Saturday, July 14, 2012

Put a bird on it

LeBron links to Stephen Williamson's post about the statistical problems inherent in calculating the vague and unobservable path of "potential output", especially when using the HP filter. I recently criticized the CBO's approach.

This is a sad but general problem in modern macro. Theories are built around unobservable variables. To calculate the output gap, we need potential output, but it's not observable. In growth & development, many issues hinge on the behavior of total factor productivity (TFP), but it is also unobservable.

Modern business cycle theory has made an art form of this. In seeking to better replicate real world data, more and more driving shocks are needed. So we discover that "shocks to the mark-up" for example (or shocks to "preferences") are now an important force in business cycles. These shocks too, are unobservable and receive even less scrutiny than do potential output or TFP (they are typically not ever displayed or forced to pass an "eyeball" test of reasonableness).

Modern business cycle theory also frequently uses the HP filter to produce the business cycle data that it calibrates to or uses for estimation. This use of the HP filter is no less problematic that the use criticized by Williamson in the original linked post.

People, when you read or hear people talking about unobservables like they were data, it's good to remember that the series in question were created by someone using a model with assumptions and limitations. Ask them to show you their series, to defend its derivation and its time series properties.

The bottom line is that no one knows what potential output is or what TFP is. I certainly don't agree with Williamson and Lacker that we are currently at or near maximum output/employment, but I do agree that we have no idea exactly how far away from that point we are currently operating.

Friday, July 13, 2012

Grand Game: "Dead Man Watching" Edition


There is just so much here. I won't spoil it for you.

Dead Man Watching....NASCAR for 18 months

Oh, I can't resist. "He was the only man who was ever nice to me." Ma'am: He was DEAD.

Thursday, July 12, 2012

Obedient Wives in Every Corner

Gadgets. LOTS of Gadgets, From Koopa

Koopa sends this email:

Thought you might like this. I put together for a friend, and then ended up posting on Facebook. Have talked to a lot of you about these gadgets. Feel free to forward.How I Turned Our Apartment Into the Jetsons
  As a lot of people know, I recently bought a boatload of gadgets for our apartment. A bunch of folks have been asking me about these devices, so I figured I would do a quick post.
 The goal was to make our day-to-day living hyper efficient, through three processes:
 a. Automation - I've automated a lot of my daily routines.
b. Go Wireless - We've upgraded a lot of items to make them wireless. These devices communicate with our network, and help me track more data.
 c. Go Faster - There are two components to "go faster". Either a gadget completes an existing function more quickly, or it subsumes another function in a more efficient manner.  Here's the list
(below the fold):

North Korean Music Video

A North Korean music video (ostensibly).  Apparently this woman ("Excellent Horse -Like Lady") is a favorite of Kim Jong "Big Un."  It's a good story, but..... not sure.

Anyway, the video has its own charm.  Not the worst I've ever seen, but then I lived through the '80s and '90s.  (Three words:  Ace. Of. Base.) The worst videos are surely David Hasselhoff's "Hooked on a Feeling" or perhaps  Jay-Z's inexplicable desire to look like "Joe Camel." 

But this is remarkable.  I give you....Excellent Horse-Like Lady!  Do check out the hot "comradess on comradess" action at about 2:00.  Forbidden love amid the thread spools.

With thanks to RPoD.  And a nod to sharp-eyed KPC fan M. Kaan.  Well done.

UPDATE:  A curious reader asks, in an email:  "Since that 'Hoff video was available, why in the world did anyone try "Rickrolling"?  Wouldn't "Hoffrolling" have been far worse.  Answers:  Don't know. Yes.  (Note to Shirley:  the link to Rickrolling is for you)


So, the guy needs to "serve" a code violation notice.  The woman's grass is "too long."  (Okay, that's pretty disturbing right there.  Here GRASS is too long?  Good Lord.)

He knocks.  Probably loudly.  He's REALLY fat, so he should be able to do some good knocking.

No answer.  So, because this summons is SO IMPORTANT, he goes into the house.  Walks into the woman's bedroom (she lives alone).  Announces his purpose.

Here is the video:

I have so many questions. (Below the fold)

Is the upcoming election holding the Fed back?

The US economy is going nowhere fast. Growth is low, unemployment is high and inflation (core and headline) are falling below 2%, re-kindling worries about deflation.

But the Fed is sitting pat. Sure they've done a lot in my view. Dropped rates to zero, promised to keep them there a while, pumped trillions of reserves into the system, ran a couple rounds of quantitative easing and don't forget about "operation twist". Nor do I have much confidence that, at this point in the proceedings, monetary policy is capable of a miracle cure for the economy.

But holy spumoli people, don't they have to do something? Sure they do; they're the Fed, dammit!

Bernanke can't keep saying that the Fed is not out of ammo but never fire the gun. The Wolfersons are KILLING him!

