Tuesday, August 30, 2011

Mark Thoma Went to the Wrong Conference

Mark Thoma went to the Lindau Nobel Laureates meetings and wonders why he did not learn anything new. No offense to these people, many of whom I admire and have learned a great deal from, but this is the geriatric set, mostly. One should not expect to be enlightened about the causes and consequences of the financial crisis by showing up at Lindau. For enlightenment, Mark should have gone to the SED meetings in July, to see what the sharpest young economists in the world are doing. I'm sure Ed Prescott would agree.

Let's deal with some of Mark's specific complaints about what he thinks practicing macroeconomists have been up to:
Macroeconomic models have not fared well in recent years – the models didn’t predict the financial crisis...
I'm so sick of hearing that one I could scream. The economic agents living in a model in which a financial crisis can occur know that there is a possibility that this event can happen. But they cannot predict it, otherwise there would be an unexploited profit opportunity. Similarly, a real human being could not have used such a model to predict the financial crisis. Economists may have been unaware of some of the things that were going on in financial markets that contributed to the crisis, and some of that was not their fault, as some of those things involved obfuscation by the financial market participants involved. Failure to predict the financial crisis does not in itself condemn all existing macroeconomic theory.

How can some of the best economists in the profession come to such different conclusions? A big part of the problem is that macroeconomists have not settled on a single model of the economy, and the various models often deliver very different, contradictory advice on how to solve economic problems.
Mark obviously finds disagreement disagreeable, but that's what makes life interesting. If we all agreed, we could pack up, go home, and watch TV. There will never be a "single model" that solves all macroeconomic problems, nor should there be. We use different models for different problems, and all of those models are going to be wrong on some dimension. Intelligent economists are going to disagree about the details of what goes into the models. Science marches on.

Finally, here's an extra bit from Mark's blog post
I have little faith that the older generation will ever acknowledge the models they spent their lives building are fundamentally flawed.
Of course, every model is flawed in some sense, i.e. it is going to be wrong on some dimensions. A model is necessarily an abstraction - a simplification that helps us to organize our thinking about the world. It cannot do its job unless it leaves stuff out, and it therefore can't be right about everything.

The idea that we are surrounded by "fundamentally flawed" models is so gloomy. Look on the positive side, Mark, and recognize what the important contributions are, and how economists have built on those contributions in the last 40 years. Pay attention to the good work that young economists are doing right now, under your nose, if you care to look.

64 comments:

  1. I agree on your first point, but isn't there more agreement in areas like physics? With the natural sciences, our knowledge base expands over time as we do more experiments, collect more data, come up with more insights, and then we have to go further out to find unexplored territory that can support a wide variety of hypotheses. Perhaps that is happening with economics, and then you could use that as an argument rather than "disagreement is okay and even fun".

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  2. You can't tell me natural scientists do not disagree. It seems to me there are plenty of disputes about experiments, how to conduct them, the replication of experiments, whether the experimenters made up the data or not, etc.

    Economists are dealing with some very difficult problems. The data is costly to collect, and sometimes what we can feasibly collect is not very good. Experiments can be extremely costly to run, and natural experiments do not always present themselves. The behavior of individual economic actors changes with economic policies, making it hard to evaluate those policies. Doing economics requires a lot of creativity, and disputes are hard to resolve. That's the way it is. It's not that economists are bad scientists. It's that we chose to work in a profession where the problems are difficult.

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  3. I agree with Steve. Macro models were not designed to forecast financial crises. So failing to predict something for which they were not designed cannot be a serious criticism. On this point, I am reminded of the line from Apollo 13 when the engineer is asked if the LEM module could support 3 men. The engineer says "We designed it for 2 men to land on the moon, not to be a lifeboat."

    On the other hand, we do have models that generate financial 'crisis' such as bank runs (Diamond-Dybvig)yet those models cannot predict when a bank run will occur. So because Diamond Dybvig didn't predict the 'run' that occurred in the commerical paper markets we should throw it out? This is equivalent to saying we would throw out all of modern seismology because the models did not predict the Japan earthquake.

