Meta tags:

Headings (most frequently used words):

2009, and, monday, december, february, the, friday, march, january, 16, sunday, 11, thursday, 2008, blog, to, krugman, is, for, policy, economics, 04, 2023, 30, 2012, 03, 2011, saturday, 14, 15, 06, 18, about, me, links, previous, posts, archives, κνζν, bullish, it, my, seems, have, disappeared, does, this, still, work, satan, sacrilegious, rant, modest, proposal, even, worse, than, paul, imagines, what, happens, inflation, when, output, gap, zero, pork, essential, good, health, time, price, level, target, damned, high, one, irrational, rational, snarking, bloomberg, on, steinbrueck,

Text of the page (most frequently used words):
the (271), that (108), and (100), have (45), but (36), will (36), for (32), are (28), you (26), they (25), would (24), inflation (23), even (23), can (23), not (21), bulls (21), with (19), more (19), #policy (18), way (17), which (17), may (16), one (16), than (16), because (16), then (16), 2009 (15), this (15), knzn (15), fed (15), 2008 (14), there (14), output (13), gap (13), comments (13), posted (13), them (13), point (13), prices (13), rate (13), our (13), when (12), still (12), about (12), should (12), now (12), 2007 (11), level (11), target (11), economics (11), all (11), were (11), such (11), like (11), think (11), could (11), was (11), those (11), lower (11), say (11), any (10), policies (10), their (10), rates (10), zero (10), let (10), make (10), 2006 (9), time (9), don (9), also (9), some (9), line (9), investment (9), blog (8), from (8), rational (8), years (8), least (8), long (8), much (8), too (8), doesn (8), implies (8), equilibrium (8), useful (8), december (7), price (7), what (7), does (7), seems (7), something (7), who (7), expectations (7), data (7), post (7), deflation (7), real (7), just (7), right (7), maybe (7), going (7), march (6), january (6), february (6), irrational (6), believe (6), doing (6), its (6), policymakers (6), only (6), otherwise (6), look (6), where (6), whether (6), today (6), run (6), over (6), things (6), out (6), potential (6), really (6), exchange (6), remember (6), old (6), being (6), new (6), rigorous (6), good (5), krugman (5), having (5), actually (5), hard (5), why (5), case (5), perhaps (5), public (5), been (5), means (5), well (5), how (5), set (5), has (5), term (5), necessary (5), above (5), here (5), enough (5), might (5), under (5), imf (5), understand (5), making (5), cbo (5), results (5), model (5), your (5), intuition (5), devil (5), lucas (5), 2012 (4), high (4), paul (4), made (4), research (4), interest (4), sector (4), very (4), economists (4), concept (4), find (4), recessions (4), see (4), must (4), idea (4), sure (4), result (4), reasonable (4), next (4), longer (4), using (4), securities (4), again (4), take (4), losses (4), hope (4), course (4), had (4), each (4), problem (4), regression (4), constant (4), economy (4), sense (4), actual (4), filter (4), guess (4), since (4), smith (4), disincentive (4), without (4), pretty (4), country (4), indeed (4), keynesians (4), monetarists (4), micro (4), macro (4), 2023 (3), 2011 (3), november (3), october (3), september (3), july (3), pork (3), happens (3), worse (3), rant (3), work (3), google (3), news (3), won (3), currency (3), mean (3), relying (3), know (3), rather (3), private (3), never (3), able (3), quite (3), effective (3), effects (3), events (3), non (3), etc (3), between (3), unusual (3), predicted (3), forecast (3), ago (3), achieve (3), later (3), economic (3), thought (3), already (3), entirely (3), 1960 (3), theory (3), phillips (3), curve (3), hopefully (3), need (3), targets (3), earlier (3), clear (3), low (3), future (3), stimulus (3), significantly (3), money (3), year (3), order (3), lead (3), worth (3), less (3), multiplier (3), change (3), software (3), fit (3), fall (3), makes (3), update (3), empirical (3), suppose (3), want (3), after (3), into (3), fitted (3), origin (3), through (3), personal (3), same (3), use (3), relationship (3), meets (3), keynesian (3), consumption (3), demand (3), therefore (3), anticipate (3), requires (3), done (3), monday (3), euroland (3), fixed (3), euro (3), once (3), continue (3), basically (3), science (3), decisions (3), behave (3), critique (3), always (3), potentially (3), models (3), assumptions (3), scientific (3), elements (3), june (2), august (2), april (2), damned (2), essential (2), health (2), imagines (2), satan (2), sacrilegious (2), disappeared (2), bullish (2), κνζν (2), previous (2), edit (2), selling (2), thursday (2), bloomberg (2), ratings (2), major (2), agencies (2), imagine (2), thing (2), did (2), isn (2), true (2), raters (2), subprime (2), debt (2), aaa (2), own (2), both (2), someone (2), conclusion (2), evidence (2), effectiveness (2), observe (2), successes (2), negative (2), perverse (2), producing (2), positive (2), unpredictable (2), avoided (2), variable (2), event (2), similar (2), couple (2), nick (2), rowe (2), following (2), cases (2), other (2), trying (2), objectives (2), bad (2), first (2), study (2), story (2), booms (2), last (2), sunday (2), nairu (2), anything (2), accept (2), historical (2), possibility (2), among (2), considered (2), deflationary (2), stop (2), cause (2), markets (2), shock (2), provide (2), setting (2), average (2), thereafter (2), assuming (2), close (2), normal (2), times (2), get (2), promise (2), promises (2), give (2), expectation (2), dramatic (2), inflationary (2), base (2), withdraw (2), prevent (2), intention (2), avoid (2), arithmetic (2), advocate (2), require (2), world (2), down (2), ugly (2), yeah (2), stand (2), bill (2), small (2), solution (2), republican (2), offer (2), defect (2), although (2), kind (2), circumstances (2), friday (2), percentage (2), lot (2), difference (2), approximately (2), intercept (2), whole (2), begin (2), conditions (2), main (2), construction (2), property (2), trouble (2), constraint (2), circular (2), reasoning (2), chart (2), stable (2), meaningful (2), precision (2), risk (2), two (2), series (2), forecasts (2), effect (2), goes (2), start (2), imagining (2), sticky (2), flexible (2), greater (2), writing (2), production (2), cease (2), process (2), inventories (2), hold (2), sort (2), conclusions (2), comment (2), nation (2), invented (2), warfare (2), sins (2), said (2), souls (2), redemption (2), agree (2), against (2), takes (2), regime (2), while (2), generous (2), terms (2), yes (2), break (2), known (2), european (2), defending (2), lost (2), deleted (2), energy (2), resident (2), optimistic (2), likely (2), absolute (2), macroeconomics (2), field (2), side (2), dsge (2), skeptical (2), people (2), logical (2), systematic (2), help (2), human (2), behaving (2), another (2), read (2), zeitgeist (2), microeconomics (2), noah (2), come (2), become (2), exercise (2), rigor (2), basket (2), unrealistic (2), archives, posts, links, view, complete, profile, aside, admit, identity, name, trader, euros, steinbrueck, headline, god, provided, homosexuals, iran, shocking, seriously, dude, fine, labeled, commentary, called, graded, credit, conflicts, abysmal, recent, records, else, counterargue, dangers, allowing, institutions, pick, winners, whatever, interesting, loans, guided, grading, snarking, many, assume, agents, breaking, silly, custom, hat, tip, applies, reaches, mistakes, cannot, recession, success, correspond, correlations, measures, outcomes, precise, inflations, couldn, correlated, supposed, measure, observed, inability, favor, profession, guide, job, avoiding, predictable, mark, thoma, concerning, occurs, retrospect, words, light, ideas, place, succeeded, achieving, exactly, econometrically, obvious, macroeconomist, probably, according, popular, boom, late, partly, deliberate, tend, teaches, ratchet, ratcheting, virtually, unknown, standards, support, hypothesis, application, remotely, accelerationist, prognosis, looking, confidently, estimates, parameters, certainty, severe, strong, serious, danger, spiral, ignored, worrying, embrace, specifically, desperately, awe, higher, previously, recommend, representing, subsequent, range, represent, achieved, 2019, 2024, experience, during, nominal, induce, buying, sufficient, quantities, treasury, retire, dangerous, highly, leaders, embracing, moment, precisely, buys, quality, risks, great, weakness, prevents, approaching, opportunity, large, these, creating, taking, implement, helicopter, drop, expand, monetary, dramatically, encouraging, bank, lending, detractors, argue, reckless, willing, respond, unless, threaten, rise, few, prove, resist, steadfastly, pressure, absence, presence, unreasonable, miss, margin, remain, meet, vital, goal, population, mind, traitors, enemies, united, states, hanged, intentions, foolishness, road, hell, increasingly, floundering, senate, possibly, edge, abyss, most, wavering, senators, 100, billion, democrats, democrat, joining, filibuster, solves, problems, big, evenly, distributed, impact, spread, space, survive, cloture, vote, solved, depression, happy, days, ain, gonna, happen, treasuries, weeks, presents, scatterplot, function, puzzled, includes, graphics, face, value, almost, half, nearly, full, falling, sensible, constrain, math, easier, hand, insists, turns, slope, relevant, region, percent, relative, consequence, found, convincing, plot, displayed, show, declines, impressive, conclude, decline, his, definition, equals, understanding, theoretical, meaning, amount, theoretically, force, prof, kurgman, imply, plug, equation, purposes, passes, original, methods, estimating, reasonably, historically, given, mixing, different, concepts, anyhow, arbitrary, decision, impose, prettier, went, matter, taste, needs, before, smoothing, iirc, hodrick, prescott, used, bit, involved, constructing, fake, necessarily, expected, properties, benefit, hindsight, wanted, keep, crossed, raw, gdp, determine, putting, directional, apply, unclear, constrained, reason, interpret, structural, wherein, exists, pass, responds, 