Krugman’s blog, 5/11/13

There were five posts yesterday.  the first was “In Praise of Econowankery:”

Mike Konczal has an interesting piece on the general question of whether wonk-blogging — the practice of putting up fairly analytical data-heavy posts bearing on policy issues directly on the web, rather than going through more traditional publication channels — is a good thing. He puts it in the context of liberal politics, which it mostly (though not entirely) is; but I’d like to think about it more generally as a way in which data and analysis can be brought quickly to bear on policy discussion.

And not to create any unnecessary suspense: I think it’s had an enormously salutary effect.

First of all, what are we talking about here? Obviously the econoblogs — Mark Thoma, Brad DeLong, Konczal himself, Marginal Revolution (although it plays a surprisingly, well, marginal role in the big controversies), Yglesias, and many more. But also some of the more institutional blogs, notably FT Alphaville and Business Insider, and columns by the likes of Martin Wolf. And as a practical matter some official institutions are effectively part of the ongoing blogospheric discussion: the IMF, both through its official blogs and, if truth be told, via its semiannual World Economic Outlook and other publications, is in effect participating in the discussion more or less on Internet time. Working papers from some of the Feds, notably New York and San Francisco, do the same.

The overall effect is that we’re having a conversation in which issues get hashed over with a cycle time of months or even weeks, not the years characteristic of conventional academic discourse. Is that a problem?

OK, first point: many people seem to have a much-idealized vision of the academic process, in which wise and careful referees peer-review papers to make sure that they are rock-solid before they go out. In reality, while many referees do their best, many others have pet peeves and ideological biases that at best greatly delay the publication of important work and at worst make it almost impossible to publish in a refereed journal. Gans and Shepherd wrote about this almost 20 years ago, and the situation has surely not improved.

I’m told by younger colleagues, in particular, that anything bearing on the business cycle that has even a vaguely Keynesian feel can be counted on to encounter a very hostile reception; this creates some big problems of relevance for proper journal publication under current circumstances.

A second point is that events are moving fast, and the long lead times of conventional publication essentially guarantee that it will be irrelevant to current policy issues.

Still, all of this would be cold comfort if wonkblogging was just generating noise and confusion. But from where I sit, the reality has been just the opposite.

Look at one important recent case — no, not Reinhart/Rogoff, but Alesina/Ardagna on expansionary austerity. Now, as it happens the original A/A paper was circulated through relatively “proper” channels: released as an NBER working paper, then published in a conference volume, which means that it was at least lightly refereed. Proper science!

Except that it was all wrong. And how did we find out that it was all wrong? First through critiques posted at the Roosevelt Institute, then through detailed analysis of cases by the IMF. The wonkosphere was a much better,much more reliable source of knowledge than the proper academic literature.

And I would say that in general the quality of economic discussion we’ve been having in recent years is the best I’ve ever seen. Yes, there’s junk economics out there, but when was that not true? And yes, it can be hard for lay readers — or for that matter, it seems, quite a few people with heavy economic credentials — to tell the junk from the real insights; but again, when wasn’t that true? As far as real, insightful, useful discussion of matters economic is concerned, this is actually a golden age.

Of course, these useful insights have been largely ignored by policy makers. But once again, when was that not true?

So wonk on proudly. As Martha Stewart would say, it’s a good thing.

The second post of the day was “Harpooning Ben Bernanke:”

Brad DeLong has the best piece I’ve seen on Bernanke rage among the hedge funders. His point is that the hedgies keep thinking of the Fed as if it were a rogue trader driving prices away from their natural value, like JP Morgan’s London Whale, rather than as a central bank trying to achieve full employment and target inflation. Hence their rage at the failure of bond prices to collapse the way they “should”.

I’d riff on this a bit further. I suspect that the hedge fund guys are relying a lot on historical correlations that worked pretty well for decades: mean reversion of yields, correlations with deficits, etc., most of it pretty much model-free. The trouble is that a once-in-three-generations deleveraging shock makes such correlations useless. Cross-national analogies — i.e., Japan — would have been better, but don’t seem to have been applied.

