faulker020

As y'all know, I love a good book about econ philosophy-of-science. Economic Rules: The Rights and Wrongs of the Dismal Science , by Dani Rodrik, is my favorite book in this vein to come out in quite some time. I gave Rodrik's book a glowing blurb in Bloomberg View, and it was well-deserved. But actually I do have one big problem: the first two chapters. These chapters consist entirely of Rodrik's very general thoughts on economic models, and what they should and shouldn't be used for.  The problem with these early chapters is the audience. Economists will already have heard most or all of these philosophical ideas. Non-economists, in contrast, will probably not understand what they're reading, because the chapters are written in sweeping, general terms, and move very quickly between a number of difficult topics that each require a good deal of background knowledge. So these early chapters suffer the same issue as Karthik Athreya's Big Ideas in Macroeconomics ...

Economics is a big, big tent. Within econ there are many schools of thought. One of these is what I call "101ism" (I didn't invent the name but I forget who did). 101ism is the set of ideas that most people take away from Econ 101. We all know basically what 101ism says. Markets are efficient. Firms are competitive. Partial-equilibrium supply and demand describes most things. Demand curves slope down and supply curves slope up. Only one curve shifts at a time. No curve is particularly inelastic or elastic; all are somewhere in the middle (straight lines with slopes of 1 and -1 on a blackboard). Etc. Note that 101 classes don't necessarily teach that these things are true! I would guess that most do not. Almost all 101 classes teach about elasticity, and give examples with perfectly elastic and perfectly inelastic supply and demand curves. Most teach about market failures and monopolies. Most at least mention general equilibrium. But for some reason, people seem to com...

I thought it would be interesting to post a private-sector economist's views on macroeconomic policy. So here's a guest post by Gerard MacDonell, who was an economist at Point72 Asset Management, (previously SAC) from 2004 through 2015: "So Much for the QE Stimulus" Last month’s Press Release from the FOMC announcing the first rate hike in a decade contained a seemingly-innocuous and yet telling discussion of the interaction between interest rate and balance sheet policy.  It marked the end of false confidence in the efficacy of quantitative ease (QE), which can be traced to a technical error Ben Bernanke made while lecturing the Japanese on deflation in 1999. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.   …The Committee is maintaining its existing policy of...

These days American public discourse tends to feel like a giant continuous race war. Well, I guess we had that "national conversation about race" that Bill Clinton always said we needed. Oops. But anyway, I guess I might as well wade in. The right's way of talking - and thinking - about race is just totally poisonous. The conservative movement has been recruiting working-class whites and Southern whites for decades by using anti-black dog-whistles , and by promoting the idea that government spending equals white-to-black racial redistribution. More recently, the Trump campaign has ridden - and possibly spurred - a wave of anti-immigrant xenophobia. In the online social science discussion, racial theorists like Steve Sailer have gained an inordinately huge amount of currency among right-leaning intellectuals. Then there are the Twitter Nazis and the Reddit Nazis (and let us speak no more of them). So it is basically now impossible to talk to people on the right about race ...

My Bloomberg View colleague Justin Fox has written an excellent post publicizing the econ profession's shift from theory to empirics. Fox puts the Hamermesh data on publication percentages into a lovely Bloombergy chart: By now this is an old story to people within the profession. But I think it's an important story to keep telling to the public, in order to increase people's trust of economists.  People instinctively know that empirical sciences - fields where theories have to be tested by data in order to gain currency - are more reliable than ones based on pure theory. Seeing that economists are now checking their ideas carefully will make the public more confident that prevailing ideas were not simply accepted because of ideology or intellectual whimsy. This is also why I think colleges should start teaching empirics in Econ 101 . Of course, there's bound to be resistance to the popular narrative of the Data Revolution. In an earlier post I tossed out some possible...