Thursday, April 19, 2012

Thursday Roundup (4/19/2012)


Ladies, gentlemen, and extraterrestrial beings, your Thursday Roundup:

1. Mark Thoma attends the INET conference in Berlin, and offers his thoughts. Predictably, the conference was just as awesome as I knew it would be, making me all the more bitter that I was too poor to go. (shakes fist and bellows at the sky: "SOROSSSSSSSSSSSSSS!!!")

2. John Taylor discusses a paper analyzing the impact of fiscal stimulus using several different New Keynesian DSGE models. The paper finds that multipliers are substantial if stimulus is A) composed mainly of government expenditures, and B) temporary rather than permanent. In other words, if stimulus is exactly what Keynesians say it ought to be! Good to see Taylor coming out of the closet, as it were...

3. Unfortunately, exponential economic growth can't continue forever, and here's the physics to explain why. I've actually been aware of this for a long time. As my understanding of the general numbers goes, we've got a century or a century and a half of Twentieth Century level growth left before we start to cook the planet with waste heat; if we slow our rate of growth to half of what we enjoyed in the 20th, we'll have two or three more centuries. If we expand into the solar system, that number will be higher, but one thing is certain; we will not grow at 20th Century rates for the next 1,000 years. (Of course, this is moot, since in a few decades we'll all be robots, right?)

4. Foreign Policy has an extremely good (and long) interview with Ed Luce about American decline. Two key facts: 1) America's share of world output is NOT holding steady, but has declined steadily. 2) America's military spending will not dwarf that of China for very much longer. Thus, two of the key talking points of the anti-declinist school of punditry are just factually false.

5. Mark Thoma and some NY Fed economists report that if you feed the right info into a DSGE model, it can forecast the economy as well as the judgment of professional forecasters. However, Robert Waldmann argues that really you're just rigging the model to give the right answers.

6. Alex Tabarrok has a good post on vocational education. We may finally be getting high-quality technical vocational education in the U.S.! Take my advice, policymakers: make vocational school a good place to meet people of the opposite sex, and all the kids will want to go.

7. Ryan Avent reports that China is probably not overinvesting to the degree that many believe. I am not surprised; China has labor and needs capital, so it should be doing exactly what it's doing, i.e. building capital at a furious rate. However, note that with a trade deficit instead of a surplus, China can build up its capital even faster!

8. However, China has other fish to fry, as this article on Chinese military corruption reveals. Note the relevance of this for my discussion with Scott Sumner about culture...personal-level pragmatism (rational rent-seeking) is causing the quality of the Chinese military's institutions to decrease. It's just hard to know how culture is going to affect institutions...

9. Steve Randy Waldman continues to call for an alliance between Keynesians, market monetarists, and New Keynesians. His post, unfortunately, is probably way too smart, erudite, and sensible to receive much attention.

10. Steve Williamson discusses the idea that Ben Bernanke is just a "wimp" who refuses to reflate the economy. In the process, Steve describes what the Fed actually can do, policy-wise, which is definitely worth a read.

11. John Cochrane discusses why asset prices and volatility seem to move in opposite directions.

12. Alex Tabarrok reports on how debtor's prison is making a comeback. Just another way that the U.S. is moving back toward the ideals of free markets and personal responsibility that gave us such unbridled prosperity in the 18th century.

13. The American Enterprise Institute appears to have jumped onto the New Urbanism bandwagon! File under "Things I never thought I'd see in my lifetime."

14. Mike Konczal offers some arguments for why better regulation, not tighter monetary policy, is the proper way to rein in the excesses of the financial sector.

15. Simon Wren-Lewis does not like my criticism of the Wieland model-aggregation approach. I may respond more if and when I figure out what Wren-Lewis is talking about. This has not yet happened.

29 comments:

  1. Point #3 I remember having the waste heat discussion in about 1974. Long before we hit the boiling point we are going to be doing interesting things to the atmosphere. Your century and half estimate may be optimistic.

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  2. Absalon: Remember, I'm talking about 20th century per capita growth rates, not total. Population exploded in the 20th century but will soon level off (according to UN estimates).

    I've read that we could produce 10 times the waste heat we currently produce, with no major problems. If population levels off at 10 billion, that would give us 100-150 more years at 20th century per capita growth rates, depending on changes in the energy efficiency of GDP.

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    1. Anonymous4:22 PM

      http://news.cnet.com/8301-11128_3-20118040-54/a-moores-law-for-computers-and-energy-efficiency/

      Something the physics guy doesn't consider (but the economist partially does but doesn't know the science). To the extent that economic growth is driven by gains in this arena we can add a lot more years.

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    2. Um, no.

      Say we're five orders of magnitude away from what's economically feasible. At 18 months per doubling, it takes less than 26 years to hit the limit. Seven orders of magnitude, you say? 35 years.

      These gains have been happening in the past, and are incorporated in the trend rate of energy consumption. This adds nothing at all to growth, and may cripple it in three decade's time.

      Delete
  3. Anonymous12:52 PM

    Was Ed Luce at the Khruschev-Nixon 'kitchen debate'?

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  4. With regard to exponential economic growth, first, there's always the matrix; we get there, and there's basically no limit to what we can have. But also, here's a good quote from the great growth economist Paul Romer:

    Now, what do I mean when I say growth can continue? I don't mean growth in the number of people. I don't even mean growth in the number of physical objects, because you clearly can't get exponential growth in the amount of mass that each person controls. We've got the same mass here on Earth that we had 100,000 years ago and we're never going to get any more of it. What I mean is growth in value, and the way you create value is by taking that fixed quantity of mass and rearranging it from a form that isn't worth very much into a form that's worth much more. A canonical example is turning sand on the beach into semiconductors.

