Saturday, October 06, 2012

"And they began sewing chaos!"

The EYM sends this link, from Chile.  Excerpt:

SANTIAGO — On October 5, 1988, after a 16 years military dictatorship, a national referendum was held to determine whether or not General Augusto Pinochet would extend his rule for another eight-year term in office. The “No” side won with just under 56 percent of the vote, and Pinochet stepped down.  To celebrate the anniversary of the return to democracy, a number of left-wing government ministers organized a memorial rally at Plaza Rosales earlier today.
Unfortunately, the commemoration quickly ended, turning into another violent student action. Students from the Internado Nacional Barros Arana (INBA) infiltrated the rally and began sewing chaos, taking out their aggression on representatives of the Communist Party (PC), the Democracia Cristiana (DC), the PPD, and the Socialist Party (PS).  The students were struggling against politics in general and against a perceived lack of changes since the end of the dictatorship. The representatives immediately left the place, no one was injured.
Despite the incident, left-wing representatives maintained their desire for unity and better democracy for the next municipal and presidential elections.  (my emphasis)

Those who sew chaos will end up wearing ripped shirts!  Or I think that's how it goes. "Struggling against politics in general"? Excellent. Nos miramos, nos gustamos, y nos besamos!

If you want to understand Chilean protest groups, you'll need to (re)watch this from Life of Brian...  (with Spanish subtitles, just in case)  (UPDATE:  As Otto points out in comments, that would PORTUGUESE subtitles to anyone except an idiot....mea culpa!)

The agreement that all will fight authorities for the symbolic, but admittedly non-existent, right of men to have babies captures perfectly the sensibilities of the Chilean student left.  And then the "splitters" thing.  Nice.

Montana: You're not good

Surprising pretty much no one, Montana was told that it cannot make its own separate campaign finance laws.  "First Amendment Incorporation" is a b***h, I suppose.  Almost all US campaign finance law is simply an attempt to shield incumbents, who are ALREADY CORRUPT, from the scolding winds of scrutiny and competition.

As CCP's Brad Smith put it:

“Few serious people really think that Montana’s limit - a total contribution of $160 to a state senator’s campaign committee over his four years in office - is going to corrupt anybody," said CCP founder and Chairman Brad Smith. "It is clear that the purpose of the many contribution limits is not to prevent corruption or its appearance, but to smother speech. We’re pleased to see a district court take the Supreme Court’s admonition in Buckley and Randall seriously. The state’s and the federal government cannot just assert an anti-corruption interest – their limits have to be actually tailored to address a real problem.”

For more....

Friday, October 05, 2012

Survey says.....

People, a very interesting jobs report this morning, no?

Let's start with the Establishment Survey which reports 114,000 net new non-farm jobs in September.

That's a bad number.

But, revisions to July and August have raised job creation in those months by 86,000 ("The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000").

Those are decent numbers.

But, as you may have seen, the blockbuster number is that the unemployment rate fell to 7.8%. And, this did not happen because people left the labor force. Labor force participation was "little changed".

You may ask, if it takes more than 150,000 net new jobs to lower unemployment unless people leave the labor force, and we had 114,000 jobs and no decline in labor force participation, how did unemployment fall .3 percentage points?

Well, unemployment is calculated from the Household Survey, which is separate from the Establishment survey and it (Household) reports that, "total employment rose by 873,000 in September", which is what caused the drop in the unemployment rate.

Obviously, 114,000 is pretty different than 873,000, even allowing for the sampling errors in the surveys. Why the big difference?

Is that because there were 760,000 new farm jobs? Technically it could be, but probably not.

The BLS has a report on the differences between the two surveys. Here is a good summary chart:

Since 2002, the two series track each other closely, though the household survey (the blue line) has been getting further and further away from the establishment survey (the red line):

The biggest difference between the dynamics of the two is that the household survey is way more volatile. Here I've graphed the growth rates of the two and you can see the difference (the household survey is the blue line, the establishment survey is the red line).

This month, one of the two jobs numbers is an outlier. If recent patterns hold, either the establishment survey number will get revised up or the household survey number will reverse itself in the next month (or some combination of the two).