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  4. Oh my goodness. Let thoma go. Between his total lack of a record in macro, his partisan outlook, his shameful blog friends, his hilarious jetting around to noncompetitive conferences (followed by his affected weariness via all the tut-tutting about how macro is a mess)...what a nincompoop. Cut these losers....loose. if and when they write an interesting paper, re-engage. At least there will be something to talk seriously about.

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  5. "I agree on your first point, but isn't there more agreement in areas like physics?"

    What is your metric for comparing areas of agreement in economics vs. physics?

    I read someone state that the lack of agreement on the effects of fiscal policy is like physicists not agreeing on gravity or some such thing. But why? Why isn't it like not agreeing on string theory? Or the weight of a neutron? Or something else?

    Is an orange more delicious than Beethoven's Fifth Symphony is beautiful?

    There is no way to compare levels of agreement (or progress) across disciplines in a sensible way.

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  6. I think I'd have to agree with anon about forgetting Thoma. Not much value added, he is not a producer of any important macro work.
    He is a partisan hack who plays to his liberal audience, not interested in engaging with serious macro.
    What would be useful to lay readers would be bringing to our attention and comments on interesting papers at the frontline. For example, Angeletos and LaO work.

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  7. Stephen, I agree with everything in this post.

    I was left wondering with the following sentence: 'There will never be a "single model" that solves all macroeconomic problems, nor should there be.'

    I agree with it as well. But, since you brought him up in the post, I started thinking if Ed Prescott would entirely agree. My take on his life's work is that he might disagree with the part that says 'nor should there be.' Maybe this is the dimension along which Ed is different from most contemporaneous macroeconomists.

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  8. 1. On Mark Thoma: I don't know, maybe I just have a weird interest in what makes some people tick. Here's a guy who has devoted a lot of time to developing a blog and maintaining it. Why does he think the way he does? Are there useful ideas lurking in the Thoma mind? I'm not just being provocative to piss him off. I'm trying to learn and hoping that some day I might actually convince him of something. However, I understand the beating-the-dead-horse aspect of it, and that this could detract from learning some useful things that we could spend our time on.

    2. Angeletos and LaO: I saw this paper in the summer. Can't remember if I have discussed it, but I have some ideas about it.

    3. "There is no way to compare levels of agreement (or progress) across disciplines in a sensible way." Exactly. There's not much point in finding fault with economics because economists disagree. The problems are different. Take all the economists from the beginning of time, and all the physicists from the beginning of time. Wind back time and successively reassign all the physicists to economics and all the economists to physics. Take a snapshot of the world today, and you'll see about the same levels of disagreement we see to today, and about the same things, in economics and in physics.

    3. On the single model, yes, I think Ed would agree. I disagree about the "nor should there be" part, though. You would have to ask him, but I think he is more tolerant than you might think, or than he might let on sometimes. If you look at his whole body of work, there is some of what Caballero calls "broad exploration," for example into information economics (e.g. work with Townsend and with Boyd on intermediation theory). Read the introduction to "Financial Intermediary Coalitions."

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  9. Thoma is trying. His blog is a good repository of links to econ blogs. And sometimes he does try to engage with modern macro, as when he posted a video of George Evans on learning in economics some time back.
    He seems to be caught in a quandary - maybe he'd like to spend more time on serious macro in his blog, but if he put any equations up he would frighten off the majority of his audience.

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  10. "He seems to be caught in a quandary - maybe he'd like to spend more time on serious macro in his blog, but if he put any equations up he would frighten off the majority of his audience."

    It is more likely that he doesn't understand serious macro, and therefore cannot distill it down to simple ideas that his audience could comprehend, as well as a partisan nature that says anything that Ed Prescott would like must be wrong and evil.

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  11. Apparently many of the commentators here don't realize that jettisoning around to 'competitive conferences' or having a track record in macro does not make for an influential economists anymore. In the past that may have cut it, but not anymore. Being influential today requires being able to effectively use new mediums like blogging.

    Now this doesn't guarantee you will be influential, but those economists who do use it successfully are able to shape the national debate. Sticking to just academic journals may bode well for breaking into the club where you can pat each other on the back about how smart you are, but it doesn't change the fact that for most of you your research is largely being ignored by the broader public. Most of you are therefore largely irrelevant to the public discussion.

