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Ask BadEconomics: End of Weekend Discussion Thread, 06 September 2015 (self.badeconomics)

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Welcome to the End of the Weekend discussion thread

Dud you get so drunk this weekend you ended up telling friends we need to return to a gold standard? Come by and share your weekend tales and anything else on your mind.

And also chat about any bad (or good) economic events. Remember to use the NP posts and whatnot.

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トップ新着論争中古い順Q&A

[–]commentsrusBring maymayday back! 6ポイント7ポイント  (8子コメント)

I intellectually identify as an /r/badeconomics user. Ever since I was an undergrad I dreamed of blazing through the /r/economics and /r/politics comments sections dropping academic econ jargon and inside jokes on disgusting users who didn't study economics. People say to me that a person being an /r/badeconomics user is arrogant and I shouldn't link to threads that I'm involved in but I don’t care, I’m a grad student. I’m having a professor install A's on my fields exams. From now on I want you guys to call me a “Labor Economist” and respect my right to laugh at both minimum wage opponents and proponents and shill needlessly. If you can’t accept me then you’re committing bad economics and need to check my RI to see why you're wrong and should die. Thank you for not understanding economics as much as I do. ;)

[–]say_wot_againConfirmed for Google bigwig 0ポイント1ポイント  (7子コメント)

Okay, what are you parodying this time? It's so hard to keep up...

[–]commentsrusBring maymayday back! 3ポイント4ポイント  (4子コメント)

https://i.imgur.com/x8d9O6T.png

[–]somegurkWhy doesn't modern medicine use more leaches? 1ポイント2ポイント  (1子コメント)

amazing, did you create that?

[–]alexhoyerI used to bullseye Keynesians in my T-16 1ポイント2ポイント  (0子コメント)

Your maymay comparative advantage is off the charts.

[–]CutOffUrJohnsonResident Free Market Marx-Leninist 1ポイント2ポイント  (0子コメント)

Us making le RI for wumbo

Not Safe for Digestion

[–]wumbotarianmodeled as if Noah Smith was a can opener 1ポイント2ポイント  (1子コメント)

The "I sexually identify as an attack helicopter" spoof on otherkin.

[–]say_wot_againConfirmed for Google bigwig 2ポイント3ポイント  (0子コメント)

I didn't realize that was a whole thing, I thought it was just one sentence.

[–]EsoteriColaHave you tried raise VAT and kill all the poor? 2ポイント3ポイント  (4子コメント)

Can anyone produce an economics version of the Navy Seal copypasta? Something along the lines of: "What the fuck did you just fucking say about me, you little bitch? I’ll have you know I graduated top of my class in the University of Chicago, and I’ve been involved in numerous economics conferences, and I have over 300 published papers in the American Economic Review."

[–]usrname42There is no God but Keynes, and Krugman is his prophet 11ポイント12ポイント  (3子コメント)

Praxxy version

I have over 300 published papers in the Quarterly Journal of Austrian Economics. I am trained in economic calculation and I’m the top Austrian price theorist in the entire Mises Institute. Your arguments present nothing to me other than the usual New Keynesian claims regarding idle resources and the profit-and-loss mechanism. I will refute your assertions with precision the likes of which academia has never been seen before on this Earth, mark my words. You think you can get away with arguing in a peer-reviewed journal that Say's Law is invalid and the "accelerator" and "multiplier" of the consumption function determine levels of employment? On the contrary, my friend, you are committing a very deep economic fallacy. As we speak I am contacting Peter Klein, Mario Rizzo, and Robert Murphy and your citation is being copied into my abstract, so you would do well to prepare for a comment. The comment that wipes out most of the claims asserted in your paper as though they are a priori principles, despite your other statements to the effect that they must be confirmed inductively somehow. You are going to be hard-pressed to respond in the next volume. I can publish in any journal, in any volume, and I can respond via a great variety of methodological approaches, and that's just with my own arguments. Not only am I extensively trained in the deconstruction of fallacious arguments, but I have access to the entire set of academic databases with economic sciences included as subjects and I will use them to their full extents to respond to your unfounded presuppositions. If only you could have known what response your otherwise non-controversial paper was about to bring down upon you, perhaps you would have reconsidered publishing it. But you couldn’t, you didn’t, and now you are facing the consequences of intellectual laziness. I will bombard you with corrections and expositions, and you will be overwhelmed by them. You may have to reconsider the theoretical underpinnings of your methodology, professor.

