Saturday, October 27, 2012

I guess he's just a "glass half full" kind of guy

David Leonhardt is frequently cogent, but his new piece "Who Gets Credit for the Recovery?" is risible.

I agree with his implicit premise: The economy is gonna do what the economy is gonna do and political involvement will mostly be credit-claiming or blame-avoidance, but after that we part company.

The biggest problem I see is the notion that anyone is giving out "credit" for the pathetic mess that is our "recovery". Yes, housing seems to turning a corner, but let's get real.

Fewer people have jobs now than did before the crash, even though 4 years have passed and the population has grown.

Housing starts remain well below pre-crash levels.

Real GDP growth so far is lower in 2012 than it was in 2011, and the 2011 figure is lower than the 2010 figure. And, given that we were emerging from a deep recession, the 2010 figure (2.4%) stunk!

Things are so bad that Democratic loyalists are celebrating a 2% growth rate in the 3rd quarter.

Things are so bad that it took a 9.6% increase in Federal government spending to get that dizzying 2% figure.

Behold: the world according to DL:

Friday, October 26, 2012

Help me pick my house design

People, we have issues at Chez Angus.  We have two different designs for the front of our potential house in Santa Fe.

Here's option 1 (which loyal readers have already seen):

and here's option 2:

Give me your thoughts in the comments.

Who are the riff-makers. Who are they really?

Fascinating post by Chris Dillow on the idea of distinguishing between the "deserving" and "undeserving" poor.

Here's his thesis:

I can see why libertarians might be opposed to all welfare spending on Randian or Nozickian grounds, but I find it hard to see why they think a welfare state should try to discriminate between deserving and undeserving.

Read the piece. He makes a very good case.

And, as always, Mark E. Smith is relevant here:

They take from the medium poor
 to give to the needy poor 
Via the government poor 
Give it to the poor poor 
They're knocking on my door 

John O: Take This Candidate Seriously!

Was just at ol' Davidson last night, for a talk.  Got to walk past the ol' frat house.

By happy circumstance, got an email from an ol' frat brother, John O.  He writes:

With the national elections looming, I know that some friends don't like to get political emails. I also think it is important to share information if we arrive at informed conclusions, so that our friends may benefit. After all the debates, platform analysis, and political punditry I have made my choice as to the best candidate in the field. Rather than vote according to just one issue, or an ideology, or a party ticket, I am voting for the principles and character of "The Man" who tells it like it is, no holds barred. Here is his campaign video. Take a minute to listen to his timely message.

Interesting.  I had never noticed how much like "I want to be sedated," by the Ramones, this chorus is.  But if I get one more Robo-call from some Romney shill, I may need to be sedated.  Or restrained.

Selling Carbon Offsets by Growing Plankton?

"A California businessman chartered a fishing boat in July, loaded it with 100 tons of iron dust and cruised through Pacific waters off western Canada, spewing his cargo into the sea in an ecological experiment that has outraged scientists and government officials...The entrepreneur, Russ George, calling it a 'state-of-the-art study,' said his team scattered iron dust several hundred miles west of the islands of Haida Gwaii, in northern British Columbia, in exchange for $2.5 million from a native Canadian group. The iron spawned the growth of enormous amounts of plankton, which Mr. George, a former fisheries and forestry worker, said might allow the project to meet one of its goals: aiding the recovery of the local salmon fishery for the native Haida. Plankton absorbs carbon dioxide, the predominant greenhouse gas, and settles deep in the ocean when it dies, sequestering carbon. The Haida had hoped that by burying carbon, they could also sell so-called carbon offset credits to companies and make money." [NYT]

Nod to Kevin Lewis

Thursday, October 25, 2012

Are Some People Just Too Ignorant?

I do often hear my climate catastrophe worshipping colleagues say that some people are just too darned stupid to understand how smart my colleagues are.  Meaning that this whole "democracy" thing is a problem. Voters should shut up and do what experts tell them to do.