While the household number is fantastic news for the economy, we need to realize that it might not last, given the high volatility of the dynamics of that survey.

Does the Fed think QEIII will produce higher inflation?

The short answer is, not really.

The longer answer can be found in these charts which were released on September 13th, the same day that QEIII was announced:

(you can clic for a slightly better image or refer to page two of the linked PDF)

The bottom panel shows that no one on the FOMC is predicting a surge in inflation from QEIII. The highest individual prediction in 2014 is 2.2% and in 2015 it's 2.3%. The "central tendencies" for those years are 1.8% - 2% in 2014 and 1.9% - 2% in 2015. You can read these numbers from the first table in the link provided above.

I just don't see that the Fed views their language in the QEIII statement or the minutes as seriously committing to higher than equilibrium (i.e. 2%) inflation in the future.

The FOMC is bullish on growth in 2014 and 2015 as can be seen from the top panel of the embedded chart, with a "central tendency" of their forecasts reported as 3.2% - 3.8%. Their long run forecast central tendency is 2.2% - 3%.

There is nothing in these forecasts that indicates the Fed expects NGDP to get back on anything resembling its pre-crash trend.

People, believe me when I tell you that I want the economy to recover. I want lots of new jobs created. I want there to be good times in America for all.

But I think people are projecting their own views onto Fed actions. The FOMC  just isn't playing the game that the Woodfordians want them to play.

 It's my view that it is impossible for the Fed to play and win the Woodfordian game, but I'd love to be proven wrong.

Thursday, October 04, 2012

Trick or treat!

Without a doubt, this will be THE costume to be wearing this Halloween:

more here. Hat tip to Mrs. A.

Calvo, we have a problem

We are operating in an era where the Fed is using forward guidance to condition the public's expectation of future interest rates.  Having already pushed the policy rate to zero, the Fed is now left with promising to keep it there in future periods.

An obvious question is, does this work? Or, in what class of models does this work?

 From this recent Cleveland Fed working paper, it seems like part of the answer is, not in the basic DSGE models everyone uses.

 I'll let the authors tell you themselves:

 Our experiments consider a fully anticipated and unconditional lowering of the monetary policy rate for a finite number of periods. We find that the workhorse Calvo (1983) models of time dependent pricing currently used for monetary policy analysis deliver unreasonably large responses of inflation and output in response to such a policy. Furthermore, if there are endogenous state variables, these models suggest that the initial responses can become arbitrarily large as the duration of the fixed rate regime approaches some critical value and then switch sign and become arbitrarily negative as this critical value is exceeded slightly. For empirically realistic models such as the Smets and Wouters (2007) model, the critical duration for which these asymptotes occur is around eight quarters - well within the duration of the low interest rate environment in the U.S. following the financial crisis. 

So, either the promise is not credible, the models are wrong, or maybe both?

Let's be clear that is paper is not done by hacks. One of the authors is Tim Fuerst, and he is the real deal.

Be Still, My Heart. WestWing Reunion

El Beisbol

I apologize in advance for this post not being about monetary policy but....

Wow! My Tigers (fan since 1967) and Cardinals (fan since 1980) are both in the post-season again.

The dream of another Tigers - Cards series lives for at least one more day.

Could there be another trip to the WS with Mungowitz?

Be still, my heart.

PS: Congrats to Miggy for staying sober and winning the triple crown.

No Presidential Debate has ever "mattered"

If I'm referencing Ezra Klein, it may be a sign of the apocalypse.

On the other hand, if even Ezra Klein can get it right, it can't be too hard, now can it?  The fact is that debates don't matter, and have never mattered.  And, no there is NOT "always a first time."  There COULD be a first time, but I would be surprised.  (On the other hand, I was surprised that the President is so sheltered from disagreement that he was shocked someone would contradict him. Thanks to Fundman for that link.)

Anyway, back to the point.  Here is a graph from a Bob Erikson book (reference here).
Horizontal axis Dem margin before debate; Vertical is Dem margin after debate.  Remember that "important" 1960 debate, where Nixon looked so bad?  Right on the 45 degree line.  The only one where the debate seems to have mattered is 1976, where Ford lost the election by saying dumb stuff about Poland being free and independent.  Meaning that Ford dropped like a rock after....wait.  Carter dropped like a rock.  CARTER dropped, going from +10 to basically even after the debate.  Carter still won, of course.  But it wasn't the debate.  There is no example of a debate mattering.