[–]urnbabyurnNeoPanglossian 3ポイント4ポイント  (2子コメント)

If someone had 300 published papers, even in the QJAE, I'd still be impressed.

[–]wshanahan 1ポイント2ポイント  (1子コメント)

Well apparently Block was able to do it. At first I was impressed, until I saw most of the journals and the titles of his papers.

This is a list of all his publications.

[–]TotesMessenger 0ポイント1ポイント  (0子コメント)

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[–]Zexy_Bastard 2ポイント3ポイント  (3子コメント)

Should all economic theory be built upon a microeconomic base? why/why not?

[–]bdubs91Maestro Today and Maestro Forever 2ポイント3ポイント  (2子コメント)

I would say yes, otherwise you aren't really telling a causal story. Famously, Lucas said the Philips's curves weren't identified. If you look at aggregates only, how do you know what you see is causal?

[–]urnbabyurnNeoPanglossian 4ポイント5ポイント  (1子コメント)

You can still draw causal links, in the same way we don't need quantum physics to understand laws of motion of large bodies. Was Newtonian physics lacking micro foundations?

There was quite a bit of this back and forth with Krugman, Noah Smith and the gang over micro foundations over the last few years. Maybe we can agree that micro foundations improve the model, but aren't necessary nor sufficient. Especially when micro foundations are pieced together to give the macro results.

Here is Simon Wren Lewis on it

Suppose there is in fact more than one valid microfoundation for a particular aggregate model. In other words, there is not just one, but perhaps a variety of particular worlds which would lead to this set of aggregate macro relationships. (We could use an analogy, and say that these microfoundations were observationally equivalent in aggregate terms.) Furthermore, suppose that more than one of these particular worlds was a reasonable representation of reality. (Among this set of worlds, we cannot claim that one particular model represents the real world and the others do not.) It would seem to me that in this case the aggregate model derived from these different worlds has some utility beyond just one of these microfounded models. It is robust to alternative microfoundations.

Lastly, I'll add this classic post of Krugman on the subject http://krugman.blogs.nytimes.com/2012/03/02/the-microfoundation-thing-wonkish/

Mark Thoma sends us to Simon Wren-Lewis on microfounded macro models (especially the DSGE models that have dominated the literature even on the Keynesian side) versus “ad hoc” models like IS-LM. Wren-Lewis is on my side, sort of; but I’d like to add a few points, in no particular order.

  1. Even in microeconomics, we don’t insist on using models built up from maximizing behavior all the time. Exhibit A: supply and demand! I mean, we kind of know how something like the supply and demand curves can be derived from maximizing behavior, but it’s not all that easy, and nobody, nobody, insists that you do this derivation every time.

  2. Relatedly, as a practical matter intellectual scratch-pads — approximate version of what we really believe, but stripped down to be tractable — are what one uses for applied economic analysis all the time.If I want to ask what the effects of some shock will be, it rarely makes sense to demand that the analysis always go all the way back to the intertemporal choices of optimizing agents.

  3. In the hard sciences, when dealing with complex systems people have often used higher-level, aggregative concepts that seem to work empirically long before they have a full derivation of effects from the underlying laws of physics. Read Air Apparent, a nifty book on the history of meteorology: meteorologists were using concepts like cold and warm fronts long before they had computational weather models, because those concepts seemed to make sense and to work. Why, then, do some economists think that concepts like the IS curve or the multiplier are illegitimate because they aren’t necessarily grounded in optimization from the ground up?

  4. And when making such comparisons between economics and physical science, there’s yet another point: what we call “microfoundations” are not like physical laws. Heck, they’re not even true. Maximizing consumers are just a metaphor, possibly useful in making sense of behavior, but possibly not. The metaphors we use for microfoundations have no claim to be regarded as representing a higher order of truth than the ad hoc aggregate metaphors we use in IS-LM or whatever; in fact, we have much more supportive evidence for Keynesian macro than we do for standard micro.

