Meme Day 2016 (Post all memes here)

Integralds · 1時間前

Lucas then threw a chair at Larry Ball, but in the interest of politeness we usually omit that bit.

Integralds · 2時間前

You may not know, but I was there for "Comments on Ball and Mankiw." Let me recount what I remember.

After Larry Ball's presentation, the chair of the session introduced its discussant:

Next we have the discussant for Ball and Mankiw's paper. Despite his impressive resume, he's an agile academic, and his comments can be highly venemous. Just like the presenter he's killing, the discussant has two curved, hollow fangs, which inject paralyzing venom.

Bob Lucas is a predator.

Integralds · 16時間前

I have lists on the /r/economics sidebar

Integralds · 21時間前

To be clear, I'm talking about M0 and leaving the rest of the M's for later.

This is a curious misapprehension of the Taylor rule which addresses rates not the stock of money.

I can always rewrite the TR as an equivalent rule in terms of the monetary base.

Integralds · 21時間前

The raw Solow residual (e.g., dz = dy - a*dk - (1-a)*dh) is contaminated with a few kinds of measurement error.

John Fernald has a series of papers that cleans the residual up; I'd look at those.

Integralds · 21時間前

The paper is marred by a programming error.

He gets identification out of state fixed effects.

His paper is run without state fixed effects. As in, the table that reports statistically significant coefficients under state fixed effects, does not use state fixed effects.

Worse, when you add state fixed effects, which he should have done in the first place, the coefficient becomes statistically insignificant.

Integralds · 1日前

Also, remember that the size of the economic distortion of tariffs is proportional to the tariff squared.

As tariffs get lower, the marginal benefits of additional tariff reductions become small.

Lest we forget, the free-traders have already won on basically all fronts that matter, with the glaring and persistent exception of agriculture.

Integralds · 1日前

Or is it the central bank that creates the first money, which is then multiplied up?

Yes. If you look closely at the $1 bill in your pocket, it clearly says "Federal Reserve Note."

If so, how does it do this?

There's a literal printing press in DC. More practically, some institutions have bank accounts with the Fed. The Fed trades with those institutions, swapping money (reserves) for other assets (usually short-term government bonds).

And how does the central bank know how much money to create in order for it to be multiplied up? Or does it create some money and then control the quantity using the interest rate, all after the fact?

That's the subject of monetary policy. Most central banks follow some kind of Taylor rule, by which they expand the stock of money when inflation and output are low, and contract the stock of money when inflation and output are high, relative to some target.

Integralds · 1日前

Start with an economic model of a barter economy. People trade goods for goods. There are n(n-1)/2 markets, one in which each good is traded for each other good.

Now add money. What happens?

With perfect information, no transport costs or frictions, "perfect trust," and "perfect memory," nothing happens. Money lies worthless on the ground and people still trade goods for goods. The value of money is zero; the price level is infinite. That's not a good way to start your theory of the price level.

To give money value, you have to do something to break the frictionless flow of goods for goods. Here are a few ways you can do that:

Assume money goes into the utility function. Theoretically abominable, but a useful shortcut.
Ban barter. Force individuals to trade goods for money.
Force producers to post prices in units of money. That doesn't solve the money demand problem, but it does lead to money as the unit of account.
Impose a generational structure where individuals wish to smooth consumption when young and old. Money can arise endogenously as a store of value. (Idea: produce when young, trade goods for money, then when old trade money for the goods of the then-young.) Money has value as an asset in these models.
Impose a structure where individuals meet other individuals sequentially. Each pair might not satisfy the double coincidence of wants, but some pairs will satisfy single coincidence of wants. Money allows people to make single-coincidence trades, trading goods for money. Money thus has value as the medium of exchange. It's possible to show that this structure devolves into the cash-in-advance structure (2).
If people can't keep perfect records of all previous transactions, then money can arise as "memory;" you can show that keeping track of who has what amount of money is sufficient for characterizing the relevant history of trades.

Integralds · 1日前

Read yer textbook shakes cane

Harford, The Undercover Economist (haven't read it myself; gets good reviews)

Harford, The Undercover Economist Strikes Back (startlingly deep discussion of macro, all without equations)

Deaton, The Great Escape (you may skip the nerdy bits on measurement issues on the first pass)

Dixit and Nalebuff, Thinking Strategically (there may be a new edition with a different title?)

Schelling, Micromotives and Macrobehavior

Malkiel, A Random Walk Down Wall Street

As a beginner, read Mankiw's blog, Calculated Risk, Marginal Revolution, and one of Paul Krugman, Brad DeLong, and Mark Thoma.

As you grow older and wiser you'll find specialist blogs that interest you more.

