Archive for the Category Misc.


Noah Smith has “incredible confidence” that he understands my views

Here’s Noah Smith:

Scott Sumner expresses incredible confidence that NGDP targeting is best .  . . .  I think normal people realize that that certitude is basically never warranted.

Well I’m certainly not a normal person, but he’s got it exactly backwards. I think it very unlikely that NGDP targeting is best, and have said so on many occasions.  As far as certitude, I’m not certain of anything.  I’m not certain that I’m not dreaming right now, or that the world won’t end next week.  More seriously, my hunch is that there are other targets that are better than NGDPLT, and that for some developing countries even an inflation target might be better.  There’s also a non-trivial chance that I’m wrong about almost everything, and that Paul Krugman or Bob Murphy is much closer to the truth.

Although I believe absolute certainty is never warranted, my impression is that “most people” believe exactly the opposite. Most people are certain that free will exists, that personal identity exists, etc. Indeed I find most people to be wildly overconfident in their beliefs in all sorts of areas.  I’m an extreme skeptic, out there on the 99.9% end of the skepticism distribution.  In fairness, I probably have occasionally used the term “certain” when I meant fairly sure, but I am quite confident I’ve never even hinted that I’m certain NGDP targeting is best.  It certainly, err, almost certainly is not.

Richest and poorest states

I thought it might be interesting to look at America’s three richest states, and three poorest states.  Here are the top three in real income per household in 2013 (adjusted for cost of living differences between states).  Income from this source, cost of living from here:

1.  New Hampshire   $67,158

2.  Virginia   $65,523

3.  Utah     $65,049

And now I’ll list the three poorest states, in terms of real income per capita in 2012, again adjusted for cost of living differences:

1.  Utah   $34,580

2.  Idaho   $34,818

3.  Arizona   $34,905

Notice anything odd?  BTW, which three American states have lots of Mormons?

And people ask why I don’t care about income inequality.

PS.  Mississippi?  Eighth poorest, beating even Hawaii.



The burden of history

[I actually wrote this before the agreement, so perhaps it’s a moot point.]

It seems to me that some of the recent commentary on Greece doesn’t provide the appropriate background information. Here’s a Bloomberg article:

When the euro region’s finance ministers gather later today, countries other than Germany need to make themselves heard with ideas for reconciling Greece’s democratic mandate for change with the integrity of the existing bailout rules.

And here’s Matt Yglesias:

This gets at the fact that the Germans simply don’t trust the Syriza government that is running Greece. It also gets at the fact that one of the reasons they don’t trust them is simply that they are Greek. The Greeks are viewed as an unreliable country that is in need of discipline and reform, and Syriza is seen as a political project that is fundamentally about resisting reform.

I can’t really argue with either statement, but the framing doesn’t really give much of a sense of why the Germans are so reluctant to negotiate with the new Greek government. Previous Greek governments lied, cheated, and swindled tens of billions of euros from northern Europeans. Unfortunately for the Syriza government, those earlier decisions, made by other governments, sharply constrain their current options. And I might add that this is also a problem for the voters in Greece, the so-called “democratic mandate.”  By electing a government containing everyone from Maoists to right-wing nationalists, united only by their fierce belief that the crimes of previous Greek governments should not reduce the willingness of Northern Europeans to lend Greece even more money to prop up social spending, the voters implicitly walked away from the burden of history.  As of today, it looks like the rest of the eurozone won’t let them off that easily.

PS.  Just to be clear, I do think a part of the problem in Greece is the tight money policy of the ECB, strongly supported by Germany.  However, this view is not at all widely held in Europe.  So Germany is not perceived as having any “guilt” for the problems in Greece–except perhaps due to its tight fiscal policy (a bum rap.)  That’s why you can’t really equate the two.  If it was ever widely believed that tight money was to blame, the solution would not be more aid for Greece from the North, but rather less tight money.  An ECB policy error that was signed off on by the policy elite of the entire eurozone is viewed as being very different from borrowing money under false pretenses, even if in some sense it is the greater “crime.”

The 20th century was a battle between the left and the right.  That’s over.  The 21st century is a battle between insiders and outsiders. The most extreme outsiders are ISIS and Boko Haram, hated by all governments.  North Korea is perhaps the most outside government that controls an entire country.  Then you have Venezuela, Iran, Russia, etc.  Somewhat more moderate are Hungary, Greece, and the surging populist parties of the left and right in Western Europe.  In contrast, the ECB (and the EU elite more generally) are the world’s ultimate insiders.

Off topic:  Commenters often remind me that sensible Keynesians favor monetary stimulus.  But of course many Keynesians, even Nobel Prize winners like Joe Stiglitz, are skeptical.  Here’s another name to keep in mind next time you read Paul Krugman trashing those Neanderthals on the right who oppose monetary stimulus:

By inflating asset prices, Mr Abe’s schemes could increase the gap between haves and have nots, Mr Piketty warned during his visit.

That’s not helpful.

Obama’s horrible advice to Germany

This caught my eye:

Greece’s pleas to stop the “fiscal waterboarding” of its devastated economy are substantively no different from President Obama’s repeated warnings to Germany to stop bleeding the euro area economy with excessive fiscal austerity. Sadly, the president’s reportedly more than a dozen phone calls to the German Chancellor Merkel in 2011 and 2012 urging supportive economic policies in the euro area fell on deaf ears.

These calls were not just brushed aside; they were plainly ridiculed as Chancellor Merkel kept telling the media that “it made no sense to be adding new debt to old debt.”

