The autistic macroeconomist
When I decided to read Tyler Cowen’s new book on the airplane to China, I pretty much knew I was going to arrive in Beijing convinced that I was autistic. Here are some reasons:
1. Any time I read some psychology I think they’re talking about me.
2. I recently heard an autistic guy on NPR who was a wizard with numbers. His description of the autistic personality reminded me a bit of myself.
3. I had heard Tyler talk about his book, and knew that he had a favorable view of what he called “the autistic cognitive profile.”
4. Autistic people like to make lists of things.
I’m not going to try to explain Tyler’s view of autism, as I would get it all mangled up. But for those not familiar with his perspective I should at least mention that he is not talking about autism as a mental illness, but rather a certain way of thinking, which may be partly genetic.
Part 1. The 12 year old macroeconomist
When I was young I didn’t have much of a social life, preferring things and ideas to people. One of my nerdy activities was collecting coins. Even worse, it wasn’t the slightly respectable collecting of type coins. No, I aimed at collecting lots of identical coins that merely varied by date and mint mark. I inferred from Tyler’s book that this behavior fits the autistic profile. And like those autistic guys with a photographic memory for numbers, forty years later I can still remember the “rare dates” that were much more expensive that other more common coins; 1908, 1921, 1931, 1938, 1958, etc. Do you see a pattern? That’s right; when I was 12 years old I had basically memorized the entire history of US business cycles. Of course I didn’t know that I knew this, as 12 year olds have only a vague idea of what business cycles are.
Now let’s suppose that as a 12 year old I wandered into a macroeconomics seminar, full of people like Bernanke and Krugman and lots of other brilliant economists. I saw the graph of business cycles and recognized the pattern. (Autistic folks are good at recognizing patterns.) I decided to raise my hand and propose a theory—maybe the recessions were caused by the rarity of coins. Pennies were especially rare throughout the early 1930s, maybe that caused the Great Depression. I suppose most of the economists would chuckle at me, and gently try to explain that coins supply is endogenous, merely reflecting the proportion of the base that the public chooses to carry as pocket change.
But then Paul Krugman might say; “wait a minute, this boy’s theory may seem silly, but is it any sillier than Friedman and Schwartz’s view that the Great Depression was caused by a big drop in M1 and M2? After all, the Fed doesn’t directly control those aggregates either. Rather they directly control the base, and the movements in the aggregates can be thought of as endogenous once the base is set. Suppose M2 velocity is stable. Then to figure out the impact of changes in the base on M2, we first have to figure out its impact on NGDP. Suppose the Fed doubles the base, but all the extra money is hoarded. In that case the policy will not increase NGDP at all, nor will M2 increase.
Exactly the same argument could be made for coins. Since they are used for transactions, coin demand is probably closely related to NGDP. When NGDP falls, there is no “need” for extra coins. And since coins are very durable, if the stock demand doesn’t increase, or even falls slightly, then the flow demand for new coins will be very small. Hence the rarity of coins made in 1931. Indeed in 1933 some types of coins weren’t made at all. Friedman and Schwartz essentially argued that if Fed policy had been expansionary enough to insure M2 kept rising at a low but steady rate then NGDP wouldn’t have fallen. Why couldn’t the same be said for coins? If the Fed had injected enough money to keep the demand for new coins rising at a fairly steady rate, then presumably the total transactions in the economy would have also kept rising at a fairly steady rate. Hence no Great Depression. The cause of the Great Depression was too few pennies being made at the Philadelphia mint.
If you think this speculation is far-fetched, go read the piece Krugman wrote in the NYR of Books right after Milton Friedman died. Krugman argues that Friedman and Schwartz’s whole argument relies on the assumption that the Fed had the ability to prevent a fall in M2, simply by printing more base money. He then argues that the Japanese case suggests otherwise; that further monetary injections might have simply been hoarded as ERs. And then early this year he made this argument again, this time citing the fact that massive base injections by the Fed had mostly been hoarded as ERs. I can’t be sure, but I think Krugman might agree with this 12 year old boy’s argument. Not agree that he was right; but agree that it was a plausible argument, just as plausible as the one made by Friedman and Schwartz. Indeed in a sense it is the same argument. You find an aggregate that is correlated with NGDP, and then you argue that the Fed just needs to expand the base enough to keep that aggregate growing at a steady, non-inflationary rate. It doesn’t have to be money at all; it could be postage stamps. (Yes, I collected them too—pitiful.)
BTW, I think Krugman is wrong; I think the Fed did have the ability to keep demand for pennies rising at a fairly steady rate. But I think Krugman and I would agree on one thing. If they did have that ability, then one could argue that the reduction of penny production caused the Great Depression.