What you should be doing is macro analysis, using something like IS-LM — something like what I did here, almost three years ago. (The forecasts have gotten worse since, so the implied long-term rate would be even lower).

But instead of saying that maybe this macro IS-LM stuff has a point, they’re raging against the man with the beard.

The third post of the day was “Inflation Madness:”

One thing I gather from various economic discussions as well as some of the trolls on this blog is that there’s a widespread view that the kind of monetary policy I advocate — which includes a higher inflation target — isn’t just wrong; it’s madness. It is, I am told in no uncertain terms, proof that I am no longer a real economist, if I ever was.

So I guess it’s worth pointing out the long list of respectable economists with similar views. The point is not to argue from authority — it is, instead, to knock down the other side’s attempt to argue from authority, on the grounds that “nobody” believes that this is a good or even legitimate idea.

So, a brief list of well-known economists who have been pro-inflation under circumstances like those we face today:

Greg Mankiw and Ken Rogoff.

Olivier Blanchard, the chief economist of the IMF.

Mike Woodford, arguably our leading macroeconomic theorist.

Lars Svensson, the deputy governor of the RijksbankRiksbank, although on his way out because his colleagues disagree.

Ben Bernanke, back when he was lecturing the Japanese.

If you think this is a terrible idea, that’s your right. But if you imagine that it’s outlandish and somehow uneconomistic, you’re just ignorant.

Next up was “Grant’s Anabasis (More Civil War Obsession):”

Still indulging myself with personal addenda to the Times Disunion blog, and feeding my U.S. Grant obsession. So, at this point in the Vicksburg campaign we’re at the amazing stage where Grant cuts loose from the Mississippi, defeats Confederate forces trying to reinforce the city, then turns toward Vicksburg, defeats another army, and pens it up for the siege to come. The campaign looks like this:

What’s so strange about this campaign — aside from giving the lie to any notion of Grant as a crude butcher who knew nothing of maneuver — is how little it looks like anything else in the Civil War, which did tend to be a matter of large armies crashing into each other with incredible bravery, but also with massive casualties on both sides, and little in the way of decisive results. Instead, here we get a campaign of rapid marches, defeating an enemy in detail, and achieving an utterly decisive victory at the end; it looks like Bonaparte in Italy, 1796, not the 1863 universe of battle.

I don’t quite understand how it happened, but it changed everything.

The last post of the day was “More Science Fiction for Economists (Seriously Time Wasting):”

Noah Smith has a list; all good stuff, although not all to my taste. (I just can’t read Cory Doctorow, and don’t know why). Definitely definitely The Dispossessed, which never seems to lose its relevance.

As I see some commenters have already pointed out, the list really must include Asimov’s Foundation Trilogy; ideally the new folio edition, for which guess who wrote the introduction.

I absolutely second (and third, and fourth) Charlie Stross. But Accelerando, although great, isn’t my top pick. He’s incredibly prolific, with the ability to write in multiple sub-genres, but if economics is what you want, you might want to look at the Merchant Princes novels, which are arguably parallel-universe fantasies that are also essays in development economics. (New edition of the MP novels coming out, with some plot snafus fixed). If you want sheer giddy fun, try the Laundry novels, Lovecraft-meets-hackers-meets-pop-references, with tips of the hat to everything from James Bond to Modesty Blaise.

Neal Stephenson: Actually, The Diamond Age is closest to being an econonovel. And I just loved Anathem.

And any Iain Banks Culture novel; Use of Weapons was my gateway, but Consider Phlebas, or actually any of them, will do. Banks is terminally ill, so his work should be especially treasured now.

Ken MacLeod: The Restoration Game is my favorite, but again there are many fine reads.

Read everything I’ve just mentioned, and you will wasted a large piece of your life. Hey, economists like to suppress their competition too!

I’m eternally grateful to Prof. Krugman for introducing me to the works of Charles Stross.  You’ve GOTTA read the Laundry novels — they’re huge fun.  And now he’s given me another list of things I haven’t read yet, so I’m looking forward to wasting spending some time with good books.

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