This paper is especially important at present..... a sharp warning to amateur gurus with colossal egos.....
Economics is Hard. Don’t Let Bloggers Tell You Otherwise
Kartik Athreya
Research Department
Federal Reserve Bank of Richmond
June 17, 2010
Abstract
In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contribute any insight to discussion of economics and, as a result, should be ignored by an open minded lay public.
Economics is Hard. Don’t Let Bloggers Tell You Otherwise
Kartik Athreya
Research Department
Federal Reserve Bank of Richmond
June 17, 2010
Abstract
In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contribute any insight to discussion of economics and, as a result, should be ignored by an open minded lay public.
HOW could anybody dislike the notion of fairness? Everything is better when it is fair: a share, a fight, a maiden, a game and (for those who think blondes have more fun) hair. Even defeat sounds more attractive when it is fair and square.
A sense of fairness, as any parent knows, develops irritatingly early. A wail of “It’s not fair!” is usually the first normative statement to come out of the mouths of babes and sucklings. People seem to be hard-wired to demand fairness. Studies in which people are offered deals that they regard as fair and unfair show that the former stimulate the reward centres in the brain; the latter stimulate areas associated with disgust.
For the British fair play is especially important: without it, life isn’t cricket (especially when you score a perfectly good goal against the Germans and it is unfairly disallowed—see above, ref). Their country becomes quite pleasant when the weather is fair, though unfortunately it rarely is. And these days fair-trade goods crowd their supermarket shelves.
Fairness is not only good, but also moderate, which is another characteristic that the British approve of. It does not claim too much for itself. Those who, on inquiry, admit that their health and fortunes are fair-to-middling navigate carefully between the twin dangers of boastfulness and curmudgeonliness, while gesturing in a chin-up sort of way towards the possibility of future improvement.
The French have taken to using le fair-play in sport, presumably because (as their coach’s refusal to shake hands with his opposite number after losing to South Africa suggested) their own culture finds the concept rather difficult. When talking politics, however, the French, like the Americans, tend to go for the more formal notion of justice. But fairness appeals to the British political class, for it has a common sense down-to-earthiness which avoids the grandiosity of American and continental European political discourse while aspiring to do its best for all men—and of course for maidens too, fair and otherwise, for one of its virtues is that it does not discriminate on grounds of either gender or skin colour.
Not surprising, then, that Britain’s government should grab hold of the word and cling to it in the buffeting the coalition has had since the budget on June 22nd proposed higher taxes and even sharper spending cuts. “Tough but fair” is what George Osborne, the Conservative chancellor of the exchequer, called the cuts he announced. “It is going to be tough, but it is also very fair,” said Vince Cable, the Liberal Democrat business secretary. At last, something they could agree on.
Fair dos
Yet the fact that everybody believes in fairness is a clue to what’s wrong with the notion. Like that other warm-blanket word, “community”, it signals limp thinking. What exactly is “fair” about restricting trade, for instance? Or “unfair” about letting successful people in business or other fields enjoy the fruits of their enterprise without punitive taxes?
“Fairness” suits Britain’s coalition government so well not just because its meanings are all positive, but also because—like views within the coalition—they are wide-ranging. To one lot of people, fairness means establishing the same rules for everybody, playing by them, and letting the best man win and the winner take all. To another, it means making sure that everybody gets equal shares.
Those two meanings are not just different: they are opposite. They represent a choice that has to be made between freedom and equality. Yet so slippery—and thus convenient to politicians—is the English language that a single word encompasses both, and in doing so loses any claim to meaning.
Fairness is fudge. This newspaper will have none of it. We reject the wide, woolly notion of fairness in favour of sharper, narrower words that mean what they say, like just or cruel. Sadly, British politicians are unlikely to follow our lead. They will continue to paper over their cracks with fairness. Which, given how handy the word is, is probably fair enough.
Economist 3 July
A sense of fairness, as any parent knows, develops irritatingly early. A wail of “It’s not fair!” is usually the first normative statement to come out of the mouths of babes and sucklings. People seem to be hard-wired to demand fairness. Studies in which people are offered deals that they regard as fair and unfair show that the former stimulate the reward centres in the brain; the latter stimulate areas associated with disgust.
For the British fair play is especially important: without it, life isn’t cricket (especially when you score a perfectly good goal against the Germans and it is unfairly disallowed—see above, ref). Their country becomes quite pleasant when the weather is fair, though unfortunately it rarely is. And these days fair-trade goods crowd their supermarket shelves.