Part 2. We see right through your silly “framing effects.”
Once I got to Chicago I found out that I wasn’t that good at the technical side of economics, but I had pretty good intuition. I don’t have much problem with most “story problems” such as the one on opportunity cost that recently stumped about 80% of economists at a recent AEA convention. I also think I do a pretty good job in looking past what are called “framing effects,” or aspects of a question that lead one astray. A good example of framing effects was provided in my recent supply and demand post, where I pointed out that people tend to associate ‘consumption’ with ‘demand,’ and ‘production’ with ‘supply,’ even though the terms ‘production’ and ‘consumption’ both refer to quantity.
Tyler Cowen pointed out that autistic people often seem to act more like a rational “economic man” than the non-autistic. They are less swayed by framing effects and also less swayed by emotions such as envy and revenge, which can be counterproductive. I always thought it was obvious that it was better to get a 5% real wage increase, when all your colleagues got 10%, then to get a mere 4% real wage increase when all your colleagues got 2%. But as I got older I realized most people don’t look at things that way. The world is not full of characters like “Spock” on Star Trek. Revenge doesn’t hold great appeal for me. Envy? I hardly know what it is.
Another area where I found that I differed from others is investment strategy. When the Asian markets crashed in 1997-98, I lost a lot of money in my 401k. So what did I do? The only thing that seemed logical, I sold all of my non-Asian stocks and went 100% into Asia. After all, I thought, Asian stocks were now “cheap.” Over time, however, I found that many people don’t look at the world that way. They might be momentum traders, assuming something that has crashed will keep crashing, or they might take the Asian crash as a personal affront, and sell their Asian stocks in disgust. Or they might simply lose their appetite for risk. (But why not lose that appetite when things are most risky, i.e. when stocks are high?) So when it comes to economics I try to be like Mr. Spock–ruthlessly logical. Of course I don’t always succeed. For instance although I have a high deductible, there is no earthly reason for me to insure my car at all—it is a waste of money.
So let me finally get to the point. I believe that the financial crisis of 2008 was the mother of all frame jobs. The commercial bankers were framed, when it was really the central bankers that created the severe recession. Paul Krugman is also good at seeing through framing effects, or at least he used to be. Here he criticizes William Greider’s argument that real factors led to high unemployment:
It is possible for economies to suffer from an overall inadequacy of demand–recessions do happen. However, such slumps are essentially monetary–they come about because people try in the aggregate to hold more cash than there actually is in circulation. (That insight is the essence of Keynesian economics.) And they can usually be cured by issuing more money–full stop, end of story. An overall excess of production capacity (compared to what?) has nothing at all to do with it.
Over the past few months I have rolled out one quotation after another, trying to show that if one believes the logic of modern macroeconomics, the implications are clear. Fed policy was effectively highly contractionary, and a more expansionary policy could have prevented the sharp fall in NGDP. And there is no evidence that the fall in RGDP is anything more than what one would expect from this sort of monetary policy failure. Here are a few more quotations:
1. It is dangerous always to associate the easing or the tightening of monetary policy with a fall or a rise in short-term nominal interest rates. (Mishkin, p. 606)
2. Other asset prices besides those on short-term debt instruments contain important information about the stance of monetary policy because they are important elements in various monetary policy transmission mechanisms. (Mishkin p. 606)
3. Monetary policy can be highly effective in reviving a weak economy even if short term rates are already near zero. (Mishkin p. 606)
And here’s one from Milton Friedman:
Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.
. . .
After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.
Put all these together, and the implications are clear; monetary policy is the key to the crash of 2008. But of course the framing effects made this hard to see, so we relied on fiscal stimulus. John Cochrane expressed my thoughts perfectly:
Some economists tell me, “Yes, all our models, data, and analysis and experience for the last 40 years say fiscal stimulus doesn’t work, but don’t you really believe it anyway?” This is an astonishing attitude. How can a scientist “believe” something different than what he or she spends a career writing and teaching? At a minimum policy-makers shouldn’t put much weight on such “beliefs,” since they explicitly don’t represent expert scientific inquiry.
So why am I not making any headway? Because the post-Lehman crash was a very powerful framing device. It’s a great story. Tyler Cowen points out that stories influence how we see the world:
Most people are programmed to think in terms of stories and they have an especially good memory for stories. (p. 126)
But Tyler also sees the danger this poses for the non-autistic:
The media is good at portraying heroes and villains and conspiracies, while it is bad at giving people an understanding of abstract or unseen social and economic forces. (p. 135.)
Exactly.
