We don't need no stinkin aloe vera

Bob responds to Brad DeLong and suggests Krugman's buttressing his point.

Errrmmm... only if you had a really bizarre perspective on this in the first place.

Perhaps Bob should take Krugman’s post as evidence that nobody disagreed with him on the relationship between investment and potential output (that this is not just something that Austrians and Larry Summers have come up with).

Perhaps?

I feel like I have a decent grasp of the way Bob thinks, and I'm honestly baffled how he could write that in the first place. And maybe he doesn't think that, it's just a little rhetorical flare (that would make me feel a lot better). But if he does, maybe that's the place to start.

That would imply that the disagreement is elsewhere – over the degree of the effect and the strength of DeLong’s initial point. Bob seems to think that DeLong is using a particular meaning of “materially lower” and he is hanging an awful lot on the assumption that Brad is using that phrase in that way.

Old post on the economics of Dr. King

One of those things I really want to revisit in more detail and have maybe 2,500 words down on, but just haven't.

- The economic thought of Dr. King
- Dr. King on property
- Dr. King on calculation
- Recent excellent blog post from the Urban Institute on the March on Washington
- A Dr. King/Obama connection on individual vs. social production

Also - here's a new post from the Urban Institute

It's an American economic thought/economic history Amazon day

-  The Road to Plenty
Foster, William Trufant and Waddill Catchings
- The Distribution of Wealth: a Theory of Wages, Interest and Profits
John Bates Clark
- A Guide to Keynes
Alvin Hansen
- Sharing the Prize: The Economics of the Civil Rights Revolution in the American South
Wright, Gavin
-  Wages and Labor Markets in the United States, 1820-1860 (National Bureau of Economic Research Series on Long-Term Factors in Economic Development)
Margo, Robert A.

Would you like some aloe vera? Bob Murphy, Brad DeLong, and Paul Krugman

As probably the only person on the whole wide internets that likes Bob, Brad, and Paul, I feel obligated to relink.

1. Brad DeLong
2. Bob Murphy
3. Brad DeLong (ouch!)
4. Paul Krugman (OUCH!)

I obviously agree with Brad and Paul a zillion times more often than I agree with Bob, but let's put that aside for a second. I didn't get involved in the initial post by Bob because I've been busy and it looked like an in-the-data-weeds sort of post. But also because I doubted it would amount to much. Paul Krugman tells us that the CBO is not stupid. This is true. They have some really smart people there and dumb mistakes simply aren't their thing. But it is even more true that Brad DeLong is one of the most careful bloggers out there. IMO he passes Krugman in this regard. Krugman has a tendency to make sweeping statements, get grouchy about the state of economics, etc. which leads him to make broad claims sometimes that don't hold up. Brad is more careful than Krugman in that sense.

Another way of putting this is that Brad is a great details guy in his posts and Paul is a great big picture guy in his posts. I feel like I disagree with Brad sometimes too - but I feel like I take my life into my hands when I do.

That having been said, I will still push the hopeless line that Keynesians ought to follow Bob's blog. Unfortunately, a lot of Austrian bloggers don't offer much interesting. It's complaining about vaguish methodological concerns. Bob, meanwhile, doesn't raise some kind of purist methodological objections - he jumps into mainstream modeling and keeps up with the best of them (Nick Rowe, for example). Bob also doesn't really have any sacred cows. He's happy to knock Mises and Hayek on substantial points and not only agree with Sraffa but claim that Sraffa didn't go far enough. And he's a clear writer. He's too obsessed with Krugman gotchas IMO, but nobody's perfect. I'm sure there are things about me that bug people too. So I enjoy following him.

To brighten your Monday

If Steve Martin's music career is news to you, you are missing out btw.

Two interesting observations on this economath discussion

Noath Smith, Paul Krugman, Bryan Caplan, David Henderson (and me, but I'm a bit player) have been talking about math in economics lately. I'll let you look up all the posts.

I've noticed two funny things.

1. The people who are generally opposed seem to treat the argument as economic intuition/relevance vs. mathematical economics. This is a category error. Economic intuition/relevance is something we expect to be in all good economics, whether it is literary or mathematical. And there's definitely examples of both with and without good relevance and good foundational economic principles. That's the substance of a piece of economics. The math/literary question is the medium. The real question is the comparative strength of the medium.

2. If find it interesting that there is a fight about math's role in economics but there seems to be little fight at all about the role of literary economics. In other words you've got people talking as if the highly mathematical papers have somehow gone off the rails but you don't have anyone criticizing the major literary contributions. I find that interesting.

My view is that both are important and we should expect people going through the PhD process to be able to write and do math well and be excellent consumers of both. I am not worried that good people are kept out because of math standards. There is a substantial enough demand for PhD slots that there's no reason why programs can't be choosy and get people good at both. So I don't think we should lower our math expectations - if anything we should raise our literary expectations. This is coming from a guy whose writing is certainly stronger than his math and for whom that certainly made a difference in his PhD application experience, so I'm not giving math expectations a pass because I'm some kind of hot shot.