    Mark Thoma on the other hand is shaping opinions. For example, because of bloggers like him TARP was changed. Another example of his blog's influence is that the St. Louis Fed president James Bullard responded to a post of Thoma's (http://economistsview.typepad.com/economistsview/2010/08/jim-bullard-president-of-the-st-louis-fed-responds-to-tim-duy-hi-tim-i-read-your-fed-watch-column-th.html). I have been told other Fed staff and officials follow certain blogs closely. More generally, the broader public does. The recent NY Times piece by David Leonhardt illustrates this point. The article's list of influential economist for more monetary stimulus were all bloggers.

    So keep being smug all you want about how smart and accomplished you are, but understand no one really cares.

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  12. SW and his lackeys who comment on this post(e.g.Chris the regression runner) love this echo chamber, and of course, are the only ones doing any useful modelling - since they are engaged in the pursuit of the holy grail of macro-economic models which is grounded on a particular model of rationality and human information processing.

    But while SW and his clan can feel proud and happy that they are using micro-foundations that are compatible with concepts of rationality used in micro-economics, what they ignore is that most neuroscientists and psychologists have long discarded the rationality assumptions underlying homo economicus, as they have learned how the brain really operates. Economists however have continued to build an edifice on their own notions of very flimsy "micro-foundations" of the brain.

    Maybe that is all economists are capable of....

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  13. "On the other hand, we do have models that generate financial 'crisis' such as bank runs (Diamond-Dybvig)yet those models cannot predict when a bank run will occur. So because Diamond Dybvig didn't predict the 'run' that occurred in the commerical paper markets we should throw it out?"

    Interesting.

    But where were the economists who were supposed to be mapping the Diamond-Dybvig model to reality circa 2002-2008? I wouldn't expect these models to predict the precise timing of a crisis, but you'd think an economist using D-D would have been alerted to a growing risk of a crisis, say like a code yellow, red, green sort of system. Are there not enough economists trying to map models to reality?

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  14. "Being influential today requires being able to effectively use new mediums like blogging."

    Exactly. What do you think I am trying to do here? I looked around the blogosphere to see what people do, and was shocked at what you think of as the influential policy advice a lot of these people are offering up. I don't think Jim Bullard values much what Mark Thoma has to say. The next time I see him, I'll ask, just to check.

    As for David Leonhardt, it's clear his opinions are formed by having lunch with Paul Krugman. From his point of view the "big name economists" are the fellow journalists he gets his information from. You should not take him as a cue as to what is useful economics and what is not.

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  15. Stephen,

    I do not understand you when you say:"One should not expect to be enlightened about the causes and consequences of the financial crisis by showing up at Lindau". These guys won the Nobel Prize which means that they made a significant contribution to economics. In contrast, the guys going to the SED are only "promises" in the best case.

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  16. After the fact, we can look back at the financial crisis, and sort out what was going on using essentially off-the-shelf economics. However, the story is pretty complicated, and it's something we had not seen before. Even in terms of the basic story line, there is still a lot of confusion. What's a bubble? What's a crisis anyway? What exactly were the incentive problems, and how did they work their way through the financial system? For someone to have put all this together prior to the financial crisis would have been miraculous. While the financial crisis had some features of previous crises, in some ways it was fundamentally different, and it would be hard for anyone to key into the symptoms, or to understand the nature of the the risks and who was bearing them. Add to that that the incentive problems often involved hiding things, and that some types of activity - e.g. shadow banking and over-the-counter activity - were not being measured. It's not surprising that no one actually put the pieces together until the event had happened.

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  17. "These guys won the Nobel Prize which means that they made a significant contribution to economics. In contrast, the guys going to the SED are only "promises" in the best case."