In the last two weeks of September 2008 even I was obsessed with the banking crisis, and all the competing proposals for reform. It is hard to see past that event, to keep one’s eye on the ball. It takes a single-minded focus on a few key points; monetary policy determines NGDP, and NGDP shortfalls cause demand-side recessions. How hard is it? Well consider that since I started studying economics in 1973 I don’t recall a single recession that was viewed as being caused by the sort of garden-variety shortfall in NGDP that could have been avoided with a suitable monetary policy. It was always “different this time.” Sure the framing effects were particularly powerful in 2008, but they are always there.
I am not arguing that the autistic approach to macro always comes up with the right answer. The new classical approach seems autistic to me, but it relied on an oversimplified model where wages and prices were set at market-clearing levels. There are fiscal models of the price level that treat cash as just another financial asset, whereas I would argue that its special liquidity characteristics and the network effects of a single currency make it more like paper gold than a Treasury bond. So I can see how someone reading this would think I am making a similar mistake. They might say “yes monetary expansion can prevent recessions from ordinary drops in aggregate demand, but can do nothing against a real shock like a major world-wide banking crisis.” In other words “by all means ignore the framing effects, but first make sure you have the right model.”
A good autistic macroeconomist cannot just rely on logic. He or she must also be a historian, have a sense of which assumptions are plausible. In my view the Great Depression provides a beautiful confirmation of the autistic view of the 2008 crash. What could be more autistic than George Warren’s insistence in 1933 that all we had to do to get prices and output rising rapidly would be to raise the price of gold. You say the banking industry is virtually shutdown? None of that should matter—just raise the dollar price of gold. And he was right.
PS. I wasn’t able to convey the complexity of Tyler Cowen’s views here. Unfortunately, I tended to rely on some of your prejudices about the autistic; that they are emotionless, like Mr. Spock. Tyler explodes many of these stereotypes in his new book. And for all you PC police, the humor was directed at myself. I was convinced by Tyler’s argument that society needs to change the way it thinks about the autistic. It has happened before—recall that homosexuality was once viewed as a mental illness. BTW, I highly recommend Tyler’s book—it’s full of fascinating insights. He finally explained to me why I was so bored in school, despite my love of learning. All I recall from school is staring at the clock waiting for it to hit 3:20, and waiting for summer vacation. When I read proposals for a 12-month school year all I can think of is the book 1984. And I am an educator.
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19. August 2009 at 15:38
Great post – you’ve convinced my to read Tyler’s book.
I had two interesting experiences that fall along these same lines of “autistic thinking”:
When iPhones first came out, I was lucky enough to win one in a drawing at a business conference. To the surprise of my friends, I quickly turned around and sold it on eBay for $400. My explanation was that if someone put $400 in my pocket, I wouldn’t go out and buy an iPhone – which they understood – so why should I keep the iPhone in my pocket when I could easily exchange it for $400? I think only my wife recognized the logic (which either explains why we are married or is testament to my incessant economic lectures during dinner).
My second example dates back to the dotcom bust. I had a family member who held a large chunk of her savings in tech stocks. When the market started to tank, I told her to sell. While she recognized that overall market risk was well above her tolerance levels, some emotional factor wouldn’t allow her to dump her shares. I asked her to consider a hypothetical in which she didn’t own the shares but instead held the equivalent value in cash in her broker account. Would she go out and buy the same stock and the same number of shares? She said no, of course. But she couldn’t see the relationship between my hypothetical and the investment advice I was giving.
On a slightly different note, do you believe the sole cause of the 2008 crash was tight monetary policy, or are you arguing that the severity would have been less had monetary policy been looser?
19. August 2009 at 17:05
> What could be more autistic than George Warren’s insistence in 1933 that all we had to do to get prices and output rising rapidly would be to raise the price of gold.
You really need to define ‘autistic’ here, as I’m not sure what you mean.
As far as Krugman goes, I think he was in effect trapped in his own liquidity trap. His story seemed to be that money was being hoarded and that the transmission method was broken, and he thought that because he saw that in Japan. So he thought of government fiscal stimulus as a transmission method for money. (He believed that fiscal stimulus worked in Japan.) He was also hampered by the fact that his analysis required the banking system to be broken and he doesn’t really understand the internals of banking systems.
I’m sure you are stuck inside your own framing as well. Perhaps you are saying that an autistic person is someone who doesn’t share the consensus position about which variables are independent in the system — ie an autistic person does not have the consensus opinion of who the real actor is?
19. August 2009 at 18:10
Great post. I just happened to read Tyler’s book last night also. If you had written your penny anecdote before the book was published, and story were included in the book it would have made one of the best stories in it. But then you would have no doubt you were autistic…
For others, you really need to read Tyler’s book to understand what Scott means by autistic. It is hard to explain it briefly.