An interesting study, along these lines:

The polarizing impact of science literacy and numeracy on perceived climate change risks

Dan Kahan et al.
Nature Climate Change, October 2012, Pages 732–735

Abstract: Seeming public apathy over climate change is often attributed to a deficit in comprehension. The public knows too little science, it is claimed, to understand the evidence or avoid being misled. Widespread limits on technical reasoning aggravate the problem by forcing citizens to use unreliable cognitive heuristics to assess risk. We conducted a study to test this account and found no support for it. Members of the public with the highest degrees of science literacy and technical reasoning capacity were not the most concerned about climate change. Rather, they were the ones among whom cultural polarization was greatest. This result suggests that public divisions over climate change stem not from the public’s incomprehension of science but from a distinctive conflict of interest: between the personal interest individuals have in forming beliefs in line with those held by others with whom they share close ties and the collective one they all share in making use of the best available science to promote common welfare.

A nod to Kevin Lewis.

More after the jump....

On notes from one's mother

Link for October 25, 2012

This "Zits" amused the LMM.  Because it is entirely accurate.

"Dude!  It has a bibliography!"

And that is just some of her texts!

Democracy is a bad idea

At least in the USA.

Tyler and I have a piece up at Slate which highlights the findings that irrelevant local events (like football games) affect peoples' voting behavior.

Beyond the pieces we cite, there is also research by Justin Wolfers showing that voters don't process economic information rationally, and a fun paper by Achen & Bartels showing how shark attacks in New Jersey hurt Woodrow Wilson at the polls.

People, the legitimacy of representative democracy rests in large part on the idea of democratic accountability, and there is a growing literature showing that such accountability is a mirage.

We open our piece with a great Churchill quote: "The best argument against democracy is a 5 minute conversation with the average voter".

It's no wonder our political outcomes are often so illogical, frustrating and counter-productive.

We have met the enemy and he is us (apologies to Walt Kelly).

Wednesday, October 24, 2012

Income and Democracy

Income and democracy: Revisiting the evidence

Enrique Moral-Benito & Cristian Bartolucci
Economics Letters, December 2012, Pages 844–847

Abstract: In an influential paper, Acemoglu et al. (2008) find that the positive correlation between income per capita and the level of democracy across countries vanishes once country-specific effects are accounted for. In this paper, we find evidence of a non-linear effect from income to democracy even after controlling for country-specific effects. In particular, our findings point to the existence of a positive effect only in low-income countries.

Nod to Kevin Lewis

Helping the private sector in Argentina

Argentina has now passed a decree allowing the government to direct both the amount and the type of investment behavior of private insurance companies. Here's the scoop from the AP (via Fox News so you KNOW it's true):

she (President Christina Kirchner)  decreed that insurance companies must invest up to 30 percent of their holdings in "productive activities" to improve Argentina's infrastructure. "This decree links the insurance industry with the development of the actual economy," said the decree published Tuesday. 

With her government redirecting resources toward "projects that have a clear productive and social purpose," insurers will "encounter new possibilities of investment that that will feed a virtuous cycle of development with social inclusion," it said. The decree, effective Wednesday, puts Deputy Economy Minister Axel Kiciloff and Commerce Secretary Guillermo Moreno in charge of a committee that will decide where the insurers can invest their holdings. 

The list begins with projects already sponsored by the nationalized pension system and other government-run funds, but also can include whatever the committee decides is "productive, according to the objectives of the political economy." 

Economy Minister Hernan Lorenzino said Argentina's insurers are sitting on $13 billion but put only $18.5 million in what the government considers productive projects. The government hopes to raise that to $1.5 billion by mid-2013. This "will be good for the national economy and for the insurance sector as well, since these investments have proven to be the best in terms of profits and security in recent years," Lorenzino said in a radio interview. 

That's right, private money decreed to go to either "infrastructure" or projects with a "clear social purpose".

Gee this sounds like a great idea. Win-Win-Win. I wonder what  other Argentine investors think?

Argentina's Merval stock market index dropped more than 3.5 percent Tuesday after Fernandez made the surprise announcements Monday night.

Uh, oh, more people making bad decisions with their money.  Sounds like La Penguina has some more work to do!

Hat Tip to NC

The Internet

Why was the internet invented?  So you can read about a Vietnamese fish with its penis on its chin.

Now you know.


