a good effort. My critique of Barro is not that he does something wrong, but that his findings aren't generalizable. When you estimate multipliers outside of depressionary conditions you can't claim to have an estimate of what the multiplier would be in a depression. We expect it to change. But Barro provides good evidence that government spending crowds out private spending in normal times.

Anyway - just frustrating to see Mulligan this morning. These guys essentially assume their conclusions and a lot of people still take these to be reasonable claims.

Chidem Kurdas bashing the "Constitution Bashers"

I don't know why some people have this assumption that if people disagree with you about the Constitution, they must not like the Constituion. Chidem Kurdas, of ThinkMarkets, considers people who question her brand of originalism "Constitution Bashers", although she doesn't even manage to successfully articulate their argument.

At issue is her allegation that a lot of people who don't think like her think the Constitution is out-dated because technology has changed. She even cites an example, but apparently misses the point. The argument usually goes that technology has changed since 1787, but human nature hasn't. Originalists can't look for what the founders would have said about things like the internet or airplanes or space flight. They have to reason from analogs and simply infer what the Constitution says about the proper relation of the government to the people. That's usually the technology argument you hear (and that's what her citation seemed to be saying), not "well we have the internet now so the Constitution is an anachronism".

She also gets upset over the notion that people would find the Tea Party push to have the Constitution read "comical". She writes: "I’m not sure why reading the Constitution is considered comical, but I suppose this is because the document is seen as fuddy-duddy." I don't know how you could have a bigger tin ear on the question! It's not that critics had anything against the Constitution! They had a problem with Tea Partiers using it for political theater. It wasn't the end of the world or anything, but I didn't appreciate the Constitution being used as a prop either. Why is it so hard for Kurdas to see this?

What's most ironic is that she goes on to talk about the amendment process, suggesting that if we "non-originalists"* don't like what's in the Constitution and think it's old-fashioned we can amend it. I could say the same of Kurdas! All the things that the Tea Party complains about are derived directly from the enumerated powers - many from the general welfare clause and the necessary and proper clause. A few from the commerce clause, but as I've shared in the past I don't think the commerce clause legitimates as much as it is claimed to. The Constitution was intended as a republican, classical liberal document but it was never intended to be a libertarian document. Many libertarians remark on this. You can't say you agree with the Constitution one day, conveniently ignoring all the non-libertarian passages, and then deny that Congress has its enumerated powers the next. Kurdas's arguments on technology and how old-fashioned the Constitution is are red herrings. If she has a problem with the plain words of the Constitution and the bulk of constitutional jurisprudence, and if she wishes the neo-mercantilist liberal founders had written a more libertarian document, then she's welcome to agitate for amendments.

Until then, I'd prefer not to be called a Constitution basher.

* I hate this term, because I consider myself an originalist. I don't think the founders originally intended a lot of what they wrote to be read the way the likes of Churdas, Scalia, and Thomas read it.

Disappointing news

Apparently, Facts and Other Stubborn Things did not make the Top 40 Libertarian Sites list.

I am both shocked and disappointed, and I want to assure readers I'll try harder in the coming year.

Jonathan announces a milestone for the Economic Thought blog. We have not topped 12,000 hits per month, but we've been over 10,000 for the last couple months and well over 6,000 for a long time before that. Jonathan has a nice cadre of followers (441 on Facebook), and a traffic every time he publishes on Mises.org, which certainly helps get the message out.

I'll try and think of something salacious to post to boost the hits for March.

Keynes, time, and uncertainty

Keynes thought very deeply about the significance of two issues for economics: time and uncertainty (which, when you consider them together, we often talk about in terms of "expectations"). What I find interesting is that he was not the first to talk about these problems - it was part of the intellectual milieu of the late nineteenth and early twentieth century. In that sense, one way to think about the "Keynesian revolution" is that Keynesianism could not happen until thinking about time and uncertainty had developed sufficiently to mix with Malthusianism, mercantilism, and various other non-Ricardianisms. The froth of thought on time and uncertainty enabled the Keynesian solution to much earlier problems.

Work on the essence and implications of time was widespread. Leibniz, Kant, and Newton had all passed the buck when it came to thinking about time - but that all began to unravel. Martin Heidegger made time and our existence in time a new basis for ontology. Henri Bergson was talking about the implications of time for free will, and like Heidegger, had a concept of our projected existence in time (Duration). Einstein, of course, deconstructed the Newtonian system by reconceiving of time completely. Einstein had some famous disputes with Bergson over precisely the question of time in the early 1920s. McTaggert was also one that questioned the traditional understanding of time in this period. By the late 1920s our thinking about time had been completely revolutionized. This all coincided nicely with the elimination of localized measurements of time. Much of this discussion occurred between 1884 at the Univeral Meridian Conference and 1928, when Universal Time was adopted to replace Greenwich Mean Time. A very poetic set of book ends.

Thinking about uncertainty was also very common in this period. I've previously gone over pragmatist contributions to this discussion in the late 19th century. C.S. Peirce's work in probability is in many ways a pre-cursor to Keynes (and in many way far exceeded it according to some authors). Later pragmatists would see connections between the implosion of rationalism and the work of the phenomenologists (again - Heidegger) and the pragmatists critique of certainty. Each branch of philosophy was stumbling upon the same problem of fundamental uncertainty that pragmatism had emerged to deal with. People don't want to just stand in a stupor when faced with uncertainty - they want to still act in a reasonable way. So it's not surprising that we also saw the growth of probability and statistics at this time. Least-squares methods had already been developed, but Pearson, Markov, Fisher, etc. Discussion of uncertainty was also fruitful in physics, with the work of Heisenberg and Bohr.

To a large extent, modern science is science that has incorporated problems of time and uncertainty. Darwin got the ball rolling by considering the implications of deep time and randomness. This is also the foundational difference between modern physics and Newtonian physics - the integration of time as something more than a track that matter runs on, and the abandonment of strict determinism. This is also modern economics: time, uncertainty, and expectations. These ideas have been incorporated in many ways, but the man most responsible for re-envisioning the entire discipline along these lines was John Maynard Keynes.

Another early 20th century writer noted this too, of course. A writer that noted both that "conflict with time seems to me the most potent and fruitful theme in all human expression" (1933) and "the oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown" (1927) is clearly a writer for the modern era.

More on Keynesian Uncertainty

- "Lord Keynes", at Social Democracy for the 21st Century, blogs about the Economist article I mentioned the other day here. He connects Keynesian uncertainty to Post-Keynesians specifically, which I found a little odd - I asked him why in the comment section. This may be a case of heterodoxy in search of distinction (similar to the wonderful Bryan Caplan characterization of the Austrian reaction to being informed that all economists are subjectivists - "Oh - well then we're radical subjectivists").

- Jonathan blogs about the same article here. This is less about the uncertainty arguments and more about questions of market efficiency and bubbles (which was the subject of the original Economist article, after all).

- Donald Rumsfeld is on a book tour that I think is relevant to this question. His book is called "Known and Unknown", based on his 2002 formulation of "known knowns, known unknowns, and unknown unknowns". This captures the essence of Keynesian uncertainty in a nice, short-hand way. Keynesian uncertainty boils down to a couple important propositions - first, that probability is a branch of logic. And second, that we can think about probability in a categorical way (which roughly corresponds to Rumsfeld's categories) depending on our ability to quantify probabilities for certain events.