I couldn’t help but think, however, that Tyler’s use of the terms neurodiversity and autistic spectrum are just new words for old concepts. Im still comfortable with the word geek.
20. August 2009 at 01:18
Thanks Justin, Your intention to buy Tyler’s book reminded me of something that happened a few months ago. After I wrote a post that praised David Glasner’s 1988 book on monetary economics, I got an email from him saying that sales had jumped sharply. I went around for a day thinking I was the next Oprah or Imus. The next day he said it appeared that the jump was from zero to one in the daily reporting period. I forgot about the “long tails.”
Your anecdotes are perfect. They remind me of a personal experience I had that I ask my class about. I bought a Springsteen ticket in 1978 for $10. As I was about to go in someone offered me $50. I ask people “what did it cost me to see the show?” Almost nobody says $50. Oddly, some people say $40. (They are also surprised by how cheap tickets were back then. It was a small show in a Chicago movie theatre. Very cozy. And in 1978 Springsteen was a very charismatic perrformer in an intimate setting.)
q, I think the problem with this post (which someone else alluded to) is that it’s hard to understand without first seeing how Tyler Cowen explains the autistic cognitive style. In this case it means blotting out all sorts of framing effects, all the ongoing symptoms of the Great Depression, and just focusing like a laser on getting nominal aggregates higher by debasing the currency.
Krugman’s views on Japan were complex, but I don’t think he thought fiscal policy worked, indeed I saw him argue it didn’t. In the late 1990s he was skeptical about fiscal policy for all sorts of reasons. Now he is more sympathetic, but doesn’t think Japan did enough of the right type of fiscal stimulus.
He did not think the transmission mechanism for all monetary policy was broken only for conventional policy. He favored an unconventional “promise to inflate.”
Thanks rob, I’m so old that the term ‘geek’ wasn’t even around when I was young. We used “nerd,” do they mean the same?
20. August 2009 at 01:55
I haven’t read Tyler’s new book however, the description above makes me think that he’s rather riffing off the ideas of Simon Baron Cohen (Sasha, ie “Bruno’s” cousin) from Cambridge University.
In a very brief nutshell, there’s a spectrum of brain types from the systemizing to the empathizing. On average women tend to be more to the e rather than the s end (“on average”, this tells us nothing about any individual) men vice versa. Autism (and the spectrum, Aspie’s etc) is simply an extreme form of systemizing.
Apologies for linking to a blog I write for but there’s a gateway to the basic theory here:
http://eqsq.com/eq-sq-theory/
And a version of Baron Cohen’s tests here:
http://eqsq.com/eq-sq-tests/
No, this is clearly not diagnosis. Also it is the difference between the two numbers, s and e which is information, not the absolute level of either.
One of the reasons I like the theory is it has an explanation for rising rates of autism (over and above the 1980 expansion of the diagnosis).
Assortative mating.
There is a genetic component to autism. We tend to cluster, according to e and s, in certain occupations. We also, much more than we used to, marry and mate those that we meet through our work. Thus, if autism is an extreme expression of s then as more with s marry those with s we would see more autism.
This might work as an argument with economists….for one explanation advanced for increasing household inequality of income is the dual professional marriage…..assortative mating.
20. August 2009 at 02:09
[…] http://blogsandwikis.bentley.edu/themone… […]
20. August 2009 at 04:46
I occasionally feel like this too, but I think it might be a bias in my thinking.
The qualities of autism that are being drawn upon are easy to spin as positive. Autism’s symptoms numerous and include inability to interact with people beyond being shy. If someone is good at looking past framing effects and likes to collect things it might just mean that they are smart horders.
The bias comes in when I can take relatively odd things that I do/did and can spin it as a “good” autism.
I will have to look into the book to see if he addresses this.
20. August 2009 at 05:47
thanks for clarifying krugman’s views — that makes sense. i remember though that he was supportive of its effects in japan on his blog during the stimulus ‘debate’ here. i didn’t know much about him before he became a partisan hack (an assessment that i largely agree with even though i agree with his politics largely) and so it’s difficult for me to keep track of where he stands/stood.
but yes, i remember krugman’s paper on japan, ten years before the blog posts, and the concept of a promise to inflate. around the time i read that paper your blog started up and it was difficult for me not to see the similarity at the base of his idea and your suggestion, and i was somewhat confused that he didn’t make more of an effort to see into your ideas.
in any case my framing makes it difficult to see how your ideas would truly work — i don’t understand by what mechanism the excess money that would cause inflation would reach the people purchasing the things that have prices. i don’t understand the idea of ‘inflation expectations’ from the point of view of the indebted consumer — if i was an indebted consumer and you told me, ‘look, i’ll give you a burst of money, and if you and every other indebted consumer spends this burst of money, your debt will go down in real terms just the same as if you all saved the money’, i would look at you askance.