    At: http://reason.com/archives/2001/12/01/post-scarcity-prophet/singlepage

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    1. "there's always the matrix; we get there, and there's basically no limit to what we can have."

      Unfortunately, there is still a limit. Due to speed-of-light constraints there's a realistic limit to how fast we can assimilate information, and therefore how quickly we can consume utility.

      The size of the economy is measured in terms of final consumption. Once households can obtain no increment in utility, growth has stopped, no matter how much more activity of various sorts there may be.

      Delete
  5. far more interested in what the heck were you thinking with a picture of Nathan Fillion up there. eew.

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  6. Wow two different Waldman(n)s in the same post (and both correctly spelled which is rare). I'm not sure you have the same reaction, but I am struck whenever I leaen of a relative who has the same last name (ok I can guess).

    On content however, the Waldman(n)s don't see eye to eye. Only so long as fiscal policy is absolutely determined can I treat market monatarists as allies. The point is that if the choice is between bad or horrible fiscal policy, I think it is necessary to fight very hard for bad fiscal policy.

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    Replies
    1. Are you and he in fact related?

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  7. "an alliance between Keynesians, market monetarists, and New Keynesians"

    What happened to the Post Keynesians?

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    Replies
    1. MrToad11:37 AM

      "What happened to the Post Keynesians?"

      Lost in the mail. (*rim-shot* *crickets*))
      Also, too, why is Captain Hammer holding a hog-leg? I am unbelievably tired right now. I think my free-associating is approaching schizophrenia levels.

      Delete
  8. Whoops, misplaced apostrophe: decades', not decade's.

    (Readers will note I have ample stocks of commas and can obtain as many as desired. The internet rumor of a shortage of commas and other punctuation marks is false. Use them wherever they aid the reader's comprehension. You won't run out.)

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    1. Due to speed of light constraints there is a theoretical limit on commas.

      Delete
  9. Anonymous9:08 AM

    Re: physics of growth. Keynes got it mostly correct yet again, but he should have put it that rather than being dead, "in the long run we'll all be cooked."

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  10. I for one like the wonkish recent turn. Though I don't have the academic background I've come to really love the wonkish stuff. What I don't love Noah is how you always ignore my comments.

    That's the one reason you got to love Scott with all my reservationis about him you don't feel like your wasting your time writing a comment over at his place.

    I'm fascinated about this model stuff. Will we fianlly move beyond DSGE? Judging by recent history it seems that macro revolutions occur about once every 40 years or so-in the 30s we had Keynes and Hick;s IS-LM reading of him, in the 70s we had Lucas of course.

    While I hope to see some new model wehter it's "multiple equilibria" or "disequilibrium" what's clear is that establishment macro at least failed one of your two tests-prediction-and largely the other part too reading Lucas' jibes against stimulus-policy guidance.

    That one link about how we can't keep growing like we've been growing was depressing. See I think some people want us to slow down and sniff the flowers. I'm not one of those people. I really actually love turbo 20th century style capitalism and want to proloing it as far as possible-Keynes I think and also Minsky have some ideas about that.

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    1. What I don't love Noah is how you always ignore my comments.

      Hey, I can't respond to every comment, I've got stuff to do! If I think I have something interesting or useful to add, I add it...

      Delete
  11. Hey Noah,

    What's your feelings on Chinese municipal debt levels and their ratio of consumption as a percent of GDP? How do you think that they'll circumvent these issues in the absence of a sharp uptick in global export demand?

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    1. That deserves its own post!

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    2. Michael Pettis has written a bit on this subject: http://www.economonitor.com/blog/author/mpettis3/

      I was wondering if your views are in agreement with his. He seems to be pretty bearish on China, despite teaching there. I look forward to your hypothetical post.

      *Above should say "What are" rather than What's". Yey for verb conjugation*

      Delete
  12. Anonymous5:06 PM

    "John Taylor discusses a paper analyzing the impact of fiscal stimulus using several different New Keynesian DSGE models. The paper finds that multipliers are substantial if stimulus is A) composed mainly of government expenditures, and B) temporary rather than permanent. In other words, if stimulus is exactly what Keynesians say it ought to be!"

    Yes, but for those of us who both (i) opposed the stimulus and (ii) don't think Obama is a socialist, one of the main reasons for this opposition was the fact that the stimulus package was (a) light on government expenditures and high on transfer payments, and (b) likely to become a permanent increase in spending.

    Of course, now that I think of it, I could be the only person who fits into groups (i) and (ii).

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  13. I agree with you about the problems with the ARRA. However, because of the "balance sheet recession" effect, I thought the stimulus might help households pay down their debts faster, so I didn't oppose it.

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  14. Anonymous6:17 AM

    Wait a second. The physicist does not say that "exponential economic growth can't go on forever", he says that "economic growth can't go on forever". That's a big difference, and it annoyed me when I read his arrogant conversation. I think many economists, including myself, see world GDP has having a finite upper bound. That does not mean that growth cannot go on forever. I can never imagine a situation in which all human creativity is preempted.

    So I believe Charles H. Duell, the Commissioner of US patent office in 1899, was wrong when he said "everything that can be invented has been invented", and I believe that every future commissioner of the office will be wrong when stating the same thing. (disclosure: I'm not sure if Charles H. Duell actually said that, but at least, that's how the story goes)

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  15. Anonymous6:18 PM

    What did you find of interest in the interview to Ed Luce? Luce does not say anything at all...

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    1. Really? I thought his data points about military spending and U.S. percent of world GDP were eye-opening, given how often those talking points are trotted out by opponents of his thesis.

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  16. GREAT recipe! We have started out creating my personal washing soap simply not too long ago * along with find it irresistible : but don't have a pretreatment spray -- They are Simple elements that i'm gonna offer mtss is a try out!!! Many thanks for posting the idea!

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