    Take an example. Lucas has a Nobel prize, and he is still working and writing papers, and can give a pretty good seminar. At 74 years old (I believe), however, he does not have the energy or the time to devote to coming up with big breakthroughs. You'll get some insight from him, for example on the financial crisis, but he's not the person who is going to be staying up all night working on a problem. The people who do that are the young ones. Now, as you point out, you're not going to be able to walk into the conference cold and sort out the wheat from the chaff instantly. For that you have to invest some time in working on it yourself, digesting what you hear, arguing about it with your colleagues, etc. That's how scientific progress works. Or you can ask a practicing scientist what is good and what is not. Don't ask a full-time blogger. He/she is a journalist, not a practicing scientist, and therefore will only know what was relevant from the days when he/she was in the game.

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  18. @ Anon 8:57

    "SW and his lackeys who comment on this post(e.g.Chris the regression runner) love this echo chamber..."

    As Steve and I strongly disagree on the efficacy of QE -- and lots of other stuff -- I think that you need to go look up the meaning of "echo chamber."

    On the plus side, I appreciate being promoted to "lackey." I was only prepared to title myself a "minion," which is a step up from my previous "flunky" position.

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  19. If these are lackeys I must be mistaken about what the word means.

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  20. I'm wondering if @ Anon 8:57 can enlighten us as to the social structure of the blog commenters. I don't think that it is fair that Chris the Regression Runner has risen through the ranks from "flunky" to "lackey" in such a short period of time. Perhaps such a rise is meritorious, but it would be nice to have some idea what a commenter must do to rise through the ranks. Should I simply copy and paste Steve's posts as my comments such that this literally becomes a virtual echo chamber? At present the standards seem arbitrary. It must be that I am thinking rationally....

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  21. Promotion from flunky to lackey requires watering my plants when I am away and looking after the cat. Or post comments such as: "What a fine idea Herr Doktor Professor, thou art brimming with insight and an edifice of scientific splendor."

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  22. We'll really need to do an MRI scan on Anon 8:57's brain (should be a brief job) to figure out the lackey/flunky ranking.

    btw, I am soooo glad psychologists have finally figured out how the brain works!

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  23. Stephen,

    I agree with your point about the lack of agreement in economics not being a bad thing.

    But onto a different, yet perhaps related, question: is it the case that the agents in the models you work with are all making decisions using the same model (perhaps with different preferences, etc.)? And, insofar as this is true, don't you need models which recognize that agents are making decisions on the basis of different, and often incompatible, models? (Keynes' Treatise on Money can be construed in a manner that accommodates this divergence of outlook.)

    I find it interesting that many S&P 500 firms employ economists whose forecasts are based on Keynesian-type models, even IS-LM models. Others may, of course, employ models more like yours. In any event, these divergent forecasts would seem to have implications for rational expectations, efficient market theory, and for the behavior of the macroeconomy.

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  24. Greg,

    In the models I write down, the people living in the model understand particular things about the environment they are living in. They certainly do not know everything. They may have imperfect information about the people they are trading with. Generally they usually know some broad features about the other people that live in the world, for example that there are some different types of people - some that will default on their debts and some that won't. Or a lender will know that people might run away from their debts and you can't quite trust them, but the lender might be able to figure out on average how borrowers will behave. I tend not to think about the problem of people forecasting in different ways, as things are hard enough already and I want to focus on other things. However, here's a book that I think deals with the problem you are interested in. It's interesting, but quite technically demanding:

    http://press.princeton.edu/titles/8535.html

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  25. I agree - no model will ever predict with 100% accuracy, for if it did, the model itself would become an important new part of reality. The new reality that includes the model would then behave differently to the old reality and therefore would no longer be able to be predicted by the model.

    The reality modeled (weakly) by IS-LM did not include the effects of blind faith in IS-LM itself. The end result is that IS-LM now is an even weaker model than it was when invented.

    Given that the model was weak to begin with (as admitted by its author), it is not surprising that economic policies predicated on the predictions of IS-LM have been, to say the least, suboptimal.

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  26. Further, it follows that blind faith in any model as a basis for macro-economic policy is unwise.

    Which calls into question the use of any type of centrally planned macroeconomic policy, for if not based on some kind of model, then what can it be based on?

    Best to focus on investing government funds carefully, wisely and frugally, where required, and leave the billions of intelligent private agents free to generate wealth, as they are naturally inclined to do.

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  27. "For someone to have put all this together prior to the financial crisis would have been miraculous."