i’m probably not going to read cowen’s book. as a rule i don’t read pop science books by non researchers. if there is something to be said about autism and cognition, let an autism / cognition researcher say it, or let it be simple enough to fit in a paragraph in a blog comment. or let it be a meme that is discussed elsewhere so that i hear about it third-hand. imho that’s a better filtering mechanism than tyler cowen.
my sense of framing effects is that, yes, there are people who are more immune to them than average but that these people are always stuck in their own very narrow framing. and having different framing doesn’t make them any more wrong or right than anyone else. a lot of them ended up pricing derivatives on wall street. it’s also true that it is very difficult to organize work for people who are immune to framing effects.
20. August 2009 at 05:58
Sounds like they treat the first ticket purchase as ‘sunk-cost’. Your second decision was of course about an opportunity cost of $40. Since if you were rational, your opportunity cost in turn of selling at 50 should have been at least 10 given that you originally bought the ticket.
Which leads me to think that people are pretty rational. Maybe you should try to rephrase your question with subsequent classes and see how the frequencies of different answers changes.
20. August 2009 at 05:59
[…] Links 1. The lost decade, from Michael Mandel. 2. Scott Sumner reviews Create Your Own Economy. 3. Distinctly rare and unique lobsters, recommended. VN:F [1.5.8_856]RATE THIS POSTplease wait… […]
20. August 2009 at 07:34
Scott: Did you ever post on “why you were not a post-Keynesian”. I’d love to hear your thoughts on that. They can be fairly “autistic” too.
20. August 2009 at 08:54
Not to hound (well, ok, a little) but your thoughts on my questions hidden at the bottom of my comment:
20. August 2009 at 16:18
[…] 2. Scott Sumner reviews Create Your Own Economy. […]
20. August 2009 at 18:33
Aren’t you attacking the Real Bills doctrine in all of these posts on low interet rates and the money suppy? And if so, why don’t you say it.
Aren’t you saying that most people believe in the Real Bills doctrine, which is false?
21. August 2009 at 04:12
Tim, having read both, I can say TC didn’t riff off SBC. The E/S dichotomy is absent; it’s not couched in those terms. It’s rational (atypical) vs irrational (typical), not male vs female (framing anyone?). As a female autie, I would have noticed and been annoyed. Moreover, recent studies suggest the popular (typical) notion that auties are less empathetic requires closer examination. Rather, it is supposed we feel too much, become overwhelmed and shut down; a sort of emo-DOS attack, shutting the server down. Alexithymia (being poorly equipped to articulate and analyze feelings) does not reflect paucity of empathy.
21. August 2009 at 06:44
Regarding interest rates….
Currently the Bank of England base rate is 0.5%. But, one year bonds from many banks now yield ~3.85%.
21. August 2009 at 08:45
Scott – I think people are just as confused about opportunity cost as they are about supply and demand. Any discussion of opportunity cost must be in terms of the subjective value of the alternate uses of the resources. The question you linked to can’t be answered, because there is no formula for subjective value. You can’t say whether someone will get more utility from a party or a refrigerator based on math. Opportunity cost can’t be valued in simple dollar terms, because eventually those dollars have to be spent or they have no value. Reserving money for emergencies is similar to spending it on insurance. Eventually, the money gets spent on something, and then the opportunity cost of buying one thing is that you don’t have that money for the second most valued use. I’m sure this isn’t really new stuff for you, but I think it’s important to emphasize. Anyone intersted in a good coverage of opportunity cost, I recommend James Buchanan’s Cost and Choice.
Tim Worstall – Interesting point. I would like to add that since our economy is growing ever more specialized and focused on mental work, “Assortative mating” is a phonomenon to be celebrated. Society benefits when people focus on maximizing their comparative advantages rather than trying to become generalists.
q – Tyler Cowen is a professional researcher. He has a PhD from Harvard and has been published in the JPE and AER (among others).
21. August 2009 at 09:49
Excellent Post.
After thinking about my penny collection and lack of envy and revenge……..I feel very autistic.
You’ve sold another copy of Tyler’s book.
21. August 2009 at 12:17
Don’t you need a time-index on “costs”? Suppose I bought my ticket yesterday for $10, and there is no secondary (resale) market for tickets. Today I have no attractive alternative to going to the concert–there’s nothing else I particularly want to do. I am asked: What is the cost to you of going to the concert? Scott wants me to answer: “Zero.” Maybe that’s true of the *cost today*, but *yesterday* it cost me $10 to put myself in a position to go. So the cost-today is zero, but the cost-yesterday-and-today is $10. The question, “What’s the cost,” without a temporal specification (at least an implicit one), is actually defective.