I think Randall Munroe reads Gene Callahan

Probably not, but hey - that logic worked for Farmer on Krugman (I actually like Farmer, but that letter was just bizarre).

http://xkcd.com/1255/

Galbraith question

I've seen this all over the place: “the conventional view serves to protect us from the painful job of thinking”. I was going to use it but can't find a citation to it. Does anyone know where he actually said this? Maybe it was spoken rather than written which is why sourcing it is so hard? Lots of people quote him on it but I can't find any citations yet.

Jonathan Catalan makes an odd claim

He writes: "Say there is country A who conquers countries B, C, & D, imposing external costs on country Z, and even threatening large future costs (e.g. an invasion). It may make sense for country Z to increase war spending to organize a way of reducing total future costs by preemptively eliminating A’s capacity to impose costs on Z. That doesn’t necessarily mean that Z’s war spending creates a net benefit, it just mitigates the loss."

I guess health care spending doesn't involve a net benefit either! That is just mitigating a loss - my eventual breakage and death.

Of course what's really at issue here is how we're netting things out. I can't control what A does. So I take it as given. When I assess net benefits it's going to be based on the consequences of my decision.

Noah Smith on math, and some of my thoughts (coming at this from a different angle)

Noah Smith has an excellent post on his journey from high school, to physics, to economics, and the role that math played. To summarize he started out talented at but bored with math in high school, became very captivated by it and its predictive power studying physics, and then ran into some disappointment with the way math was used in economics (particularly macro). A good summary of his concern is provided here:

"In macro, most of the equations that went into the model seemed to just be assumed. In physics, each equation could be - and presumably had been - tested and verified as holding more-or-less true in the real world. In macro, no one knew if real-world budget constraints really were the things we wrote down. Or the production function. No one knew if this "utility" we assumed people maximized corresponded to what people really maximize in real life. We just assumed a bunch of equations and wrote them down. Then we threw them all together, got some kind of answer or result, and compared the result to some subset of real-world stuff that we had decided we were going to "explain". Often, that comparison was desultory or token, as in the case of "moment matching"."

So he begins by discussing one way that math is used by scientists - to represent reality precisely and predict its behavior. He discusses two other uses of math that he thinks are common in economics: signaling that you're smart and obscurantism. I can't disagree that these things go on, although I think it's very hard to get away with it. Most celebrated economists really do have something valuable to say - a contribution - and could not win their acclaim just by doing hard math. Some of the most celebrated papers have fairly accessible math, after all.

I come at this from a different perspective and would add one more way to use math to the list that I think characterizes most math in economics.

In high school, I was "good, not great" at math. I was in the advanced classes, but not the most advanced classes (probably due to where I was tracked early on more than anything else). I had no real interest in doing much of it in college. I knew I wanted to study economics (and very quickly realized I had to do some more math), and had initially planned on double-majoring in government. But in my freshman year, practically randomly, I took a criminology class in the sociology department and was hooked on sociology. I never took any more government after that and I double majored in economics and sociology.

Sociology is very different from economics. There are some great empirical sociologists but sociological theory isn't nearly as formalized as economic theory (there are some important exceptions, for example people dealing with social networks). There are some good reasons for this - what sociologists deal with is harder to quantify and therefore harder to formalize. But that comes with costs. When you take a theoretical outlook in sociology you are juggling lots of different forces and trying to make sense of how they work together and feed back into each other. That's very hard, and the quality of the theory is obviously going to suffer because it's hard. That's not a slight on sociologists - that's just the nature of the problem.

Economics is different. We're dealing with trade-offs - comparisons - which are therefore eligible for mathematical representation. We're also often dealing with quantifiable things. That means math has a real shot in economics.

But Noah is right that it's not quite the same as physics. Our microfoundations and really any equation - microfoundation or not - is not as concrete or testable as it is in physics.

For me, that misses the point of the value of math in economics. Of course it would be nice if we could get more concrete in the way that Noah is suggesting physics is concrete. There are some obvious advantages associated with that. But the big advantage of math in economics is that all those complex interactions and variables that sociological theory is juggling can be much more carefully laid out and related to each other. That is not a guarantee that we are hitting on laws of the universe the way physics is (although good Kuhnians have to take that bit of language about "laws" with a grain of salt anyway). It is, however, a path to a much more coherent and useful way of doing social theory than probably any other social science offers.

This, I think, is very clear if you're coming to economics from another social science. It is less clear if you come from the natural sciences and try to cut and paste your experiences from the natural sciences.

So for me, it's primarily not about signaling or obscurantism. It's about making our ideas clear. That helps to test and arbitrate between different ideas. We're not getting at any kind of precise laws yet. I'm guessing we never will. It's just not the nature of the beast. We are learning a lot about how the world works, though.