Fairness is not only good, but also moderate, which is another characteristic that the British approve of. It does not claim too much for itself. Those who, on inquiry, admit that their health and fortunes are fair-to-middling navigate carefully between the twin dangers of boastfulness and curmudgeonliness, while gesturing in a chin-up sort of way towards the possibility of future improvement.
The French have taken to using le fair-play in sport, presumably because (as their coach’s refusal to shake hands with his opposite number after losing to South Africa suggested) their own culture finds the concept rather difficult. When talking politics, however, the French, like the Americans, tend to go for the more formal notion of justice. But fairness appeals to the British political class, for it has a common sense down-to-earthiness which avoids the grandiosity of American and continental European political discourse while aspiring to do its best for all men—and of course for maidens too, fair and otherwise, for one of its virtues is that it does not discriminate on grounds of either gender or skin colour.
Not surprising, then, that Britain’s government should grab hold of the word and cling to it in the buffeting the coalition has had since the budget on June 22nd proposed higher taxes and even sharper spending cuts. “Tough but fair” is what George Osborne, the Conservative chancellor of the exchequer, called the cuts he announced. “It is going to be tough, but it is also very fair,” said Vince Cable, the Liberal Democrat business secretary. At last, something they could agree on.
Fair dos
Yet the fact that everybody believes in fairness is a clue to what’s wrong with the notion. Like that other warm-blanket word, “community”, it signals limp thinking. What exactly is “fair” about restricting trade, for instance? Or “unfair” about letting successful people in business or other fields enjoy the fruits of their enterprise without punitive taxes?
“Fairness” suits Britain’s coalition government so well not just because its meanings are all positive, but also because—like views within the coalition—they are wide-ranging. To one lot of people, fairness means establishing the same rules for everybody, playing by them, and letting the best man win and the winner take all. To another, it means making sure that everybody gets equal shares.
Those two meanings are not just different: they are opposite. They represent a choice that has to be made between freedom and equality. Yet so slippery—and thus convenient to politicians—is the English language that a single word encompasses both, and in doing so loses any claim to meaning.
Fairness is fudge. This newspaper will have none of it. We reject the wide, woolly notion of fairness in favour of sharper, narrower words that mean what they say, like just or cruel. Sadly, British politicians are unlikely to follow our lead. They will continue to paper over their cracks with fairness. Which, given how handy the word is, is probably fair enough.
Economist 3 July
This paper analyses who pays and who wins from CSR..... (thanks to NZBR)
Who exactly benefits from CSR
Who exactly benefits from CSR
The new iPhone 4 is deliberately pitched and to be marketed as the result of combined design principles drawn from the arts as from the geek end of technology. CEO Steve Jobs has often spoken of this concept - and to some extent it is evident in various Apple products. It appears though to have been taken to a new level in a stringly commercial sense in the upcoming release....
From ZNET....
Leading up to the launch of the iPhone 4 (Techmeme, live coverage, gallery, all Apple posts), run by the iOS since it powers the iPhone, iPod touch and iPad, there were whispers everywhere about the Android’s turbo-charged innovation cycle, the end of iPhone envy and how other smartphones from the likes of HTC were closing the gap.
Now it wasn’t like the iPhone was becoming a commodity device, but you could see some parity on the horizon. Even Sam Diaz got over his iPhone envy. Enter Apple CEO Steve Jobs who was having none of that talk. Jobs talked about the mix between technology and liberal arts. The emphasis is on technology as an art form.
From ZNET....
Leading up to the launch of the iPhone 4 (Techmeme, live coverage, gallery, all Apple posts), run by the iOS since it powers the iPhone, iPod touch and iPad, there were whispers everywhere about the Android’s turbo-charged innovation cycle, the end of iPhone envy and how other smartphones from the likes of HTC were closing the gap.
Now it wasn’t like the iPhone was becoming a commodity device, but you could see some parity on the horizon. Even Sam Diaz got over his iPhone envy. Enter Apple CEO Steve Jobs who was having none of that talk. Jobs talked about the mix between technology and liberal arts. The emphasis is on technology as an art form.
06/06: The Beat Goes On....
French Connection: The Eurozone Crisis Worsens Sharply
By Peter Boone and Simon Johnson
The big news is France. With sentiment worsening across Europe, France has lost its relative safe haven status – credit default swap spreads on French government debt were up sharply today.
The trigger – oddly enough – was Hungary’s announcement that its budget is worse than expected (blaming the previous government; this is starting to become the European pattern) and in the current fragile environment discussed yesterday, this relatively small piece of news spooked investors. But these developments only reinforced a trend that was already in place.