Until now?  Maybe.  My main man Ezra and I, we doubt it.


Wednesday, October 03, 2012

IT Humor

So, I had never noticed this.  Have used this thing for years, never saw this.  When you are finished with using the projector system in the big auditorium (White Lecture Hall) on East Campus here at Duke, you get this confirmation screen.  And I always just pressed "yes" at the bottom.  But look at the choice in the middle:

Well played, IT android drones, well played!  Ya got me.

Links Post: Narcissus Edition

Narcissus was supposedly so taken by his own image reflected in the surface of a pond that he starved to death.  I don't need a pond; I have the google!

1.  Interesting piece on "liberal bias" in academics, in the Chronicle of Higher Ed.  Author is kind enough to quote me....

2.  Article by the amazing Rob Christensen, on the Gov Debate in NC.  Author is kind enough...

3.  When this video came out, from Learn Liberty, about majorities, I got a number of emails, asking why I didn't say anything about gay marriage.  But....I already had, four months earlier.  C'mon, people, the google is your friend!

4.  Finally.... a giant Munger family conspiracy?  Really?

What the Fudge?

ADP reports that job growth slows in September: Yglesias says it shows that QE3 is already working!

People, I am not making this up.

Here's the deal: Today, ADP reported 162,000 new jobs for September. It also reported that August's number had been revised to 189,000. Thus we have 27,000 fewer new jobs in September than in August.

Matt then posted this:

the ADP report out this morning says there was a net gain of 162,000 jobs in September (PDF). Now that's all preliminary and maybe it won't hold up. But this—rather than long and variable lags—is what I'd expect to see from QE 3.

Wow. And I thought I was a QE bear!

Now Matt's overall point is that when (if) the Fed is playing the expectations game, we might expect to see things change quickly if they are successful rather than having to wait for a mechanical chain of events to slowly unwind over time.

I even agree that what our economy needs now is a jump from what Tyler calls the "low trust" state to a "high trust" state and that maybe Fed jawboning can help us make that jump.

But I have to question pointing to a slower rate of job growth as evidence that we are jumping.

Tuesday, October 02, 2012

Spanish drills for Mungo

My multi-lingual co-blogger whipped out a "me gusta"! Here's my a favorite song of mine that uses the phrase a time or two:

Not a Dime's Worth of Difference!

This is mighty.  The great '80s video game music.  The validation of the Median Voter Theorem.  Me gusta.

With thanks to Delaney B.

Who's on first? The Bernank!

Our esteemed Fed chairman gave a widely hailed speech that was, on the key point at least, clear as mud.

Check it out:

In the category of communications policy, we also extended our estimate of how long we expect to keep the short-term interest rate at exceptionally low levels to at least mid-2015. That doesn't mean that we expect the economy to be weak through 2015. Rather, our message was that, so long as price stability is preserved, we will take care not to raise rates prematurely. Specifically, we expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens. We hope that, by clarifying our expectations about future policy, we can provide individuals, families, businesses, and financial markets greater confidence about the Federal Reserve's commitment to promoting a sustainable recovery and that, as a result, they will become more willing to invest, hire and spend.

So which is it?

"Rates will be exceptionally low til at least mid-2015. "


"so long as price stability is preserved we will take care not to raise rates prematurely."

People, those are two very different guidances. Which (if either) did he actually mean and which is the dog whistle?

Well, since the first is a promise that Bernanke cannot actually keep (it's highly unlikely he'll be Fed chair in mid-2015), and the second is business as usual, I'd put my money on the second phrase as actually being closer to what will happen.

Then, he adds insult to injury with this gem: "We hope, by clarifying our expectations about future policy,...."

Not clarifying the path of future policy but his expectations about the path of future policy. Not that it will work, but that he hopes it will work.

Is Ben actually giving the middle finger to the expectations channel here? You wouldn't have to be a rabid Straussian to think so.

Monday, October 01, 2012

Thinking Causes Selfishness?

Perhaps.  If people stop to think, they are more likely to behave selfishly.