5228, 4739, reading, karl, entry, started, implications, context, thinking, calvo, pricing, mundell, tobin, introduce, expects, cohorts, adjust, toward, levels, expect, investing, pay, capital, goods, sell, product, tomorrow, overall, larger, faster, immediately, says, foreign, normally, simply, throw, government, presumably, grind, completely, halt, awful, wonder, holding, technically, reduced, incentives, reduce, rises, bound, incentive, rigorously, unpleasant, appears, inevitable, referring, automobile, hint, president, obama, chemical, final, respected, godwin, law, curse, comrade, gorbachev, countenancing, demolition, berlin, wall, despite, repented, apparent, sincerity, germany, fundamentally, evil, angela, merkel, horns, pitchfork, accurate, four, counted, independently, sway, forces, darkness, france, italy, sold, little, chance, remainder, call, redeem, continental, europe, perish, fire, brimstone, china, wants, cheap, yuan, premier, wen, figure, luxury, mistrusting, assets, near, alternative, pointless, competitive, devaluation, mercantilism, olden, nobody, wins, solve, europeans, skulls, beggar, thy, neighbor, neighbors, mediterranean, north, sea, begging, beggared, keynes, die, suggest, repent, john, maynard, savior, temptingly, ungenerous, individual, currencies, collectively, sinner, worshiping, golden, calf, fondness, french, franc, italian, lira, picturesque, bills, preserved, relics, varied, beautiful, coins, recently, 2002, grocery, store, spain, wondering, looked, realizing, pesetas, cents, garden, shall, assert, faith, regained, everyone, intend, compromise, modest, proposal, saturday, certainly, functioning, spam, collector, try, posting, letting, reappeared, temporarily, hadn, logged, changed, privacy, deleting, cached, temporary, error, 195, decided, substantive, haven, fallen, category, inclined, busy, tired, roommate, fly, back, england, maintain, residency, seemed, table, question, benefits, blogger, comparable, word, title, suggests, fairly, genuine, recovery, several, months, anyone, referred, bearish, leads, issue, especially, thread, throats, interestingly, newly, christened, market, claim, legitimate, intellectual, heirs, seem, issues, either, depending, obviously, sympathetic, pseudonym, instead, sometimes, extremely, basis, often, helpful, fields, clarify, arguments, interpretation, discussions, pretense, relies, premise, beings, convince, yourself, certain, particularly, realize, manipulate, expecting, changes, cultural, sunspots, paragraph, vaguely, remind, practiced, held, receive, foundations, wouldn, argument, though, observing, unwholesome, step, further, saying, paraphrase, upon, modern, founded, doubt, slightly, better, got, underlying, experimental, involving, subjects, inevitably, subject, version, part, environment, determines, behavior, screw, robust, build, modeling, begrudge, steve, williamson, talking, general, comes, monotonic, usefulness, put, eggs, particular, type, live, alone, pudd, nhead, wilson, stick, sloppy, mode, macroeconomic, analysis, unaided, easy, astray, allows, correct, condition, applying, complicated, typical, economist, generate, unrealism, becomes, him, guilty, association, related, tried, obnoxious, mood, update2, concede, politics, relatively, unimportant, whereas, critical, replies, chris, dillow, smithist, smithian, revoked, visa, decade,

Text of the page (random words):
re optimistic means i think there s a genuine recovery going on and that it is likely to continue for at least several more months not that i think things are going well in an absolute sense i mean does anyone think things are going well in an absolute sense so i am more of a smithian than a smithist but another post to which i was referred by the bearish smith s blog leads me to think about the issue of macroeconomics as a field it seems especially from the comment thread that the old keynesians and the new monetarists are at each other s throats but interestingly the newly christened market monetarists who have some claim to being the legitimate intellectual heirs of the old monetarists basically seem to be on the same side as the old keynesians on the major issues