    Gorton did so contemporaneously (prior to Lehman). He found plenty of data to back up his argument. Why couldn't one have used his approach to predict the crisis? Shadow banks grew to be systemically important; A run on their liabilities would jeopardize the entire system; their liabilities were uninsured; these were backed by AAA-rated ABS collateral; the performance of this collateral was highly sensitive to house prices; delinquencies in these collateral types were observed to spike in the fall of 2006 after house prices plateaued. Transparent? Reasonably so. Complicated? Not very. Miraculous? Certainly not.

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  28. Anon1,

    Quite a few economists did the same. However they were unable to convince others sufficiently.

    Had they done so, people would have scrambled for the exits sooner, and the crisis would have happened earlier, and would have been less severe.

    However, people would still have asked the same question you are asking now, and the answer would be the same as I have outlined above.

    If enough economists had predicted it very early on, and convinced enough people, then it wouldn't have happened, and those economists would have been proven wrong.

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  29. anon1:

    If the problems were so transparent, why didn't you tell us? Hindsight is 20-20 of course. Not much point in laying blame. Pick up the pieces and move on.

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  30. Ignoring Thoma's complaint about current macroeconomics not having predicted the last recession (whatever its causes), his post is neither that bad not that great. I thought the main point was that with the disagreement within the scientific community on a topic that is of general political interest it is not surprising that we don't get a fast political resolution of the current crises. Not that deep an insight. A bit like climate science, although that area seems to be moving towards a consensus. I guess once we have the single model we can send the politicians home and have the winningest group of economists run the show.

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  31. Maybe I'm a glass-half-full person, but I look at the discussion among economists on the current policy issues and think that, if you put good people in positions of power in the government and give them good advisers, that you could sort through the noise and come up with good policy. I don't think the fault for the lack of "fast political resolution" is with the economists.

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  32. Probably the most clear "crisis warning" was Reinhardt and Rogoff in early 2008, when things were already starting to look bad but had not yet collapsed. However, they focused very heavily on the foreign financial flows / exchange rate side of things, and when it comes to that, the US functions in a fundamentally different way.

    Still, there was plenty done prior to the crisis on credit booms and asset pricing booms, and how these are often (though not always) followed by pronounced busts. We would need to ask around, but somehow I think people like Reinhardt or Mendoza who have worked with financial crises were not nearly as shocked as macroeconomists whose research focused on post-war US business cycle.

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  33. If you know much about the US financial system, it was hard to be surprised that the crisis actually happened, though I think most of us learned a lot when all the details were revealed. If you know about the roots of the US banking system in the early 19th century, the free banking era, the National Banking era and the repeated banking panics during that period, the Great Depression, Continental Illinois, the savings and loan crisis, and the long sordid history of regulation of the financial industry, that the thing happened is no surprise at all. Anyone who knows the history and how our financial system is put together and regulated would assign a significantly positive probability to that event happening, and that view has not changed.

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  34. i'm curious as to why anyone thinks more warnings would have prevented a crisis. construction, finance etc. are big campaign donors, subsidizing home ownership is politically popular...which politician would have stood in the way of all that?

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  35. Yes. Suppose Greenspan had said in 2005 that house prices were too high and the Fed needed to fix that (I'm not suggesting that's what he should have done, but some people think so). What kind of reaction do you think he would have got?

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  36. "Yes. Suppose Greenspan had said in 2005 that house prices were too high and the Fed needed to fix that..."

    And even if Greenspan had said it and even if everyone had believed him, that would have been far too late to avoid most of the fallout from the crisis. It would still have been bad.

    Paul Andrews has it exactly right in his post. This is largely an efficient markets issue. If crises could be better predicted then they would occur earlier or not at all.

    (My agreement with Paul Andrews puts me at risk of "echoing" his comment, but I dare it anyway.)

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  37. On Prescott: 'If you look at his whole body of work [...] read the introduction to "Financial Intermediary Coalitions.'

    Thanks. I will have to read up on that.

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  38. Hi Dave,

    That's a word I love to hear. Welcome to the echo chamber. You can start as flunky if you want. Lackeyhood requires a donation.