... humans are predisposed to cooperation and generosity, and only become selfish when they take time to think about the situation. The effect was robust, occurring both in subjects recruited from AMT and in college students.  Furthermore, a meta-analysis of previously published work showed that this effect was observed not only in the donation scenario described above, but also in other social “games” (such as the prisoners’ dilemma) that are either played just once or repeated multiple times.

The researchers were even able to manipulate participants into being either selfless or greedy, based on whether they were primed to think about intuition or careful reasoning.  Some participants were primed to believe in their intuition by asking them to either write an essay about a time in their life when their intuition was right, or when careful reasoning was wrong. A second group, which had to write about when their intuition led them astray or when careful reasoning proved helpful, was primed to promote rationality. When asked to contribute money, donations were much higher in the first, intuitively-primed group than in the second group, which had been primed for rationality and reflection.

Nod to MAG

Harvest Moon Meets Uranus in Opposition

Okay, so I was originally attracted by the title (and so was Angry Alex).

But it's pretty interesting...


Sunday, September 30, 2012

Libertarians Explained...

Phone call for Mr. Overwater:  The UNauthoritarian personality is a Libertarian.

Interesting article in the WSJ, by Matt Ridley.  Excerpt:

In his recent book "The Righteous Mind," Dr. Haidt confronted liberal bafflement and made the case that conservatives are motivated by morality just as liberals are, but also by a larger set of moral "tastes"—loyalty, authority and sanctity, in addition to the liberal tastes for compassion and fairness. Studies show that conservatives are more conscientious and sensitive to disgust but less tolerant of change; liberals are more empathic and open to new experiences.

But ideology does not have to be bipolar. It need not fall on a line from conservative to liberal. In a recently published paper, Ravi Iyer from the University of Southern California, together with Dr. Haidt and other researchers at the data-collection platform, dissect the personalities of those who describe themselves as libertarian.

These are people who often call themselves economically conservative but socially liberal. They like free societies as well as free markets, and they want the government to get out of the bedroom as well as the boardroom. They don't see why, in order to get a small-government president, they have to vote for somebody who is keen on military spending and religion; or to get a tolerant and compassionate society they have to vote for a large and intrusive state.

With a nod to MAG.

So Dog-gone Cute!

The wonderful Ms. Angus sends this link, to a video and a story of a man who loved his dog so much he took him to the lake so the dog could sleep comfortably.  A very sweet picture.

And, it turns out the pup got better!  People donated money, and Schoep got laser treatment.  (I don't even know how that works....Laser treatment for arthritis, for a dog?  Really?)


Why is this a car commercial?

Oh, and to Tommy the Tenured Brit:  You're quite welcome.

A nod to Angry Alex, who is Confused Alex for the purposes of the above.

"Tyler is trying to sphincter us"

People, I teach development economics (among other things) for a living. I only let paying customers into my class, & I don't let them tape the classes.

It's a sweet deal for me and people of my ilk.

But now Tyler and Alex are giving away the cow for free!

Yes, MR. University is up. Online, live and from a quick tour I took, mighty snazzy.

The first course, development economics, is ready for matriculation.

Check it our for your own selves: Learn, Teach & Share!

Part of me really wants this venture to succeed, but part of me doesn't want to spend the last few years of my working life saying "welcome to Walmart" 200 times a day.

Thus the title of my post.

PS: I am also going to spill the beans and inform you that Mrs. Angus will be doing a major MRU module on Mexico. Look for it in early 2013. et tu, Mrs. A?

The Sistine ain't so pristine

The Sistine Chapel is not for the faint of heart. While some may swoon over the over the top artwork, others complain of heat, smells and pick-pockets.

The Italians are having a logic-free emotional debate about the situation. One guy calling to limit the "drunken herds" (5 million visitors a year), the other side saying that limiting the numbers or putting time limits on visits is unthinkable.

People, all they have to do is raise the price and things will sort themselves out, but that move is apparently not in the Italian tool box!

This would be even funnier if it weren't for the fact that the hordes and their effluvia may be damaging the artwork.

Oh well, if they don't man up and cut the crowds one way or another, I know exactly who they should get to try and restore the Chapel's artwork!