here and the new keynesians can break for either side depending on whether they re more keynesian or more new obviously i m more sympathetic to the old keynesians than the new monetarists otherwise maybe my pseudonym would be dsge instead of knzn here s my take to begin with economics is basically bulls t i mean it s necessary bulls t sometimes even useful bulls t but i m extremely skeptical of people who think economics is a science or that it could be a science we have to make policy decisions and investment decisions and personal consumption decisions etc and we have to have some basis for making them we could just use intuition and we often do but it s helpful to use logical thought and empirical data also and systematic study using fields like economics can help us to clarify our intuition our logical arguments and our interpretation of the empirical data the same way that bulls t discussions that don t make any pretense at being science can help economics is bulls t because it relies on the premise that human beings behave in a systematic way and they don t once you have done enough research to convince yourself that they behave in a certain way they will change and start behaving in another way particularly if they read your research and realize that you re trying to manipulate them by expecting them to continue behaving the way they have but even if they don t read your research they may change the way they behave just because the zeitgeist changes cultural sunspots if you will the last paragraph may vaguely remind you of the lucas critique lucas basically said that macroeconomics as it was being practiced at the time was bulls t but he held out the hope that it could receive micro foundations that wouldn t be bulls t the problem with lucas argument though is that microeconomics is also bulls t and noah smith writing some 36 years after the lucas critique and observing its unwholesome results takes it one step further by saying if i may paraphrase yes the microeconomics upon which modern macro has now been founded is indeed bulls t but if we do the micro right then we can come up with non bulls t macro yeah i doubt it maybe we can come up with slightly better macro than what we ve got now but the underlying micro is never going to be right experimental results involving human subjects are inevitably subject to the micro version of the lucas critique once the results become well known they become part of a new environment that determines a new set of behavior and the zeitgeist will screw with them also and so on and in any case even if the results were robust i m skeptical that we can really build them into a macro model or that it would be worth the trouble even if we could economics will always be bulls t now there s a case for doing rigorous bulls t at least as a potentially useful exercise that s what i think dsge modeling is it s a potentially useful exercise in rigorous bulls t and i don t begrudge the work of people like steve williamson i think there s some rigorous bulls t there that may be worth talking about but in general when it comes to bulls t there is not a monotonic relationship between rigor and usefulness and to put all your eggs in the rigorous bulls t basket not only that but in one particular type of rigorous bulls t basket because rigor does not live by rational equilibrium alone is something that not even pudd nhead wilson could advocate so i m going to stick with sloppy old keynesian models as my main mode of macroeconomic analysis they re bulls t they re not rigorous bulls t but as bulls t goes they re pretty useful a lot more useful than unaided intuition and they re easy enough to understand that we can have a reasonable idea of where their unrealistic assumptions are likely to lead us astray of course all economic models have unrealistic assumptions but hopefully our intuition allows us to correct for that condition when applying the models to the real world if the model is too complicated for the typical economist to understand how the assumptions generate the conclusions then the unrealism becomes a real problem update at the risk of making him guilty by association i want to point to a post by chris dillow where he makes a related point that is perhaps the point i would have tried to make if i had been in a less obnoxious mood update2 noah smith replies defending economics as being at least potentially scientific i ll concede that economics can have scientific elements as indeed politics or warfare can have scientific elements but i think those elements will always be relatively small and unimportant whereas bulls t will always be critical to the field posted by knzn at 3 30 2012 05 05 00 pm 195 comments my blog