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  39. "Suppose Greenspan had said in 2005 that house prices were too high."

    The crisis was not caused by high house prices; it was caused by erosion of the safegaurds against system-wide bank runs. Greenspan was in a position to argue for more bank capital and reserves; for less shadow bank reliance on overnight repo funding; etc. This would have met with resistance from bank lobbyists and their Congressional clients, but not so much from the general polity. I would argue Greenspan went the other way. He pushed the idea of the "Great Moderation": a secular decline in volatility that required less, not more, hedging against systemic risk. Rajan's reception at the 2005 Jackson Hole symposium was telling. He was pilloried for saying the following:

    "“It is possible these developments may create … a greater (albeit still small) probability of a catastrophic meltdown,” he told the assembled central bankers and academics. “If we want to avoid large adverse consequences, even when they are small probability, we might want to take precautions.” "

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  40. BTW, Cristine Lagarde, yet another IMF official, received a similar reception for her recent Jackson Hole speech. She had the temerity to argue that European banks are undercapitalized.

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  41. "The crisis was not caused by high house prices; it was caused by erosion of the safegaurds against system-wide bank runs. Greenspan was in a position to argue for more bank capital and reserves; for less shadow bank reliance on overnight repo funding; etc."

    I think the house prices are an important part of the story. That's linked to shadow banking and the value of asset-backed securities as collateral. What I think you, and Gary Gorton would call a "repo run" involved a collapse in the value of MBS, for example, as collateral. That feeds back to the prices of houses. A "housing bubble" need not be a bad thing, but in this case it was, because the bubbly aspect of the price of real estate was built up on false pretenses.

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  42. Contra Stephen Williamson:

    http://hayekcenter.org/?p=4961

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  43. I agree in general with your comment. However, note that Gorton argues the run on shadow bank liabilities began in August of 2007 (with ABCP market). At that point, the Case-Shiller 20-city house price index was down only 5% from its peak.

    The shadow banking system was extremely sensitive to small declines in nominal house prices. How did that fragility come about? This is a fertile area of study. One idea is that the system will act to maximize the value of any free at-the-money put (on liquidity risk) written by the Fed.

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  44. Stephen gives away the game:

    "I tend not to think about the problem of people forecasting in different ways, as things are hard enough already and I want to focus on other things."

    In other words, Williamson eliminates the central causal / explanatory element in economics science -- then pretends to do "science".

    Pathological. Pathetic.

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  45. Anon at 11:36 - I do not think that Prof W denies there can be a co-ordination failure in our economy. He has written in previous posts about how one can build models of such failure - for example Diamond, Russell Cooper, John Bryant have models like this.

    anon tx

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  46. anon at 12.32 fails to understand. There are economists working on mathematically modeling forecasting in different ways -didnt Prof W send us to Sargent's work?

    Your rudeness is uncalled for and impolite.

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  47. everything is personal to these people

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  48. @anon 12:32: "In other words, Williamson eliminates the central causal / explanatory element in economics science..."

    No. Explanation is not the same as forecasting.

    Understanding how a system works does not mean that one can forecast it.

    For example, asset returns contain a very limited amount of predictability but we broadly understand how asset prices react to the unexpected component of economic fundamentals.

    Admitting that there is and will always be a limited ability to forecast a system does NOT mean that you are giving up on systematic accumulation of knowledge.

    Criminy.

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  49. anon1:

    Yes, I agree there are some very interesting things going on there, that we should be working on.

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  50. No point in addressing anything to anonymous 12:32. That's our Austrian troll back again. Nothing productive will come of that.

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  51. 1)

    "what they ignore is that most neuroscientists and psychologists have long discarded the rationality assumptions underlying homo economicus, as they have learned how the brain really operates. "

    What do you mean by saying "they have learned how the brain really operates"? MIT has a department to explore. Here it is

    http://bcs.mit.edu/

    On the middle of the page they say "We want to know how the mind works". Well, apparently they are still seeking some answers. Plus, what do you mean by saying 'rationality'? What is your definition? Think about the dollar auction game for example (Martin Shubik). Players are rational. Yet the outcomes (most of the time) are not rational. How can we disentangle the rational strategies from the irrational ones? You may also want to have a look at the works of David Levine. Plus, 'Moral calculations' by Laszlo Mero is a quite interesting book.