21. August 2009 at 14:21
Philo – Opportunity cost has no meaning outside the framework of choice. Unavailable options, such as sunk costs, have no opportunity cost.
In your example: When you first bought the ticket, the opportunity cost of going to see the concert was $10. Once the ticket is purchased, the opportunity cost instantly becomes zero (unless there is resale).
So yes, you are right. Opportunity cost needs a time to be meaningful.
21. August 2009 at 14:36
To clarify things a bit: Tyler’s book is not at all about autism per se. Instead, it asks the question: Can we learn anything from the strengths of an autistic perspective?
22. August 2009 at 05:28
Hello Econ Bloggers, Excellent analogy, Scott!:)
I am an occupational therapy (OT)student currently doing a fieldwork rotation at a pediatric OT center where I work with children who are autistic.
My OT professors encourage us to educate the general public about OT, and to advocate for people with disabilities (note: not disabled people).
Autism is NOT a form of mental illness. (Those are the “crazy” clients I treated at my last OT clincial at an acute psychiatric unit in a hospital. And, for those “nutty” patients, I try to discontinue the stigma of Mental Ilness.)
Anyhoo, back to Autism (I’ve very passionate about anything OT!). Autism is a communication and social skills disorder. It orginates from the gene (#17). It’s a neurological disorder that affects one’s ability to understand and use language and interact and communicate with people.
Fyi, 1/150 individuals are diagnosed with autism. And, despite what celebrity Jenny McCarthy claims, it is not caused by vaccines (proven by evidence-based research). Furthermore, her son is not “cured,” either, since there is no cure. However, I am thankful that she is promoting autism awareness.
Autism is so sad, but children with autism are beautiful and there are effective OT programs that can help children with autism focus on developing communication, social, and cognitive skills – such as econ. 🙂
Thanks for reading.
Vickie
NH
Bentley University Econonics Professor fiancee
22. August 2009 at 08:00
Scott –
What’s the answer to the refrigerator opportunity cost question? I can’t seem to find it on the web.
23. August 2009 at 22:15
Well I just lost everything I typed @#$%^&*
So this time I’ll be briefer.
Tim, Yes, I think Tyler does discuss Cohen. And I agree that autism (whether a disability of cognitive profile) tends to be somewhat more common with males.
Smokey, You should read Tyler’s book as I can’t really do justice to his subtle arguments.
q,
1. Yes, my vioews are close to those of Krugman, circa 1998.
2. My argument does not depend on consumers recognizing changes in monetary policy and reacting by going out and spending more. I agree that is implausible. When inflation targeting has been highly effective in a deep depression, i.e. 1933, investors led the way and consumers followed. If the policy is credible then asset prices will rise sharply. This leads to greater output and consumers respond to the higher asset prices and higher output by spending more.
3. I don’t know if you’d like Tyler’s book, but don’t avoid it for the reason you cited. It is not a book about autism, and it certainly doesn’t merely summarize academic research. He covers a lot of ground, and looks at many issues that researchers have probably never even thought about.
23. August 2009 at 22:30
Jon, The original $10 was a sunk cost, that’s why the opportunity cost of me seeing the show was $50, not $40.
Zanon, I once looked at a bit of post-Keynesianism, but not enough to have an intelligent opinion. What I did read made no sense to me. There didn’t seem to be a theory of nominal aggregates. They seemed to view monetary policy as being about credit, not money. They drew the wrong inferences from money being endogenous.
Justin, I would guesstimate that nearly 90% of the late 2008 crash was monetary policy. In other words if the Fed had kept NGDP rising at roughly 5%, then the rise in unemployment would have been tiny, and asset prices would have held up pretty well. The other 10% or so was due to real effects from the subprime crisis. But remember that if NGDP had been kept growing at 5%, then the financial crisis would have been far, far smaller, perhaps something like late 2007.
Greg, I thought the real bills doctrine was the view that monetary policy should be procyclical, which was recently revived in the “opportunitic disinflation” thesis. Perhaps real bills advocates also think low interest rates mean easy money. But so do lots of other economists of all stripes.
Kathleen, Good to have your perspective on this issue. What you say makes sense to me. In terms of empathy, I think there is a big difference between what people feel, and what they articulate. My hunch is that autistic people feel much more empathy than they articulate, and non-autistic people sometimes feel less than they articulate. So the gap in “feelings” isn’t as great as it might appear.
23. August 2009 at 22:45
Current, Is that spread due to default risk?
azmyth, Sorry about the mix-up, I was referring to another question. The link merely provides the information that 79% of economists got in wrong. it dopesn’t provide the question. I can’t find the question. Perhaps someone else can dig up the question asked by the two Georgia economists. It wa not at all ambiguous. I agree that the refrigerator question was weird.