It did not help that the Irish Minister of Finance announced Ireland has 74.2bn euros of guaranteed bank loans, bonds, and systemic support falling due between now and Oct 1. This is around 55% of GNP. It sounds like everyone backed by the Irish government had the “clever” idea to roll over their debts to just before the guarantees expire.
The big losers are Portugal-Ireland-Italy-Greece-and-Spain as always, but Belgium is now in the line of fire, and France is clearly under pressure. The spread between French and German credit default swaps (measuring the relative probability of default) is up – yesterday this was 40 basis points, today it stands at 44 (up from just 5 basis points at the end of 2009; most of the increase is since mid-March, with a sharp acceleration recently). French bonds have become illiquid, with wide bid-ask spreads; not what is supposed to happen in a safe haven. This is going to make the French angry – watch for more market slanders from top French politicians over the weekend; you know they would just love to ban trading in something.
Earlier today the French Prime Minister came out with a quote for the ages:
“I only see good news in parity between euro and dollar”.
Be careful what you wish for – such statements will drive the Germans crazy as they see further evidence that inflation lovers are clearly winning influence and might just gain control at the European Central Bank (ECB).
By Peter Boone and Simon Johnson
The big news is France. With sentiment worsening across Europe, France has lost its relative safe haven status – credit default swap spreads on French government debt were up sharply today.
The trigger – oddly enough – was Hungary’s announcement that its budget is worse than expected (blaming the previous government; this is starting to become the European pattern) and in the current fragile environment discussed yesterday, this relatively small piece of news spooked investors. But these developments only reinforced a trend that was already in place.
It did not help that the Irish Minister of Finance announced Ireland has 74.2bn euros of guaranteed bank loans, bonds, and systemic support falling due between now and Oct 1. This is around 55% of GNP. It sounds like everyone backed by the Irish government had the “clever” idea to roll over their debts to just before the guarantees expire.
The big losers are Portugal-Ireland-Italy-Greece-and-Spain as always, but Belgium is now in the line of fire, and France is clearly under pressure. The spread between French and German credit default swaps (measuring the relative probability of default) is up – yesterday this was 40 basis points, today it stands at 44 (up from just 5 basis points at the end of 2009; most of the increase is since mid-March, with a sharp acceleration recently). French bonds have become illiquid, with wide bid-ask spreads; not what is supposed to happen in a safe haven. This is going to make the French angry – watch for more market slanders from top French politicians over the weekend; you know they would just love to ban trading in something.
Earlier today the French Prime Minister came out with a quote for the ages:
“I only see good news in parity between euro and dollar”.
Be careful what you wish for – such statements will drive the Germans crazy as they see further evidence that inflation lovers are clearly winning influence and might just gain control at the European Central Bank (ECB).
This morning President Obama stated, flatly "This BP's fault and BP will pay the costs (of clean up compensation etc)".
This statement says a great deal about:
- one of the most common mistakes made by non economists
- just how attractive rhetoric rather than analysis is for politicians
And it's so simple.....
This statement says a great deal about:
- one of the most common mistakes made by non economists
- just how attractive rhetoric rather than analysis is for politicians
And it's so simple.....
22/04: Values matter...
The next fall of Rome
Schoolchildren around the world learn that European history starts with Athens and Rome. In future times, they will also be taught that the end of modern Europe began in the same places.
The European welfare state model hit the buffers in Greece’s fiscal crisis. Universal cradle-to-grave care for everyone as practised by consecutive Greek governments will never return. Not because European politicians would not want to provide it but because such promises can no longer be paid for. Greece’s current budgetary near-death experience only foreshadows what most of Europe will suffer in the coming years.
Schoolchildren around the world learn that European history starts with Athens and Rome. In future times, they will also be taught that the end of modern Europe began in the same places.
The European welfare state model hit the buffers in Greece’s fiscal crisis. Universal cradle-to-grave care for everyone as practised by consecutive Greek governments will never return. Not because European politicians would not want to provide it but because such promises can no longer be paid for. Greece’s current budgetary near-death experience only foreshadows what most of Europe will suffer in the coming years.
In their search for drama and an underwhelming desire to be "first", journalists frequently make the following blunders...
1. Failure to specify a base, for example: "This (insert any food additive) increases the chances of getting cancer of the (insert any organ) by 40%" according to (insert any source dubious or otherwise)". Without knowing the chance of contracting the original disease, the increase tells us nothing. The original probability might have been 5% in which case the increase in the overall probability is less than 2%. Boringly, it helps to know what base you are coming off.