    2) About predicting the financial crisis. Predicting the timing of such events or disasters indeed seems a difficult task. Nevertheless, this does not imply that modeling is impossible. Check this out

    http://www.sciencedirect.com/science/article/pii/S0304407609001456

    and also this

    http://www.sciencedirect.com/science/article/pii/S0165188911000911

    DSGE models are 'dynamic' and 'stochastic'. Stochastic means random. Random is something related to uncertainty. Uncertainty is something we model. We can change or update the stochastic part of the models by allowing such rare disasters or events. Those events may occur rarely with large sizes. We may not predict when they occur, yet we can have an idea about how likely they are to occur. If they are likely to occur, the risk and its premium might be different than what we would have without such events. It is not about predicting the timing of the disaster or crisis, it is about understanding the impacts of those disasters or rare events.

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  52. Of topic - but I read the May 29 2010 post of this blog, the very first one - and one rather critical of dr. Krugman.

    Fun to read it now, more than a year later - guess who was right all along?

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  53. "Fun to read it now, more than a year later - guess who was right all along?"

    It sure wasn't Krugman.

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  54. Mitt Romney just announced his economic advisors: Glenn Hubbard and Greg Mankiw.

    Any thoughts on his selection?

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  55. Name calling isn't an intellectual argument, Stephen.

    You remarks are peppered with what logicians call informal logical fallacies -- and your are utterly and constantly non-responsive to substantive points about how to do science & the deep cognitive inadequacies of your own causal / explanatory strategy.

    This is all very telling.

    Why can't you defend your scientific strategy in a way that cuts any emprical / casual / predictive / explanatory ice?

    It's a BIG issue Stephen, and you do nothing but PUNT.

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  56. If your science had utterly nothing to do with the lives of other people, it wouldn't matter that you can't defend or support your scientific strategy on empirical, predictive, explanatory, or cognitive grounds.

    But the whole point of your science -- all that is left when it is exposed that the project can't be defended on cognitive, predictive, causal or explanatory grounds -- is a claim for policy relevance, and the insistence that what you have produced should drive policy. And the justification for that come down to nothing else but a claim to authority -- give by elite status within an inbred guild of mathematicians, each certifying the mathematical excellence of each other.

    That's all you've got -- a cluster circle of mathematicians self-certifying each others work _as mathematics_.

    In other words, the whole things rests on a fraud perpetrated on public where mathematical certification is passed off as scientific standing -- causal / predictive / explanatory standing -- as standing your profession does not have.

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  57. It's worth pointing out that leading scientists is the legitimate sciences consistently reject the notion of conferring scientific status on the math work produced by academics in the economics department.

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  58. I for one would be interested in knowing what Anonymous thinks he's talking about. Sounds exciting!

    If you [Anonymous 2:20] are so sure that you are correct, please let the ignorant people like me in. Talk slowly, give examples! Why so vague?

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  59. Anonymous 2:02 thinks his point is valid if he uses lots of words and dashes to repeat himself over and over without saying anything of substance. How many times can you say

    "empirical, predictive, explanatory, or cognitive grounds"

    "cognitive, predictive, causal or explanatory grounds" (different order, nice touch)

    "causal / predictive / explanatory" (you forgot cognitive).

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  60. Anon 2:02 aka the Austrian troll - nobody cares, outside a little cluster of self-satisfied self-certifying Mises worshippers. Austrian econ has failed spectacularly in the intellectual and policymaking marketplace. Accept your fate before you have an aneurysm.

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  61. Anon 2:02 is probably not an Austrian -- they don't know most of the words in his post. I'd guess he's an econophysics type -- a literature which has been an abject failure.

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  62. it's a shame the comments section seems to often degenerate into a mud-slinging contest. it's possible to learn something from someone without agreeing with them.

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  63. "...it's possible to learn something from someone without agreeing with them."

    But only if the "someone" actually makes a reasoned argument and backs it with evidence.

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