This advice would have merely added to the eurozone debt woes, without doing anything to promote recovery,  Even worse, most of the countries lacked the ability to spend more, as the markets were worried they might default on their debts.  Germany could have spent more, but any extra demand in Germany would have been offset by even less growth in the other countries, leaving total eurozone AD unchanged.  That’s the real “beggar-thy-neighbor” policy.

People reading this will probably assume I’m making wacky market monetarist claims again.  But unless I’m mistaken Paul Krugman agrees with me.  After all, he has repeatedly said that when not at the zero bound, central banks determine the path of inflation.  The eurozone was not at the zero bound in 2011, and indeed the ECB was repeatedly raising rates to slow inflation.  Had there been more fiscal stimulus, the ECB would have raised rates even more, offsetting the effect.  That’s what an inflation target means.  If you don’t like it, then don’t target inflation.

There is one type of fiscal stimulus that would have been effective, employer-side payroll tax cuts.  Oddly, in the past Krugman has been relatively skeptical of this approach, and I’ve been more supportive.  So you could argue that I’m more supportive than Krugman of the argument that fiscal stimulus might have helped the eurozone in 2011, but only a very specific type of stimulus.

PS.  I love the way the press acts as if the fiscal austerity was forced onto Greece, with the metaphor “fiscal waterboarding.”  Greece could have said “we don’t want your emergency assistance with strings attached”, and left the eurozone.  Maybe they should have done so.

PPS.  Over at Econlog I catch Robert Shiller reasoning from a price change.


What does it mean to admire someone?

It’s silly Sunday, and as I take a break from shoveling another 18 inches (plus high winds and bitter cold and ice dams causing roof leaks, etc.), I’d like to offer some thoughts on Tyler Cowen’s recent post asking whom we most admire (among people still alive.)  I’m more interested in what it means to admire someone, and also what we mean by “someone.”

I might refer to “my” arm or my kidney, or my left foot.  That suggests there is some sort of personal identity—me—that possesses these things.  And this doesn’t just apply to parts of the body, but also intangible attributes.  I could speak of Paul Krugman’s analytical brilliance, or Tom Cruise’s charisma, or Russell Westbrook’s athleticism. Then there’s my memory, or my consciousness, etc.  In the end, I’m skeptical of the idea that there is some sort of core personal identity that possesses all these things—people are probably just a bundle of attributes. It’s not even clear where “Scott Sumner” ends and “not Scott Sumner” begins.  Are my tooth fillings part of me?  What about an artificial limb (if I had one.)  In the future we may have brain implants.  How about our clothing?

One theme that comes up in Tyler’s discussion is that people seem a bit embarrassed to admire people for certain personal attributes (say artistic or athletic skill that is partly genetic) as opposed to attributes like courage and hard work, which may require lots of self-sacrifice.  Of course courage and willingness to work hard may also be partly genetic.

I also wonder whether ability to understand something reduces our admiration. The behavior of a very good person (Gandhi) or a very bad person (Hitler) seems mysterious in some way, and I think at some level we want it that way.  There’s an old saying, “to understand all is to forgive all.”  We don’t really want to be able to say, “I know how Hitler felt” because we don’t want to forgive him.  Now of course there’s something illogical about assuming that understanding goodness or evil makes it less good, or less evil, but I think that’s how most people look at things.

I have sort of contrarian views on this.  I don’t believe in free will, and yet oddly I think we should admire good people, and scorn evil people, because people react to incentives.  By admiring people who do good things, we encourage good behavior. Deep down we feel that we should devote more effort to encouraging Aung San Suu Kyi to fight for freedom in Burma, than to encourage Tom Cruise to be even more charismatic when he smiles.  So that provides some justification for thinking heroes are more worthy of admiration, although we may underestimate how much pleasure we derive from artists, athletes and other people engaged in seemingly “superficial” activities.

Not sure anyone cares, but I’ll list people I admire, in two categories.  The first is heroic figures, who fight for classical liberalism at great personal risk:

Heroes:  Aung San Suu Kyi, Liu Xiaobo

Now I’ll list people I admire for specific talents or attributes.  Oddly I don’t have any scientists, and the only economist is not admired for his economics.  If Einstein was alive I might include him, but I don’t know much about modern science.  The people I admire most for attributes is artists.  (Here I don’t care about what the person is like “deep down,” whether they cheat on their wives, etc.)  I’m most admiring of people whose achievements seem miraculous.  Recall the earlier discussion of good and evil; we want to think it’s somehow mysterious, as if demystifying the achievement would drain it of any real meaning.

Music:  Bob Dylan — My favorite living artist, even though I’m not a musically-oriented person (I prefer literature and the visual arts.)  His achievements in the first 25 years of his life seem incomprehensible to me.  Perhaps that’s because I know little about music. Please don’t demystify it in the comment section.

Writers:  Karl Ove Knausgaard, Haruki Murakami, Orhan Pamuk

Athletes:  Kareem Abdul Jabbar, Russell Westbrook, Giannis Antetokounmpo

Directors:  Wong Kar Wai, David Lynch

Actors:  Tony Leung, Gong Li

Intellectuals:  He is an infovore who’s read everything, heard everything, and travelled everywhere.  He seems to have an Apollonian view of the planet that us mere mortals struggle to comprehend.  He’s an economist.  And a blogger.  And I sort of work for him.  Can you guess?

Business:  I don’t admire business leaders, except perhaps Elon Musk

Politicians:  Can’t think of any

Good people:  Mom, former colleague Ted Woodruff

PS.  I sort of admire some other bloggers, but I decided not to start down that road, as I don’t know where to draw the line.