faulker020

I've been writing some posts about Econ 101 ( post 1 , post 2 , post 3 ). The basic theme is that kids need to learn a lot more evidence at the intro level, including methods. One response has been that it's actually very hard to teach kids even the simplest methods like OLS. At best, it would take a lot of time, and a one-semester intro course is just not long enough. That got me thinking: What are the kids doing in the second semester of a year of intro economics? At a lot of schools, they're taking intro macro, often called Econ 102. I used to teach that class at Michigan, actually. And to be honest, I'm starting to think that this class is not really necessary. I think econ departments should think seriously about turning 102 from a macro class into a data/econometrics class. Why should undergrads learn macro in their first year of econ? If they go on to be econ majors they can easily start out with intermediate macro and not miss anything important. If they just ta...

I wrote a post for Bloomberg View about how Econ 101 needs more empirics (a favorite hobbyhorse of mine). They titled it "Most of What You Learned in Econ 101 is Wrong", which was a catchy but inaccurate title, since the word "wrong" is often unhelpful in describing scientific theories. For example, in the post, when writing about minimum wages, I wrote: That doesn't mean the [Econ 101] theory is wrong , of course. It probably only describes a small piece of what is really going on in the labor market. Sometimes you test a theory by looking at policy experiments, and what you find is that the treatment effect is in the direction the theory predicts, but the fit is poor - the percent of the variance explained is small. Does that mean the theory is "right", because the treatment effect is in the expected direction? Or does it mean the theory is "wrong", because the fit is poor?  The answer, of course, is that "right" and "wrong...

Here's a Big Sweeping Theory that I've been toying with. There are lots of theories of the cycle of rise and decline of empires in the agricultural, premodern world. I'd like to create a parallel theory of low-frequency cycles (or, more accurately, long-term impulse responses to stochastic technology shocks) in the modern, industrialized world. It's possible to see the convulsions of the World Wars and the Great Depression as a one-time event - part of the growing pains of the industrial revolution, not to be repeated. But what if some of the core features of those events are actually part of a cycle? Here's a sketch of how that cycle might work: Phase 1: Technological Change. A huge burst of new stuff gets invented. Growth accelerates.  Phase 2: Globalization. New tech and growth create new global supply chains. Trade and migration accelerate.   Phase 3a: Inequality. New tech and globalization offer lots of opportunity for rich people to deploy their capital. N...

John Cochrane comments on a recent Bloomberg post  of mine. In that post I wrote: [I]nflation reduces the burden of debt. Japan’s enormous government debt represents the government’s promise to transfer resources from young people (who work and pay taxes) to old people (who own government bonds). Since Japan is an aging society, there are more old people than young people. That makes the burden especially difficult to bear. Young people also tend to have mortgages, the repayment of which is another burden.  Sustained higher inflation would represent a net transfer of resources from the old to the young. That would increase optimism, and hopefully raise the fertility rate, helping with demographic stabilization. John agrees that (unexpected) inflation is a partial debt default that has (among many other effects) the net effect of transferring real resources from the old to the young. But he believes this to be unfair, and also cruel: [L]et us remember where debt actually comes...

"Just then the floating disembodied head of Colonel Sanders started yelling Everything you know is wrong" - Weird Al Yankovic The problem with discovering how the world works by intuition alone is that the model space is just enormous. Humans are really really smart, but very rarely are we smart enough to just sit down and think about how the world might work and actually get it right. Our most spectacularly successful leaps of theoretical insight - Newton's Principia , Einstein's relativity stuff, Mendel's theory of inheritance - were all very closely guided by data. The general pattern was that some new measurement technology would be invented - telescopes, plant hybridization experiments, etc. - that would provide some new unexplained data. Then some smart theorists would come up with a new theoretical framework (paradigm?) to explain it, and the new framework would then also explain a bunch of other stuff besides, and so people would switch to the new theory. ...

Case and Deaton, welcome to the blogs. Prominent academics are often astonished at the rapidity with which the blogosphere occasionally pounces on and dissects their research findings. In this case, it happened to Case and Deaton, authors of a recent much-publicized study  entitled "Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century." The pounce was done by Phil Cohen , and - most prominently - by Andrew Gelman .  The TL;DR version is that rising mortality in some of the subgroups spotlighted by Case and Deaton was increased by a composition effect - the average age within the subgroups increased over the observation period, which pushed up death rates for the aggregated subgroups. If you remove the composition effect, the mortality increase among these groups was considerably less. Anne Case responded with the consternation typical of researchers first encountering blog attacks: Case said that she didn’t buy this argument. “We ...