seems to have disappeared but then why is it letting me make this post update ok it seems to have reappeared maybe google temporarily deleted it because i hadn t logged in since they changed their privacy policy or maybe they are in the process of deleting it and some things are still cached or maybe it was just a temporary software error and the blog was never really deleted posted by knzn at 3 30 2012 02 02 00 pm 19 comments monday january 03 2011 does this blog still work it certainly seems to be functioning as an effective spam collector maybe i should actually try posting something again posted by knzn at 1 03 2011 12 34 00 pm 20 comments saturday march 14 2009 satan and the g 16 a sacrilegious rant and a modest proposal it appears now that the g 20 intend to make their compromise with the devil that s pretty much inevitable since the devil is one of them when i say the devil i am of course referring to the nation that invented the automobile hint president obama not the us it also happens to be the nation that invented chemical warfare and the final solution what kind of a rant would this be if i respected godwin s law i curse comrade gorbachev for countenancing the demolition of the berlin wall it is clear now that despite having repented with apparent sincerity of its earlier sins germany is fundamentally evil and right now i m imagining angela merkel with horns and a pitchfork the devil as i said is one of them it might be more accurate to say that the devil is four of them euroland which is counted independently as one of the g 20 is entirely under the sway of the forces of darkness france and italy sold their souls long ago and have little chance of redemption if i had my way the remainder call them the g 16 would redeem their own souls and let continental europe perish in fire and brimstone i would have the g 16 agree on a set of fixed exchange rates against the euro and if china wants a cheap yuan i say so be it let s see how long it takes premier wen to figure out that he doesn t have luxury of mistrusting us assets with interest rates at or near zero the alternative to a fixed exchange rate regime among the g 16 is a regime of pointless competitive devaluation much like the mercantilism of olden time nobody wins that way fixed exchange rates are the way to go and while we re at it we can solve the n th country problem by making euroland the n th country making euroland the n th country on more than generous terms of exchange indeed let us say more than more than generous terms yes if the europeans want a hard currency let them have it let them have a currency so hard it will break their skulls it s a policy once known as beggar thy neighbor and our neighbors between the mediterranean and the north sea are begging to be beggared but keynes did die for everyone s sins and i suggest we hold out an offer of redemption to any european country that will repent and accept john maynard as its personal savior set a temptingly ungenerous exchange rate against the euro for each of the individual european currencies and agree to collectively continue defending that exchange rate for say 7 years if the sinner will stop worshiping the golden calf i remember with fondness the french franc and the italian lira i remember the picturesque bills i remember indeed i have preserved some relics the varied and beautiful coins i remember as recently as 2002 going to a grocery store in spain wondering why the prices looked so high and realizing that the prices were in pesetas rather than euro cents i remember i remember the garden lost it is lost shall not we assert the faith that it may be regained posted by knzn at 3 14 2009 11 53 00 am 75 comments monday february 16 2009 even worse than paul krugman imagines reading karl smith s comment on my previous entry i started to think about the implications of rational expectations in the context of potential deflation i m thinking of a model like rational expectations meets calvo pricing meets the keynesian multiplier meets the mundell tobin effect it goes something like this start out imagining that prices are stable then introduce the expectation of an output gap like the output gap that the cbo expects an output gap implies that actual sticky prices are above equilibrium flexible prices as more cohorts adjust their prices toward equilibrium levels actual prices will fall if you expect actual prices to fall you have a disincentive from investing because you have to pay today s sticky prices for your capital goods but you will only be able to sell your product at tomorrow s lower flexible prices so investment will be lower than it otherwise would be and because of the multiplier effect consumption will be lower than it