Izabella Kaminska and the problem of communication in macro

One amusing sidelight of Nick Rowe’s recent post was all sorts of people agreeing that they can never understand what Izabella Kaminska is talking about (including Nick and I.)  The lazy way out would be to assume that Kaminska is a phony.  But lots of smart bloggers do find her interesting, as does the Financial Times, which publishes her columns.  So she probably has valuable things to say.

This reminded me of a recent conference I attended in London.  I discussed my ideas with fellow monetarists like Tim Congdon and David Laidler, and was increasingly frustrated with my inability to get them to see things my way.  There were operating under a radically different framework of how the monetary system works.  And they were my fellow monetarists.  The analogy is not English people being unable to communicate with Chinese people, it’s English people being unable to communicate with Scottish people.

So why is macro so fragmented?  Why can’t we talk to each other?  It’s not because macro issues are “bigger,” the global oil market is bigger than most GDPs, and economists do have a common language to discuss oil shocks.  It’s related to complexity, but even more to the very peculiar type of complexity that one observes in macro.  Macro issues can be examined on many different levels, which sort of overlay one another.  In that respect macro is like some of the “softer” social sciences, which can also have communications problems.

1.  Macro has a very important set of real shocks

2.  Macro has a very important set of nominal shocks

3.  The real and nominal shocks are both interdependent and independent, depending on time frame, expectations, etc.

4.  The causes of real and nominal shocks are often unclear.

5.  Nominal shocks have a special problem, where every attempt to try to construct some sort of mechanical transmission mechanism seems to fail.  No matter what we are discussing (IOR, QE, Gov. spending, taxes, banking distress, etc) the answer is always the same:  “It depends how mechanical change “X” affects the expected future path of monetary policy (or perhaps fiscal policy.)  There are no straightforward answers.

Is it any surprise that some people consider the labor market to be the essence of the business cycle? Or that others think it’s aggregate spending.  Or safe assets.  Or saving imbalances. Or money supply and demand.  Or fiscal policy.  Or the banking system.  Or productivity shocks.  They develop their own special language, which is incomprehensible to those with different macro frameworks.  In frustration, Nobel Prize winners start calling each other idiots.

Does that mean progress is not possible? No, at the end of January I plan to do a long post carefully explaining exactly why the market monetarist framework has been far more successful in explaining the past 5 years than any of the competing frameworks.  I’ll explain what went wrong with our competitors, and why.  I hope that when bright young students at schools like Michigan and Princeton see that we are more successful, market monetarism will gain new adherents.  That’s how progress is made.  Successful schools of thought get everyone to talk their language.

The older people stuck in their ways?   One funeral at a time . . .

PS.  One of my very first blog posts was called “The Economics Babel

PPS.  I was going to comment on George Selgin’s thermostat post, but never got around to it.  Since David Henderson recently commented, let me put in my 2 cents worth.   George implied (I think) that since the Fed is falling short of their 2% target, raising the target would not work.  I do not agree, although I agree with George that raising the inflation target is not the way to go.

The public expects the Fed to come close to their inflation target, even if they don’t hit it perfectly.  They expect inflation to usually be within 1% of the target.  And it usually is.  If the Fed raised the target, it would raise the future expected rate of inflation, and hence raise velocity.  That would raise NGDP.  Targets matter, even if very imperfect.


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47 Responses to “Izabella Kaminska and the problem of communication in macro”

  1. Gravatar of Geoff Geoff
    7. December 2013 at 11:07

    “So why is macro so fragmented? Why can’t we talk to each other?”

    It’s because macroeconomics is dominated by Platonism. Macroeconomists tend not to constrain their theories to individual action. But they are all individual actors. As a result, their idealistic…I do not hesitate in saying vanities, are clashing with each other left right and center. There is no common objective ground, action, that macroeconomists are grounding their theories on.

    It’s inevitable that disagreement with be rife if there are no constraints to the rules of symbol manipulation and transformation in theory. You can blame positivism for this. Postivists relegate all theories to analytic statements that are only true or false based on testing them in observation. But because economics laws proper cannot be empirically tested (since ANY empirical event is ALWAYS consistent with multiple, mutually incompatible theories), the battle continues to rage in the realm of idealistic theory unconstrained to action.