Thanks Greengenes.
Philo, I don’t follow your question. I didn’t argue the cost was zero, I argued it was $50. If someone also wants to say the cost is foregone time, that is fine. My point was that if we were going to put a specific dollar number on the cost, it would be $50, not $40, $10, or $0. But I am fine with “$50, plus four hours” (They were long shows back then.)
azmyth, I agree that the opportunity cost depends on whether you have bought the ticket yet. But in the question I asked it was clear that I had, indeed I was about to enter the concert.
Rob, That is exactly right.
Thanks Vickie, It’s good to have someone I know comment here. I appreciate your perspective, and would just add that Tyler feels very passionately that autism should not be stigmatized.
Butter, That was my mistake–see my first response to azmyth. I intended a different question
24. August 2009 at 01:04
I don’t think so, since many of the accounts offered are protected by deposit insurance.
Regarding Autism….
I had a very interesting conversation with a mental health professional about it last year. She told me that in her opinion many people in Ireland who are diagnosed with Autism don’t have it.
She told me that for bipolar disorder and other mild mental problems the standard approved procedure is to prescribe drugs. The patient doesn’t recieve much in the way of visits of psychotherapists. However, Autistics do. So, doctors, uncertain of what to diagnose often give a provisional diagnosis of “autistic spectrum disorder”. This ensures that the patient ends up in the hands of other mental health specialists who may know how to diagnose the person better.
24. August 2009 at 05:08
re:the refrigerator question.
My best guess, based on various cues, is ‘$1000’. The other details are extraneous.
My second guess, on the assumption that we’re calculating the value over time of A & B is that A & B are infinitely valuable (since the story doesn’t specify a time horizon). But that seems silly.
24. August 2009 at 12:09
[…] Big HT2 Scott Sumner. […]
25. August 2009 at 06:17
Scott–
You didn’t read my post carefully. I was discussing a different scenario from the one you presented, one in which *no one offers you $50 (or anything) for your ticket*.
25. August 2009 at 08:02
[…] the comments of this post by Scott Sumner he links to an exercise of opportunity costs (note that this is apparently not the question that […]
26. August 2009 at 08:32
@ssumner
“If the policy is credible then asset prices will rise sharply. This leads to greater output and consumers respond to the higher asset prices and higher output by spending more”
This clarifies a couple things for me. It makes sense that this would work after (or in the middle of) a deleveraging cycle. But the problem in 2008 was at least in part because asset prices were too high (at least higher than historical norms) with respect to returns on assets (look at total asset value versus gdp in the US series). So you would need a certain amount of increase in nominal GDP just to reach historical norms in this ratio; ie during mean reversion you would need a strong inflationary dynamic in the price level just to _avoid_ asset deflation. i don’t see how you can do that. not sure i am using the proper technical vocabulary here — in fact i am sure i am not.
27. August 2009 at 02:13
Current, Then can I assume that one year UK government bonds also yield 3.85%? Otherwise why would anyone in their right mind buy a one year gilt?
I am not surprised that autism is hard to diagnose. It’s probably not an either or thing, but rather a matter of degree. There are actually many cronic conditions like that. Another one is asthma.
jb, I never even noticed that question when I posted the link. I really don’t know what they were getting at.
Philo, Sorry, now I see what you mean. And you are right. I would add, however, that the question I asked my class is not at all ambiguous, as I clearly spell out that it refers to the moment right before I enter the concert, but after I have been offered $50.
q, I think what you say is true for mid-2007, and I think the following 12 months showed what occurs when asset prices need to fall. But by mid-2008, however, I’m not sure they were still too high. I think if we had had 5% nominal GDP growth from mid-2008 going forward, then asset prices might have been fairly stable, or perhaps fallen a bit more, but not drastically. Look how much stocks have recovered since March, and NGDP growth is still far too low.
28. August 2009 at 08:18
Oddly, some people say $40.
Tax professionals. Since you started with a $10 asset, you really only walked away from $40. Your foregone profit, and your reportable taxable income, was $40 in that context.
(I understand the fallacy, just trying to explain)
28. August 2009 at 08:25
I should have read all the comments first, sorry.
28. August 2009 at 08:53
This is the interesting thing, the yield on short gilts is quite low:
http://www.fixedincomeinvestor.co.uk/x/bondtable.html?groupid=3
Have a look though at what savings rates are on offer:
http://www.moneymadeclear.fsa.gov.uk/tools/compare_products.html
I don’t understand this myself. I think it may be due to regulation I don’t know about.