Integralds · 1日前

In addition, most "banks" in macro models are more adequately described as capital mutual funds or, even more starkly, as grain warehouses.

Banks in most macro models facilitate the trade of real goods and services across agents. Banks in the real world trade in currency and cheques (and other transactions media), not real goods and services directly.

The question of interest is whether we can abstract from the surface movements of transactions media to focus on the underlying flows of real goods and services.

Integralds · 1日前

It's also an exercise in talking past each other at a high level.

Integralds · 1日前

I want to build a theory of banking up from the ground, because doing so would really help in these discussions, but don't care enough to actually write the paper.

(I suspect the distinction between "real loans" of goods should be distinguished from "nominal loans" of banknotes, and that doing so will clarify the "banks lend deposits" stuff. But again, I don't care enough to write the paper. If someone does care enough, I'll gladly coauthor it with them.)

(To do banking properly you need to build it from the dirt up with a sequence of about six thought experiments of increasing complexity. I can provide the thought experiments and tell you what the result will probably look like, but don't care enough to dot all the i's and cross all the t's.)

Integralds · 1日前

It helps to be the very best (like no one ever was).

And to have coauthors of people on admissions committees tell adcoms to that effect.

Like, "Hey Greg, it's Ricardo. I'm advising this undergrad at Columbia and he's pretty hot shit. Attached is an early draft of his senior thesis. Give his application a look when you meet for grad admissions."

Integralds · 1日前

I had a long argument with my macro-labor prof about this, and in the end we decided to go with HP-filtered HOANBS per capita. (Or band-pass filtered, whatever, the filter's not the important part.)

Some papers look at filtered "average weekly hours / 168" then appropriately scale up.

The object "L" in the RBC theory is, most technically, the fraction of available hours used for work. HOANBS, or average weekly hours, both get you there.

Integralds · 1日前

In general, yes.

Integralds · 1日前

There's no "universal VAR" but I will give you two benchmarks.

The "output, inflation, nominal interest rate VAR" with RGDP in growth rate, inflation as measured by the rate of change of the GDP deflator, and the nominal interest rate (usually Fed funds rate). Usually, but not always, commodity price inflation is tacked on top to control for things like oil shocks and to resolve various puzzles that come out of the VAR. It's common to use one year's worth of lags.
The consumption-income VAR. Growth rate of RGDP and growth rate of personal consumption expenditures. One year's worth of lags.

Integralds · 1日前

I always get nervous when we try to analyze a permanent shock in a model that (1) is locally linearized around a determinate steady-state and (2) may not have a determinate equilibrium path anyway.

I need to write some things down; the question is too hard to answer in a reddit post. I need TeX and maybe Matlab.

Integralds · 1日前

It's unwise to discuss banks on /be. Just leads to a lot of pain with no clear advantage gained.

Integralds · 1日前

>discussing banks on /be

Yeah no I'm going to work on /u/colacoca's neo-fisher problem instead. Have fun.

Integralds · 1日前

Varies by field.

The AEJs compete with or dominate the top field journals, which in turn compete with or dominate the second-tier general interest journals.

For example, in macro, (AER = JPE = ... = REstud ) > (JME = AEJ) > (EJ = ... = REstat) > (second-tier macro journals like RED and JMCB, maybe JEDC) > (third-tier general interest journals).

Integralds · 1日前

The vast majority of the time, you move down or sideways.

There is a mild exception at the very, very top. To take the trivial case, MIT is at the top, so if MIT is going to take in grad students it has to look "down."

Integralds · 1日前

For that matter, what problems does reasoning from a price change create?

The price of oil goes up. What happens to the quantity of oil traded?

You don't know. You don't know because the price of oil could have gone up due to an increase in the demand for oil, or due to a decrease in the supply of oil.

What happens to RGDP when the price of oil goes down?

You don't know. You don't know because the price of oil could have fallen because of a general lack of AD (as in 2008), or could have fallen due to an increase in oil supply (as in 2016). Or both.

You are allowed to reason from a price change in the following cases:

when the economic unit in question is small relative to the market, so that when that unit changes its behavior, prices don't change
when you're making a small open economy assumption, so that when the country changes its behavior, global prices don't change (basically the macro version of 1)
If you have very, very good reasons to think that either supply or demand is perfectly elastic

Otherwise, you may not reason from a price change. For the market as a whole, or for large open economies, you cannot reason from a price change; you have to go back one step and ask why the price changed in the first place.

Hard mode: the interest rate is a price, so everything I've said also holds for interest rates.

Integralds · 1日前

However, it got a burst of mods from BE (me, ashen, Zoidberg, and Reg_Monkey) just yesterday

Regime change!

Integralds · 1日前

You're in the queue. I came home from work with five or six things to respond to. :)

Integralds

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