  5. A practical observation: the economists who get most bent out of shape at the notion that maybe we don’t always have to derive everything from optimizing individual agents also tend, with remarkable regularity, to be the economists who make simple, ludicrous conceptual errors when they discuss real-world macroeconomic issues. See many posts here and on Brad DeLong’s blog for examples. I don’t think this is an accident; it really helps your ability to think clearly to have those simplified, ad hoc models always in the back of your mind.

In these circumstances, it would seem sensible to go straight to the aggregate model, and ignore microfoundations...

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[–]Shiloh86I didn't choose the Krug life, the Krug life chose me 4ポイント5ポイント  (0子コメント)

FITE ME IRL

[–]laboreconomist3Pundit with Basic Excel Proficiency 1ポイント2ポイント  (1子コメント)

Who else is excited for tomorrow? #praisegompers

[–]wumbotarianmodeled as if Noah Smith was a can opener 3ポイント4ポイント  (0子コメント)

Under communism EVERY DAY is labor day.

So, obviously, capitalism is inferior.

[–]shunt31 0ポイント1ポイント  (6子コメント)

I thought of a decent, non-inflammatory, question this time!

My textbook (seriously, every time) says in the general equilibrium between goods, money and labour markets that the collective and household labour supplies are upward sloping (see panel a), because workers are willing to substitute employment and higher wages, but earlier on the book it says that in the short run, labour supply is inelastic and in the long run it's backwards bending, as you can see in table 6.1. Where does the difference come from? IS-LM is short-run, isn't it?

(sidenote: I got a bit miffed when I read what general and partial equilibriums were about; general is to do with interdependencies between markets, and partial is something else entirely no, I can't read)

[–]alexhoyerI used to bullseye Keynesians in my T-16 3ポイント4ポイント  (5子コメント)

The upward sloping portion of the labor supply curve is is the portion where the substitution effect dominates the income effect. So the argument here is, if you receive a raise in hourly salary tomorrow, you will want to work more hours. For most intents and purposes, it usesful to think of the individual labor supply curve as upward sloping. The backward bending portion occurs when the income effect starts to dominate the substitution effect (assuming leisure is a normal good). If you've worked with indifference curves, this is a useful graphical demonstration.

[–]shunt31 0ポイント1ポイント  (4子コメント)

Thanks. So labour supply is treated as upwards sloping, even if it isn't in reality (in either the long run or the short run) because it's more useful? Seems like a bit of a cop-out.

[–]alexhoyerI used to bullseye Keynesians in my T-16 1ポイント2ポイント  (3子コメント)

Not really, no. There are a couple of issues being mixed here. Labor supply is generally upward sloping in both the long and short run, at least until the income effect takes over. Short run labor supply may be somewhat inelastic, but it absolutely remains responsive to wage changes. My intuition says that long run labor supply should be more inelastic. Over the course of 150 years yes average hours worked have fallen while wages have risen, but that analysis isn't really controlling for other variables. Generally, particularly from an intuitive standpoint to build an understanding of what supply is, it is most useful to think of labor supply decisions as upward sloping, then move on to the backward bending part and consider how that relates to the conditions required for the upward sloping part.

[–]urnbabyurnNeoPanglossian 0ポイント1ポイント  (2子コメント)

In the anthro-economics book "Stone Age economics" the author argues the case that Stone Age man really worked short hours and consumed a good deal of labor. Cave men lived a life of leisure. Kill a mammoth, take a nap for a the rest of the day, gather some berries, go home and relax by the fire...

[–]wumbotarianmodeled as if Noah Smith was a can opener 0ポイント1ポイント  (0子コメント)

....die when you're 22

[–]alexhoyerI used to bullseye Keynesians in my T-16 0ポイント1ポイント  (0子コメント)

All fun and games until your sister is carried off by a giant bird and your brother eats your foot.

[–]13104598210I help banks get free monies 0ポイント1ポイント  (2子コメント)

Is this bad economics or should we rise against the Fed?