    If you want macro economists to agree with each other, you’re going to have to contribute to a complete epistemological overhaul in all of economics. You’re going to have to spend your days and years advocating for all economic theories to be constrained to human life, that is, individual action. But it’s tough for those who are psychologically repelled by the thought of such limitation. To the intellectual, there is a tendency to wanting to escape any intellectual bounds, to make the horizon as far and wide as possible, so that truth is more likely found. But the answer was always within the observer.

    No matter what happens in observable reality, you will never convince anyone to accept one theory consistent with the data over another theory consistent with the data, based on observation only. You have to go inward, because YOU are the subject matter of economics.

  2. Gravatar of Name Name
    7. December 2013 at 11:16

    Not related to this post, but congrats on winning this competition of economics bloggers based on musical taste: http://tmblr.co/ZIqa1s10E6mLW

  3. Gravatar of Geoff Geoff
    7. December 2013 at 11:21

    “Nominal shocks have a special problem, where every attempt to try to construct some sort of mechanical transmission mechanism seems to fail.”

    What if I told you that nominal shocks are equivalently supply shocks?

    After all, the Fed is not out there destroying dollars when there is a decline in spending (rise in cash holding times). When a demand/supply shock occurs, it is because people are finding that the goods and labor that they have been selling are not the correct goods and labor that should be offered for selling. There should be a change in what is produced and the labor type/experience offered.

    More aggregate money and aggregate spending cannot solve this problem, and yet, this problem looks exactly like more money and spending would solve it, because this “real” side problem tends to always be accompanied by a temporary aggregate rise in cash holding times and temporary aggregate decline in spending.

    If everyone finds that they should change what they produce and sell, and they regroup, replan, and stop producing what they are currently selling, then it should not be surprising that everyone would reduce their spending on existing production. The only way to solve aggregate real problems is through real side changes, that we call a recession, and increasing unemployment.

    Harsh? Indeed it is, but it is necessary pain to experience given that the problem was caused by previous inflation from people who are not the unemployed. Such institutions should be abolished, not merely decide on a new arbitrary rule of non-market money production. The problem IS non-market money production. Money and real goods production are always at cross purposes when one is directed by force of law and the other via the market of voluntary exchange.

    This irreconcilable difference cannot be solved by adding the word “market” to “monetarism”, and insisting that not letting the market decide NGDP is “the market deciding how much money the central bank prints” such that money is “market driven.”

  4. Gravatar of Dustin Dustin
    7. December 2013 at 11:38

    Does it matter the breadth and make-up of those of among who hold expectations? I am confident to blindly assert that the vast majority of public have no clue what the Fed is targetting, let alone how much is being targeted.

    Assume that’s true. Does such a truth impair the ‘expectation-becomes-reality’ framework? Or maybe ‘If you build it, he will come’ is a more interesting framework name.

  5. Gravatar of Lorenzo from Oz Lorenzo from Oz
    7. December 2013 at 13:01

    In addition to what you say, macro has a high level of abstraction, since it deals with aggregate data. But not agreed abstraction; folk abstract from the data differently–what you might call the economics babel 🙂

  6. Gravatar of Geoff Geoff
    7. December 2013 at 13:10

    Lorenzo:

    Aggregate concepts are abstractions.

    We don’t abstract from aggregates.

  7. Gravatar of Morgan Warstler Morgan Warstler
    7. December 2013 at 13:35

    I thought the little blow up was fun.

    The Fed is printing $85B a month (for inflation) to force people to spend their money faster.

    But we don’t see any inflation!?!

    True believers say well Fed isn’t printing enough fast enough….

    So somebody stops believing, and looking for an answer and says “well people must be demanding low inflation to hold these instruments”

    It was very cute.

    BUT NOBODY YET says “this is WHY even though the Fed is printing $85B, we are not seeing inflation…”

    And I don’t mean some graphs.

    I mean nobody yet tells a story that says “here is why prices are plummeting EVEN THOUGHT people expect the govt. to keep printing money”

    Scott, will say “Fed isn’t printing enough”

    But something is very, very different.