The other day, I noticed something disturbing in a graph from a Brookings report on immigrant mobility: We see that Hispanics are strongly upwardly mobile from the first to the second generation. Asians are slightly upwardly mobile, but from a pretty high base. Those are both good news. But black immigrants, on average, appear to show downward mobility. Why would black immigrants be downwardly mobile? I posed the question on Twitter. A smart person called Abraham Bloodshack immediately tweeted this to me: generational effects? i.e., recent increase in African migration could mean second gen are all quite early in careers That was smart. We'll follow up on that later. But first, let's review some possible explanations for the mobility disparity: 1. Household size decrease. 1st gen. African immigrant families are probably really big, since Africa is a super-high-fertility place in general, while 2nd gen. families probably have drastically lower fertility. 2. Cohort effect. R...

Everyone is talking about the Case-Deaton paper that shows an increase in mortality among American white people. Most people have noted that the increase is concentrated among less-educated whites. Here is the relevant excerpt from the paper: The three numbered rows of Table 1 show that the turnaround in mortality for white non-Hispanics was driven primarily by increasing death rates for those with a high school degree or less. All-cause mortality for this group increased by 134 per 100,000 between 1999 and 2013. Those with college education less than a BA saw little change in all-cause mortality over this period; those with a BA or more education saw death rates fall by 57 per 100,000. Although all three educational groups saw increases in mortality from suicide and poisonings, and an overall increase in external cause mortality, increases were largest for those with the least education...  The final two rows of the table show increasing educational gradients from 1999 and 2013; ...

Tony Yates offers his reading list on "Panics and Bubbles". The list has some good stuff on it. Diamond-Dybvig , Geanakoplos , and Cogley and Sargent especially stand out. There's also some good stuff on how "expectation shocks" can cause economic fluctuations - for example, Angeletos and Werning , Farmer , etc. There were one or two incongruous things. (Money search? What does money search have to do with panics and bubbles??) But mostly good stuff to read. However, there's also a lot that I think Tony left out. His list skews heavily toward macro and money-based models, usually with rational expectations but with a few learning-based models thrown in. It is also mostly made up of theory papers, with little empirical work. This is understandable, since macro theory is what Tony does. But there are a lot of good non-macro and empirical papers out there on the topic of "Panics and Bubbles". For example: Harrison and Kreps (1978) model how overco...

NOTE: Mystery probably resolved! See update below. Here was the original post, for posterity: While recently complaining about the overselling of static-efficiency policies, I asserted that rich countries have all grown at about the same long-term rate, despite decade-long divergences. I was talking, of course, about Total Factor Productivity, which at long horizons should be determined by technology. I had been under the impression that over the last three decades or so, the rich countries had all experienced similar rates of TFP growth. My source for that was the OECD's time-series on multifactor productivity ( another name for TFP). Here is a chart of those OECD productivity numbers since 1985: As you can see, most rich countries grew their TFP at the same average rate, consistent with the idea that TFP mostly measures technology in the long term, and that technology spreads rather easily between rich countries. A few countries, like Korea, Ireland, and Finland, did much bett...

I have a new Bloomberg piece where I criticize John Cochrane, and conservatives in general by extension, for selling static efficiency policies as "growth" policies. The title is not the best (and the picture they use of John is also not the best; sorry about that). But the point is one I've really wanted to make for a long time: Most of the so-called growth policies Cochrane and other conservatives propose don't really target growth at all, just short-term efficiency...Cochrane sells us on the need for growth policies by citing the undeniable benefits of long-term economic growth...But most of the policies Cochrane recommends are most certainly not things that would increase the growth rate for decades on end!...[S]uppose we cut taxes...the deadweight loss goes away...It provides a one-time bump, but nothing more...The same is true of most regulation. You can read the whole thing here. Now,  Cochrane's piece is a very good one, as far as conservative policy man...

Back in August, a bunch of people were talking about Paul Romer and Bob Lucas and history of macro and stuff like that. Somehow I missed this post , where Brad DeLong dug up a Bob Lucas memoir and made fun of Lucas' college biology class exploits. For reference, here's a longer version of Lucas' story: The only science course I took in college was Natural Sciences II - a biology course. We read a modern anatomy text, and also selections from Darwin, Mendel, and others...  [T]here was nothing spooky about Mendel’s genetic theories. They were clear, they made some kind of sense (though there was nothing molecular in our Nat Sci II readings), you could work out predictions that would surprise you, and these predictions matched interesting facts. We did a classroom experiment with fruit flies, focused on eyes, and pooled the results. Our assignment was to write up the results in a lab report and compare them to predictions from a Mendelian model. I had not enjoyed the actual l...