[–]say_wot_againConfirmed for Google bigwig 1ポイント2ポイント  (1子コメント)

That's...more than a little different than Tim Duy's normal tone.

[–]besttrousers"Then again, I have pegged you for a Neoclassical/Austrian." 0ポイント1ポイント  (0子コメント)

Also I don't see why productivity wage gaps are the Feds purview. Maybe there's something for dol, maybe not.

[–]prillin101Fiat currency has a 27 year lifespan 0ポイント1ポイント  (0子コメント)

So, is there still debate going on whether QE worked or not, or do we know for sure that QE worked/didn't work.

[–]Llan79 0ポイント1ポイント  (0子コメント)

What impact does the British monarchy actually have on the UK's economy? I hear conflicting claims from both sides as to whether they are a net positive or negative for Britain.

[–]CatFortuneにゃんぱす! 0ポイント1ポイント  (1子コメント)

I asked the other day about whether the TPP might make it easier for Japanese music artists to come into America, at least on iTunes. The answer seemed to be yeah sure. But I was never clear on why they aren't here to begin with. Is there an economic reason why this is the case? Like something about international trade?

I guess this is a finance question but what's the story with bank holds? I thought I understood them, but I ordered this slick WataMote shirt on RedBubble, and there was a hold in addition to the charge that lasted all the way through the time it took to manufacture and ship, and for me to receive it. I thought holds went away like a little while after the charge at most, but I guess I don't get it at all.

Now for a completely unrelated question: Does anybody have DirecTV? I've been experiencing this weird thing where certain commercials cause my receiver to freeze until I fast forward or change the channel. Carnival Cruise is a big perpetrator. Not a huge inconvenience worth calling about, but totally weird.

I'll try to come up with better questions next time.

[–]say_wot_againConfirmed for Google bigwig 2ポイント3ポイント  (0子コメント)

I'm say_wot_again, and I have DirecTV.

And I'm bad at economics say_wot_again, and I have cable.

[–]wumbotarianmodeled as if Noah Smith was a can opener 0ポイント1ポイント  (7子コメント)

Reply to this with some literature if you want me to read a paper or multiple papers. I will have a boat load of free time for about 4 weeks so I can probably slog through 1 paper a day.

[–]urnbabyurnNeoPanglossian 1ポイント2ポイント  (5子コメント)

You hate micro, right? What fields catch your fancy, and which make you wish you were getting a root canal instead?

[–]wumbotarianmodeled as if Noah Smith was a can opener 0ポイント1ポイント  (4子コメント)

I don't hate micro. It just kinda bores me. The worst class I had was one on network theory. I wanted to jump into a pool of hot tar during that class.

[–]urnbabyurnNeoPanglossian 2ポイント3ポイント  (3子コメント)

Networks are awesome. Platform competition, matching and search, etc.

[–]wumbotarianmodeled as if Noah Smith was a can opener 0ポイント1ポイント  (2子コメント)

We didn't do any of that. It was an econ/cs mix and based off a cornell course. It was dumb. We didn't do cool stuff like network externalities until the end of the course.

Though we did do auction theory which was awesome! But that was only one part.

[–]say_wot_againConfirmed for Google bigwig 2ポイント3ポイント  (1子コメント)

econ/cs mix

It was dumb.

Why do you hate me so, wumbo?

[–]wumbotarianmodeled as if Noah Smith was a can opener 0ポイント1ポイント  (0子コメント)

It was dumb! There wasnt even any real CS in it.

My professor was trying to make it applicable to us. I give him props for that. But I would have rather taken Math Econ with him as he is known to make PhD students cry in that class (not really, but he's a mathematical economist).

[–]shunt31 0ポイント1ポイント  (0子コメント)

This voxeu page is quite interesting (at least to me, a European). For you, maybe Yagan, D (2014), “Moving to opportunity? Migratory insurance over the great recession” would be good. It says that 2006 local residents bore 93% of the labour demand shock in the Great Recession, with labour migration providing only 7% insurance.
But what do I know; I'm just a lowly CS student.