I know that some Irish banks are not trusted by lenders so they have to go to retail savers. (Since retail savers don’t care, they have deposit insurance). Also, there are restrictions on building societies drawing funds from the money markets. Still, that doesn’t explain all the names on the FSA site.
29. August 2009 at 20:04
bababooey, Yes, a lot of people think in terms of historical costs, which are of course meaningless.
Current, Maybe someone else can explain this, as gilt buyers certainly aren’t fools.
29. August 2009 at 20:16
Scott writes:
You’ve got that right in a certain sense, but you’re missing their logic. The 10 you paid is irrelevant. You have the ticket now. How you got it is in the past. The decision to go is a loss of $40 because it carries an opportunity cost of $50 and a ‘pleasure’ of $10–$10 being the least the show was worth to you if we take your prior decision to purchase as rational.
-$50 + $10 = -$40.
30. August 2009 at 04:35
This post is so wrong on so many levels!
Inherent in your world-view is that logic and reasoning are somehow more pure and better than emotions. Only in certain situations is this the case (I agree economics is one of them, to an extent).
I don’t know much about autism from a medical point of view from what I’ve read and seen my theory is that autism could be said to be on the right side of a spectruma and on the opposite end of someone who is only led by emotions. Now excuse a slightly sexist example but lets says the extremely emotionally led person on the left is a woman and the extremely logical autist is a guy. (Hey, stereotypes exist for a reason). In a way ‘autism’ is an extremem male trait (aren’t most autists men?). Did you know that children of engineers are much more likely to be autists? So yes, if you are a bit of a geek, nerd, like to make lists, sit on your own playing on the computer then you probably lean more to the right of the scale. But does this make you better? Because you see how the world really works, it’s just other people are lead by greed etc and make non optimal decisions. Well here’s something for you… if your logical way of making decisions leads you to lose out… then you have not made the optimal decision!
Finally you might consider the fact that we live in a finite world with finite resources, oil, clean water, air, wood, metals… what do you think happens when theoretically infinitely expanding money supply and economic growth meets a finite planet and resources?
Don’t mean to be rude, but this is exactley the kind of self-important thinking that gives nerds a bad name. There is a difference between what goes on in your spock-like perfect world you made up in your head and what goes on in the real world.
2. September 2009 at 15:14
Jon, The decision to go has a net impact of somewhere between negative 40 and positive infinity. It might be a loss of 40, as you say, but it could just as easily be a gain of 40.
Jordon, You said;
“This post is so wrong on so many levels!
Inherent in your world-view is that logic and reasoning are somehow more pure and better than emotions. Only in certain situations is this the case (I agree economics is one of them, to an extent).”
I never said anything of the sort, nor do I believe it. GK Chesterton said something to the effect that anyone guided soley by logic would be insane, and I agree.
You said,
“Finally you might consider the fact that we live in a finite world with finite resources, oil, clean water, air, wood, metals… what do you think happens when theoretically infinitely expanding money supply and economic growth meets a finite planet and resources?”
When the money supply expands by an infinite amount you get hyperinflation. And why can’t economic growth conserve resources? And what does this comment have to do with autism?
25. September 2009 at 10:17
Did you really just refer to Krugman as “Brilliant”. Yikes.
26. September 2009 at 12:36
Steve, Brilliant, but also partisan and misguided. How’s that?
10. July 2010 at 05:41
[…] I had to pick one post to have Paul Krugman read, it would be (part 1 of) ”The Autistic Macroeconomist.” It’s probably my favorite post. I took his criticism of Friedman and […]
10. July 2010 at 10:45
[…] I had to pick one post to have Paul Krugman read, it would be (part 1 of) “The Autistic Macroeconomist.” It’s probably my favorite post. I took his criticism of Friedman and Schwartz’s focus […]
27. September 2010 at 05:59
[…] racked my brains for an answer. So has Krugman. Once I even delved into pop psychology, arguing that monetary policymakers needed to have a relentlessly logical attitude in applying […]
19. July 2011 at 13:11
[…] problems fills me with delight. Remember, I’m the guy who once claimed the recession was caused by too few nickels. Yes, I am slightly embarrassed to be in with the MMT people. (Firestone seems to think we have […]
26. August 2011 at 10:43
[…] about it ~2:40) – might write down some thoughts on that. (A short review can be found here: The autistic macroeconomist; most imp. part: […] he is not talking about autism as a mental illness, but rather a certain way […]
22. September 2011 at 15:04
[…] And finally a post I’ve always liked, a odd sort of mixture of Tyler Cowen and Paul Krugman. […]
31. January 2012 at 19:40
[…] My personal favorite among my posts was about framing affects, although it was quite different from Nick’s […]