    And Williamson having a case of the yips is natural BECAUSE Scott’s answer might be prescriptive, but he is NOT DESCRIBING THE EXTERNAL FORCES THAT ARE DIFFERENT.

    Forget there is a central bank.

    Something in our economy is BIZARRO.

    And all of tech knows exactly what it is. We all talk about it constantly. It was written about years ago in mainstream publications, it even bubble up routinely today.

    It’s the nut that blind squirrel Kaminska has found, it’s the only thing that makes her interesting, the fact that she can’t reason from first principles – speaks to the power of the nut the econs have yet find themselves.

    SH*T IS BECOMING FREE

    And all that money has no place to go.

    The LARGER FORCE is the end of scarcity.

    It TRUMPS all this macro junk.

    It violates a basic rule of Micro – the real economics.

    What happens to economics when every single year, current nominal dollars are unable to keep things from costing ZERO DOLLARS?

    What do you cal a “shock” that is unrelenting, last 40 years, and at the end of it, has every human being consuming 25% of the atoms they used to consume, an they are 1000x happier.

    Kids today DO NOT WANT CARS.

    COLLEGE WILL BE FREE.

    Question: when someone says “college will be free” to a bunch of academics, what exactly goes thru your brains?

    Do you even imagine that YES college will be free?

    Let alone, ACCEPT IT?

    Neal Stephenson and “goggling in” or The Matrix… this stuff is happening all around us.

    If you live your entire life in a virtual space literally on soylent with your brain jacked into a machine for 150 years….

    WHAT BECOMES OF MACRO?!?

    All indicators point to a constant continued move towards this future, it behooves all of us to start modeling the next 40 years assuming that literally there will not be any place to INVEST MONEY SAFELY.

    And thats a good thing!

    Why isn’t our answer, there can be NO SAFE ASSETS or this economy is doomed!

    meh.

  8. Gravatar of ssumner ssumner
    7. December 2013 at 13:49

    Thanks Name, by Tyler is the music expert, not me.

    Dustin, The people that matter know what’s going on.

    Lorenzo, Good point.

    Morgan, You said;

    “Scott, will say “Fed isn’t printing enough”

    No, I say they have the wrong target. They’ve printed plenty of money.

  9. Gravatar of W. Peden W. Peden
    7. December 2013 at 15:22

    “The analogy is not English people being unable to communicate with Chinese people, it’s English people being unable to communicate with Scottish people.”

    Can no ken wha ye beir wi this, Scott. Dafties aside, oour mutual patter is braw.

  10. Gravatar of Garrett M Garrett M
    7. December 2013 at 15:45

    “Targets matter, even if very imperfect.”

    Did Japan have an inflation target between 1992 and 2011?

  11. Gravatar of Morgan Warstler Morgan Warstler
    7. December 2013 at 15:50

    Scott, I’m talking about TOMORROW

    If we adopt NGDPLT tomorrow, you will still be saying PRINT.

    It’s fine to say “we could have printed less, if only we were chuck norris in 2008”

    BUT you are really putting yourself out there, and I don’t think it is smart.

    What I know for sure is that shit is becoming free.

    I also know NGDPLT can keep us on a target and I think thats healthier for our political economy.

    But, as I said, by claiming we just needed to hit the target earlier, blah, blah, blah…

    You are avoiding the elephant that NOW IS DIFFERENT.

    And you should get yourself a “because things are different NGDPLT is even more important” story.

  12. Gravatar of Mark A. Sadowski Mark A. Sadowski
    7. December 2013 at 16:30

    Scott,
    Off Topic.

    Another day and another baseless claim about QE.

    http://angrybearblog.com/2013/12/qe-is-not-deflationary-2014-is-100th-anniversay-of-the-5-a-day-wage.html

    Edward Lambert:
    “QE is for those who own capital. QE will cause inflation in capital income.”