otherwise would be so overall demand will be significantly lower than it otherwise would be therefore equilibrium prices will be even lower therefore we have to anticipate an even greater rate of deflation therefore we have to anticipate an even larger disincentive from investment which implies an even lower level of investment which implies an even lower level of consumption which implies even less demand which implies even lower equilibrium prices which implies even faster deflation which implies an even greater disincentive from investment and so on and all the so on is something that if we have rational expectations we will immediately anticipate without actually writing down a model which i m not going to do i can t say for sure whether there will be an equilibrium but if there is one i m pretty sure it is really really really ugly my intuition says that in an economy without a public sector or a foreign sector there will normally be no equilibrium and all production will simply cease if you throw in a government then you can presumably have an equilibrium even without any private investment so the economy won t grind completely to a halt but it will sure look pretty awful although i wonder if the process of selling requires holding inventories then it requires some investment technically it requires a level of investment that may not be positive but that can still be reduced if there are incentives to reduce it if the disincentive to investment rises without bound then there will be no incentive to hold inventories and production will still cease even with public sector demand i would guess that someone has already done this sort of model more rigorously and i don t know what the conclusions were but i would guess that they were quite unpleasant posted by knzn at 2 16 2009 06 39 00 pm 36 comments sunday february 15 2009 what happens to the inflation when the output gap is zero in a blog post a couple of weeks ago paul krugman presents a scatterplot of the change in the inflation rate y as a function of the output gap x with the following regression line y 0 5228 x 0 4739 i m puzzled as to why he includes a constant term in this regression maybe he was using graphics software that won t do a no constant fit if you take the regression line at face value it means that the inflation rate is predicted to fall by almost half a percentage point each year when the output gap is zero it also means that the economy must run nearly a full percentage point above potential in order to prevent the inflation rate from falling that doesn t make any sense the sensible way to do the fit is to constrain the constant term to zero which makes the math a lot easier if you re doing the fit by hand but some software insists on doing things the hard way even when it doesn t make sense it turns out it doesn t make much difference in the conclusion the slope of the line is still approximately 0 5 and in the relevant region with output gap above 6 percent the intercept is not of much relative consequence but i would have found the whole thing more convincing if the plot had displayed a reasonable regression line to begin with when you show a line that implies that the inflation rate declines even under normal conditions it s not that impressive when you conclude that it will decline too much under unusual conditions update paul krugman responds his main point is that the imf s definition of potential output doesn t require that the inflation rate be constant when actual output equals potential i e when the gap is zero so now i understand that the imf s construction doesn t have that property but i m having trouble understanding the theoretical meaning of that construction doesn t the imf s filter amount to an empirical way of making a guess at a concept that still should have that property theoretically i suppose i can understand that you don t want to force a constraint on the guess after it has already been made see prof kurgman s point about circular reasoning but the chart still doesn t look right to me since the cbo s potential output concept does imply stable inflation at the zero point how can you plug the cbo s gap forecast into the imf s gap equation and get a meaningful result well ok the result is meaningful for our purposes because the fitted line passes close enough to the origin to give approximately the right result to at least the level of precision necessary for the original point about deflation risk and because the two methods for estimating the output gap lead to reasonably similar results for the us historically again given that we don t really need much precision under the circumstances since we re mixing two different concepts anyhow it s an arbitrar...