Could it be possible that the Fed does not want to be seen "goosing" the economy in the run-up to the Presidential election?

Might the Fed be guarding its vaunted "independence" by avoiding any actions that could be considered politically motivated?

Will we see QE3 or a higher inflation target on the first Wednesday in November?

I think this has to be a factor in the Fed's decision about the timing of further action. Things may worsen enough for them to feel they have to act no matter what, but I think they may be trying to muddle through with the status quo until after the election.

Tell me why I'm wrong in the comments.

Wednesday, July 11, 2012

Tuesday, July 10, 2012

You are going to need another soldier....

Adam and Billy, doing a sketch.  Without the mustaches.

The future of higher ed: an alternative view

Brian Caplan & LeBron have been discussing online higher ed vs. brick and mortar higher ed.

I believe that the future of higher ed is brick and mortar.

 I don't think bad lectures are what is holding back students (self-serving perhaps). It's actually just LECTURES that hold them back, whether they are in a classroom on online.

Kids don't learn a ton, don't retain what they learn, and struggle to apply what they've learned.

I am becoming convinced that "peer instruction" or "the flipped classroom" is the way to go. This approach combines classroom work with online work, but the main thing it does is take the lecture out of the classroom.

Students do required reading or watch a required video before the class and then take a pre-class quiz on the material. Instructors use that feedback to generate discussion questions and instant feedback quizzes to help students work out their issues with the material. Instructors can pair up students who are getting it right with those getting it wrong for some peer to peer instruction.

Eric Mazur of Harvard is the guru of this approach. Mrs. A and I are hoping to transition onto his bandwagon. Here's a link to an article about Mazur.  Here's a link to an excellent blogpost on how the method can work.

Monday, July 09, 2012

Burning Questions

Hat tip to CZ, aka PR.

Monday's Child is Full of Links

1.   Kid thought he was having nightmare.  To wake up, shot himself in forehead.  Mushrooms were involved.  "It didn't feel real."  I bet it didn't.  Until it did.

2.  We have no idea what is going on in Iraq.  But it is probably not good.

3. Timmy Mac wants to compete for "Biggest idiot since Joe Morgan" prize. But that's a big idiot to fill. My own experience with Locks of Love, in 2007. As for Mr. McCarver's question: Actually, quite a few young women turn out to have alopecia areata, and it's pretty tough.

4.  Man lives off Craig's List for a month, then sells the story.

5.  Conservatives are happier.  I'd say the reason is straightforward:  if you don't expect the world to be perfect, you are not bothered that it is not perfect.  Liberals project their goals onto everyone, and their wring their hands because they don't want to be authoritarian.  That conflict, a rigid narrow view of a just society, and the unwillingness to try to impose it, are always going to leave lefties unhappy.

6.  If you need a pig for emotional might be a redneck.  At least now "when pigs fly" has come true.

(Nods to the Blonde, to Angry Alex, and to Dutch Boy)

Sunday, July 08, 2012

California was a friend of mine. Maryland, you are no California.

 California may be able to get away with constantly increasing taxes, because it's beautiful.  Or would be, except for the fact that it's full of Californians.  

 But Maryland?  The urban parts are a dungheap.  Now wonder people are baling out.  Maryland apparently wants to be the new Michigan.

Music as Cultural Data

Emotional Cues in American Popular Music: Five Decades of the Top 40

Glenn Schellenberg & Christian von Scheve
Psychology of Aesthetics, Creativity, and the Arts, forthcoming

Abstract: Some musical characteristics are cues to happiness (fast tempo, major mode); others are cues to sadness (slow tempo, minor mode). Listening to music with inconsistent emotional cues leads to mixed feelings and perceptions, or simultaneous happy and sad responding. We examined whether emotional cues in American popular music have changed over time, predicting that music has become progressively more sad-sounding and emotionally ambiguous. Our sample comprised over 1,000 Top 40 recordings from 25 years spanning five decades. Over the years, popular recordings became longer in duration and the proportion of female artists increased. In line with our principal hypotheses, there was also an increase in the use of minor mode and a decrease in average tempo, confirming that popular music became more sad-sounding over time. Decreases in tempo were also more pronounced for songs in major than in minor mode, highlighting a progressive increase of mixed emotional cues in popular music.

(Nod to Kevin Lewis, and thanks to LeBron, now that I think of it...)

Government = Anarchy

Chile and Bolivia find common ground.  Okay, not in politics, but in markets.  Okay, illegal markets.

But isn't that interesting?  Far from anarchy, the ONLY place these two countries can cooperate is in a sector where the government is not only not there to enforce contracts, but is actively trying to suppress the cooperation.  In every other way, Chile and Bolivia are nearly at war (to the extent that a national clown car like Bolivia can be "at war" instead of "at lunch").   POLITICS is anarchy, markets are orderly.  Even without government.

For markets, war is a liability, a cost.  For governments, war is an asset, and a revenue source.