  13. Gravatar of Mark A. Sadowski Mark A. Sadowski
    7. December 2013 at 16:31

    By definition capital income is dividends, interest and rent. There’s four major episodes of QE at the zero lower bound where we have sufficient data to put this claim to a test: 1) US 1933-41, 2) Japan 2001-06, 3) US 2008-13 and 4) UK 2008-13.

    Unfortunately the US uses a different accounting standard (NIPA) from the rest of the planet (SNA). The simplest comparable measure is the proportion of the sum of income from employee compensation, proprietorships and capital income that is from capital income. In NIPA terms this is the proportion of personal income less personal current transfer receipts that is from capital income. In SNA terms this is the proportion of the total resources side of primary income that is from property income in the household sector.

    Here’s a graph of annual US capital income share and the monetary base during 1932-41:

    http://research.stlouisfed.org/fred2/graph/?graph_id=150169&category_id=0

    Note that the proportion of capital income fell every year with the sole exception of 1938. The US had a recession in 1937-38 that followed on the heels of the decision to sterilize gold inflows in late 1936 through 1937, which effectively meant temporarily freezing the size of the monetary base. The correlation between capital income share and the monetary base is statistically significant at the 1% level, and is of course negative.

    Here’s the monetary base (billions of yen) and capital income share (percent) for Japan in 2000Q4 through 2006Q2 (QE ran from March 2001 through March 2006):

    Date””””-Base””Capital
    2000Q4 64,759 9.0
    2001Q1 66,217 9.4
    2001Q2 66,904 7.6
    2001Q3 69,230 7.6
    2001Q4 74,857 7.6
    2002Q1 84,616 7.4
    2002Q2 87,765 7.2
    2002Q3 85,972 7.6
    2002Q4 90,091 7.2
    2003Q1 95,013 6.9
    2003Q2 101,887 7.0
    2003Q3 103,671 7.1
    2003Q4 105,145 7.0
    2004Q1 108,171 7.5
    2004Q2 108,141 7.2
    2004Q3 108,537 7.1
    2004Q4 109,768 7.6
    2005Q1 110,737 7.5
    2005Q2 110,663 8.1
    2005Q3 110,099 8.8
    2005Q4 111,692 6.7
    2006Q1 111,618 8.4
    2006Q2 96,399 8.7

    The bottom line is there is no correlation. Here’s a graph of quarterly US capital income share and the monetary base during 2008Q2 through 2013Q3:

    http://research.stlouisfed.org/fred2/graph/?graph_id=150170&category_id=0

    Again, the bottom line is there is no correlation. Here’s the monetary base (millions of pound sterling) and capital income share (percent) for the UK in 2008Q2 through 2013Q2:

    Date””””-Base””Capital
    2008Q2 77,216 14.9
    2008Q3 81,272 14.4
    2008Q4 97,472 14.1
    2009Q1 93,429 11.4
    2009Q2 152,466 11.1
    2009Q3 198,777 11.1
    2009Q4 201,465 10.1
    2010Q1 210,419 11.2
    2010Q2 207,913 10.1
    2010Q3 205,420 11.1
    2010Q4 199,782 10.8
    2011Q1 196,064 11.8
    2011Q2 190,177 11.4
    2011Q3 186,656 10.3
    2011Q4 210,006 11.1
    2012Q1 249,933 10.6
    2012Q2 287,678 10.7
    2012Q3 312,807 9.9
    2012Q4 340,808 10.6
    2013Q1 341,065 10.9
    2013Q2 353,115 10.7

    The correlation between capital income share and the monetary base is statistically significant at the 1% level, and is of course negative.

  14. Gravatar of Mark A. Sadowski Mark A. Sadowski
    7. December 2013 at 16:37

    Although the following paper confirms what other papers have found concerning the negative effect of contractionary monetary policy on inequality (and the positive effect of expansionary monetary policy on equality) via the earnings heterogeneity channel, its most significant result, in my opinion, is that concerning the impact of contractionary monetary policy on inequality (and the positive effect of expansionary monetary policy on equality) via the capital income (dividends, interest and rent) channel (what the paper calls “financial income”). Pages 20-21:

    “Second, these results suggest that the response of income inequality would likely be even more pronounced if the top 1% of the income distribution were included. This is because the source of income for the top 1% is quite different from that of other groups. The CBO (2011) reports that the top 1% received only 40-50% of their total non-capital gain income from labor earnings between 1980 and 2007 while financial income and business income accounted for approximately 30% and 20% respectively. Because financial income rises persistently while business income declines only briefly after contractionary monetary shocks, and because their labor earnings are likely to rise at least as much as the 90th percentile, one can reasonably speculate that the total income of the top 1% would rise by more than most of the households in the CEX.”

    http://emlab.berkeley.edu/~ygorodni/CGKS_inequality.pdf

  15. Gravatar of benjamin cole benjamin cole
    7. December 2013 at 17:43

    Mark S–superb work.

    Scott Sumner: One funeral at a time, but the Fed will never die…the Fed’s influence on monetary policy theory is growing and huge…does the Pentagon influence thinking on defense policy?

    Think about it: Has the Fed ever even mentioned MM, let alone held a conference about MM? MM has “grown up” in the only hospitable environment—the blogosphere.

  16. Gravatar of Jon Jon
    7. December 2013 at 18:15

    Morgan writes: “I mean nobody yet tells a story that says “here is why prices are plummeting EVEN THOUGHT people expect the govt. to keep printing money””

    You cannot say that nobody is offering an explanation. An explanation is interest-on-reserves. This is the Fed’s own explanation of interest-on-reserves: sterilization of the monetary base. They have been saying this since 2008. It is also the Fed’s explanation for why they need never sell down their assets holdings.

    So someone is assuredly telling a story. Now a fair question is whether that story is true. Personally, I would say it is expectations of when the Fed will tighten in the future that are constraining the present.

    So now you have two stories being told as to why there is not strong inflation today.

  17. Gravatar of ssumner ssumner
    7. December 2013 at 18:31

    W. Peden, Will they talk that way after independence?

    Garrett, It was price stability, and they came very close (using the CPI.)

    Morgan, No, if we adopt NGDP targeting tomorrow (level targeting) we don’t need to print money.

    Mark, Thanks, I always thought the income distribution question was a phony issue.

  18. Gravatar of W. Peden W. Peden
    8. December 2013 at 03:07

    Scott Sumner,

    I hope we’ll not go down that road in the first place, but probably not, because there are so many dialects of Scots, so teaching it at schools would be a very artificial exercise.

  19. Gravatar of Frances Coppola Frances Coppola
    8. December 2013 at 06:41

    Scott,

    I don’t have problems understanding what Izabella Kaminska is talking about. But maybe that’s just me.

    It’s very exciting that there is such a competitive market in macroeconomic theories. As long as it doesn’t degenerate into a brawl, the inevitable lively debate should much improve our understanding of the macroeconomy.

  20. Gravatar of ssumner ssumner
    8. December 2013 at 07:52

    Frances, Not just you, but there are also lots of people like me.

  21. Gravatar of Noah Smith Noah Smith
    8. December 2013 at 07:57

    Scott, the first paragraph of this post was distinctly un-civil.

  22. Gravatar of ssumner ssumner
    8. December 2013 at 08:07

    Noah, If that’s a joke it went over my head.

  23. Gravatar of Chris Chris
    8. December 2013 at 08:12

    Scott, Noah seems (weirdly) to have assumed you were calling Kaminska a phony, rather than having actually correctly understood what you wrote, which is that it would be lazy to assume she is a phony and therefore you think she probably has something interesting to say, even if you can’t figure out what it is.

  24. Gravatar of Mark A. Sadowski Mark A. Sadowski
    8. December 2013 at 09:17

    I’ve already said it elsewhere many times, but just to reiterate, I find nearly everything Izabella Kaminska writes to be thoroughly incomprehensible, to such an extent I often find it irresistible to crack jokes about her writing. As Nick Rowe said, her latest post on QE and deflation would work as a Sokal hoax in its own right:

    http://www.youtube.com/watch?v=4ToUAkEF_d4

  25. Gravatar of Vivian Darkbloom Vivian Darkbloom
    8. December 2013 at 09:42

    Regarding “the joke”. It is entirely possible that Mr. Smith thought he was being included among those “smart bloggers” who supposedly find her interesting. Perhaps he finds that association (not among the “smart bloggers”, obiously, but that particular subset) “un-civil”.

