faulker020

I'm going to do the inadvisable, and argue with Brad DeLong. Hopefully this will turn out OK, since it's in response to Brad doing the inadvisable and arguing with Paul Krugman (thus breaking at least two of his own rules ). The topic is globalization. Krugman has a new essay in which he lays out what seems to be a rapidly crystallizing conventional wisdom on the recent history of globalization. Some excerpts: [D]uring the 1990s a number of economists, myself included...tried to assess the role of Stolper-Samuelson-type effects in rising inequality...[these analyses] generally suggested that the effect [of factor price equalization from globalization] was relatively modest, and not the central factor in the widening income gap...  [T]he basic fact in the mid 1990s was that imports of manufactured goods from developing countries [were only] around 2 percent of GDP....[T]his wasn’t enough to cause more than a few percent change in relative wages...  In retrospect, however, trad...

Bryan Caplan is one of the most enthusiastic proponents of the signaling theory of education, and this theory plays an important role in his new book, " The Case Against Education ". But I've always had a number of problems with this theory, and also with its application to the education policy issues. Recently, I wrote a Bloomberg View post in response to an essay Bryan wrote in The Atlantic that was adapted from his book. Now, Bryan has responded to my post. He makes many interesting points, but here I'd just like to deal with one issue - the issue of sheepskin effects, and which model they support. Sheepskin effects Sheepskin effects are central to my debate with Bryan. In brief, the sheepskin effect is the fact that most of the college wage premium vanishes if you drop out right before finishing (e.g. in the final semester). Bryan, and many proponents of the signaling model, believe that sheepskin effects are solid evidence that college is mostly about signa...

I've sworn off macro-bashing . I said what I had to say. And I'm seeing lots of young macro people doing good stuff . And the task of macro-method-criticizing has been taken over by people who are better at it than I am , and who have much better credentials . My macro-bashing days are done. But sometimes I just have to offer macro folks some marketing advice. The new defense of DSGE by Christiano, Eichenbaum, and Trabandt is pretty cringe-inducing. Check this out: People who don’t like dynamic stochastic general equilibrium (DSGE) models are dilettantes. By this we mean they aren’t serious about policy analysis. Why do we say this? Macroeconomic policy questions involve trade-offs between competing forces in the economy. The problem is how to assess the strength of those forces for the particular policy question at hand. One strategy is to perform experiments on actual economies. This strategy is not available to social scientists. As Lucas (1980) pointed out roughly forty y...

So, Richard Thaler won the Nobel Prize , which is pretty awesome. If you've read Thaler's memoir , you'll know that it was a long, hard, contentious fight for him to get his ideas accepted by the mainstream. And even though Thaler is now a Nobelist and has been the AEA president - i.e., he has completely convinced the commanding heights of the econ establishment that behavioral econ is a crucial addition to the canon - resistance still pops up with surprising frequency in certain corners of the econ world. It's a sort of ongoing guerrilla resistance. An example is this blog post by Kevin Bryan of A Fine Theorem. Kevin is one of the best research-explainers in the econ blogosphere, and his Nobel explainer posts have always been uniformly excellent. This time, however, instead of explaining Thaler's research, Kevin decided to challenge it, in a rather dismissive manner. In fact, his criticisms are pretty classic anti-behavioral stuff - mostly the same arguments Thale...

There's a particular style of argument that some conservative economists use to dismiss calls for government intervention in markets: Step 1: Either assert or assume that free markets work best in general. Step 2: List the reasons why this particular market might be unusual. Step 3: Dismiss each reason with a combination of skeptical harumphing, handwaving, anecdotes, and/or informal evidence. Step 4: Conclude that this market should be free from government intervention. In a recent rebuttal to a Greg Mankiw column on health care policy, John Cochrane displays this argumentation style in near-perfect form. It is a master class in harrumphing conservative prior-stating, delivered in the ancient traditional style. Young grasshoppers, take note. Mankiw's article was basically a rundown of reasons that health care shouldn't be considered like a normal market. He covers externalities, adverse selection, incomplete information, unusually high idiosyncratic risk, and behavioral...

On Twitter, I wrote that I disagreed with Brad's ideas about speech on college campuses . Brad then requested that I write my ideas up in the form of a DeLong Smackdown. So here we go. Brad's post was written in a particular context - the recent battles over right-wing speakers at Berkeley. More generally, the alt-right has been trying to provoke conflict at Berkeley, seeing an opportunity to gain nationwide sympathy. The murder of Heather Heyer  by Nazis, and general white supremacist street violence, has turned the national mood against the alt-right. The alt-righters see (correctly) that the only way to recover rough parity is the "both sides" defense - in other words, to get people so worried about left-wing street violence that they equivocate between left and right. To this end, they are trying to stir up the most obvious source of potential leftist street violence: Berkeley. Brad, who works at Berkeley, is far closer to the action, and knows far more about t...