2. Failure to specify any counterfactual (even the Court of Appeal judges have cottoned on to what these are, see Finau v Southward Engineering 1 ERNZ 522). Current prime example.... numerous statistics on flu and swine flu and deaths and coughs and colds. What we want to know is how many people died from swine flu who, but for catching swine flu, would not have died. Being "pretty terminal already then caught the flu" does not count. Nor do the significant number dying of non porcine flu strains every year (over 500,000 in the US alone).
3. Failure to adjust for age. Western populations are getting older and older faster and faster but also living longer and longer. This has numerous impacts.... more years exposed to the chances of being run over, becoming alcoholic, becoming deaf but not necessarily getting a hole in one. Rates of old peoples' problems increase without any change whatsoever in the per capita incidence of whatever is making headlines.
4. Failure to invert - i.e. apply a sanity test, for example "3 out of every 10 children in N.Z. schools today have reading difficulties according to (whoever currently stands to gain out of attracting more resource into education)". This means 70% of children do not have reading difficulties - at least on this measure.... just as having a 5% chance of dying in the next 5 years means you have a 95% chance of getting by if you don't give it another thought.
Many people like to say they have read "How to Lie with Statistics" - a great book by Daryl Huff. Judging by observed behaviour I think they are lying. As with the above - cute party statement - following the advice is a good deal less socially elevating and therefore shunned by the kings and queens of melodrama.
1. Failure to specify a base, for example: "This (insert any food additive) increases the chances of getting cancer of the (insert any organ) by 40%" according to (insert any source dubious or otherwise)". Without knowing the chance of contracting the original disease, the increase tells us nothing. The original probability might have been 5% in which case the increase in the overall probability is less than 2%. Boringly, it helps to know what base you are coming off.
2. Failure to specify any counterfactual (even the Court of Appeal judges have cottoned on to what these are, see Finau v Southward Engineering 1 ERNZ 522). Current prime example.... numerous statistics on flu and swine flu and deaths and coughs and colds. What we want to know is how many people died from swine flu who, but for catching swine flu, would not have died. Being "pretty terminal already then caught the flu" does not count. Nor do the significant number dying of non porcine flu strains every year (over 500,000 in the US alone).
3. Failure to adjust for age. Western populations are getting older and older faster and faster but also living longer and longer. This has numerous impacts.... more years exposed to the chances of being run over, becoming alcoholic, becoming deaf but not necessarily getting a hole in one. Rates of old peoples' problems increase without any change whatsoever in the per capita incidence of whatever is making headlines.
4. Failure to invert - i.e. apply a sanity test, for example "3 out of every 10 children in N.Z. schools today have reading difficulties according to (whoever currently stands to gain out of attracting more resource into education)". This means 70% of children do not have reading difficulties - at least on this measure.... just as having a 5% chance of dying in the next 5 years means you have a 95% chance of getting by if you don't give it another thought.
Many people like to say they have read "How to Lie with Statistics" - a great book by Daryl Huff. Judging by observed behaviour I think they are lying. As with the above - cute party statement - following the advice is a good deal less socially elevating and therefore shunned by the kings and queens of melodrama.
"The curious task of economics is to demonstrate to men how little they know about what they imagine they can design."
F.A. Hayek, The Fatal Conceit
F.A. Hayek, The Fatal Conceit
Greg Mankiw provides an interesting answer via this blog, to this question about Keynes - someone people seem determined to resurrect right now....
Was Keynes really a savvy investor?
An excerpt from Scott Sumner's thought-provoking blog:
See what you make of this:
“In early 1920, he [Keynes] set up a syndicate, with his brother, some of the Bloomsbury circle, and a financier friend from the City of London. By the end of April 1920, they had made a further $80,000. Then suddenly, in the space of 4 weeks, a spasm of optimism about Germany briefly drove the declining currencies back up, wiping out their entire capital. Keynes found himself on the verge of bankruptcy and had to be bailed out by his tolerant father. Nevertheless, propped up by his indulgent family and by a loan from the coolly acute financier Sir Ernest Cassel, he persevered in his speculation”
Translation.......
Was Keynes really a savvy investor?
An excerpt from Scott Sumner's thought-provoking blog:
See what you make of this:
“In early 1920, he [Keynes] set up a syndicate, with his brother, some of the Bloomsbury circle, and a financier friend from the City of London. By the end of April 1920, they had made a further $80,000. Then suddenly, in the space of 4 weeks, a spasm of optimism about Germany briefly drove the declining currencies back up, wiping out their entire capital. Keynes found himself on the verge of bankruptcy and had to be bailed out by his tolerant father. Nevertheless, propped up by his indulgent family and by a loan from the coolly acute financier Sir Ernest Cassel, he persevered in his speculation”
Translation.......