The First Law of Petropolitics

Romain Wacziarg, Economica, October 2012, Pages 641–657

Abstract: We examine empirically the relationship between crude oil prices and the ebb and flow of democratic institutions, in order to test the hypothesis that high oil prices undermine democracy and sustain autocracy. We use a variety of time series and panel data methods over a wide range of country subsamples and time periods, finding strictly no evidence in favour of this so-called ‘First Law of Petropolitics’ (Thomas Friedman 2006).

Nod to Kevin Lewis

Tuesday, October 23, 2012

Wow. Seems Impossible....

This would be a really interesting, beautiful photograph.

Except that it is NOT a photograph.  It is drawn with a ....pencil.  Click for an even more absurdly realistic view.

I bought it off the Baptists

These renderings may or may not end up being what we eventually build in Santa Fe, but they are where we are at now in the process (clic the pics for even more speculative images). 

Of course, Mark E. Smith is always relevant:

Free Falling

Cute prank.  Interesting that it worked; the monitors must in fact be pretty good.

Nod to Angry Alex

Monday, October 22, 2012


Models with a persistent, time-varying error variance (i.e. GARCH) models, are mainly used in Macro to investigate whether uncertainty affects the conditional mean (i.e. GARCH-M).

However, even if we are not modeling GARCH in Mean effects, ignoring conditional heteroskedasticity, or "correcting" our coefficient standard errors for it by a White-type of correction can be problematic.

For one thing, a maximum likelihood approach can have almost infinite relative efficiency gains over OLS. Thus in a VAR context, ignoring the conditional variance-covariance process, can lead to poorly estimated coefficients and thus poorly estimated impulse responses.

For another, White (or Newey-West) standard errors are not generally appropriate in the case of a GARCH variance process.

Jim Hamilton has a great piece about these phenomena, with a couple interesting examples of how dealing with the conditional variance can change inferences about the conditional mean.

This is a situation I've seen in my own work. Here is an older piece with Mark Perry in the Journal of Finance about liquidity effects, and here is a joint piece with Haichun Ye in Economic Inquiry about the twin deficit phenomenon. In both cases modeling the conditional variance process changed inferences about the conditional mean.

Here is a recent piece by rising macro star Olivier Coibon in the AEJ: Macro which also demonstrates the importance of modeling the conditional variance process.

GARCH (or Stochastic Volatility if you prefer) in macro is still way under appreciated and under used.

Sunday, October 21, 2012

YYM in Portugal

So, I get this phone call at 7 am Saturday from the YYM:  "I got pickpocketed in the Lisbon train station."

He still has his passport, and he is with his girlfriend so he has access to cash.  But it is worrisome.  Apparently the two of them had "met" this aggressive woman who stood very close to them and asked for directions.  Presumably confederate behind him reached and took the wallet.

From his front jeans pocket?  Because that is where I always tell him to keep his wallet in train stations and public place:  keep your wallet in your FRONT jeans pocket.  Make them "kiss the dog."

No, it was in his outside jacket pocket, the big open one where you put your hands.  *&$^#$&^@!

Later in the day, he sent this picture, after they had rented a car and driven over to the coast.  Things must not be TOO bad...

Click for an even more happy image.

V meets Jubilee meets Disturbing Nutjobs

A call to the armed forces of England to commit the grossest and most destructive kind of treason. 


A target rich environment

People you know I'm talking about the Sunday NY Times!

Let's start with yet another defense of the stimulus by Christina Romer.

The piece starts with a remarkable display of selective amnesia. Romer says,

After listening to Representative Paul Ryan in the vice-presidential debate, you might think that careful evaluation isn’t needed. In his view, we spent $800 billion on the stimulus, yet unemployment still rose to 10 percent — so obviously it wasn’t helpful.

She then goes on to (correctly) point out that to evaluate a policy, we actually need the counter-factual, what would have happened without the policy in question.

But she ignores the counterfactual elephant in the room:

Which of course arrived to us in a document authored by... Christina Romer (and Jared Bernstein)!

Even more amazingly, she says the stimulus would have worked better if people would have believed in it more! In most circles, this is known as blaming the victim, not economic analysis.

And yet, who could fault people for not believing in the stimulus when by the second quarter of 2009 it was obvious that it would not accomplish anything nearly close to what the government had claimed it would accomplish?

Case #2 is after the jump!