  26. Gravatar of Morgan Warstler Morgan Warstler
    8. December 2013 at 09:44

    Noah misreads a lot. He is a natural supporter of GI / CYB, but his pride gets in way.

    C’mon Noah just admit there is a lion who rides a horse and he’s super cool.

    Scott, kudos to you. I didn’t realize we have gotten this far along. In the past you have spoken about make-up. And you have also said, “don’t stop QE” I egt the needle you are threading.

    Jon and Scott, yes I’m happy to hear “don’t do QE, do no IOR etc”

    BUT whatever the Fed action, that the moment we set NGDPLT, we’ll have to have a couple Chuck Norris style fights. Peeps are going to not believe the Level Target.

    Also, Scott this goes to your CATO talk, WHY the “couple years” later hit the level target.

    I think of this as ripping of bandaid.

    Say we set target of 4.5%.

    Say GDP is 17T Jan 1 2014.

    So Jan 1, 2015 we KNOW GDP is 17.765

    GDP has to be $765BILLION higher for 2015.

    To make my math easy that is $64BILLION per month.

    So Jan 31, 2014, GDP is $17,040. $24B light

    Under rip off the bandaid…

    We now have to do 88BILLION in Feb. 64B + 24B make up.

    That means some kind of super aggressive action QE, IOR something. – essential a Fed shock.

    But we don’t do Chuck Norris, we piddle around.

    And Feb 28th 2014 total GDP is 17,070 – we’re now light $57BILLION

    The point is each month we either come in:

    at, below, or above not $64B

    think of it like current account balance for a state, where budgets must be balanced.

    Everyone assumes AS LONG AS Greece lives on its revenue, DEBT IS NOT A PROBLEM.

    I don’t get why this doesn’t become situation for NGDPLT.

    As long as the country is hitting $64B for a given month (not coming in light)

    Unless we are doing chuck norris month to month… Unless we riop off thr bandaid.

    WHY won’t everybody be happy as long as we grow $64B a month,? even if we are growing at 4.5%?

    Thats almost the current state of affairs.

    I’m not talking about getting back to 2008 on macro’s most famous graph.

    I’m saying under NGDPLT – we’ll it make up “IN A COUPLE YEARS” becomes UNBELIEVABLE.

    IT INTRODUCES THE VERY DISCRETION we are so against.

    The captain with his hand on wheel and he gets off course, he has to options:

    1. from current point, now point at target.

    2. from current point, RACE BACK to the line.

    #1 gives him discretion.

    #2 takes it away.

  27. Gravatar of ssumner ssumner
    8. December 2013 at 09:49

    Chris, I’m glad I’m not the only one confused.

    Vivian, So he’s insulted if I imply he’s “smart?” BTW, I have no idea whether he even knows who Kaminska is.

    Morgan, Not sure if my views have changed, or maybe you are just interpreting them differently. The exact path of NGDP is not important, as it’s not coming soon anyway. By the time the Fed is ready, no makeup will be needed.

  28. Gravatar of Noah Smith Noah Smith
    8. December 2013 at 09:55

    No, it’s pretty clear Scott is calling Izabella a phony.

  29. Gravatar of Frances Coppola Frances Coppola
    8. December 2013 at 10:14

    Mark Sadowski

    If you find Izabella’s writing incomprehensible, how on earth are you able to crack jokes about it?

  30. Gravatar of Noah Smith Noah Smith
    8. December 2013 at 10:31

    Scott: To see how your comment is insulting, try replacing a few of the words, and imagining that it was someone else writing a similar post about you:

    “The lazy way out would be to assume that Sumner is a phony economist. But lots of smart bloggers do find him interesting. So he probably has valuable things to say.”

    Sounds insulting, right?

  31. Gravatar of Vivian Darkbloom Vivian Darkbloom
    8. December 2013 at 10:33

    “Vivian, So he’s insulted if I imply he’s “smart?” BTW, I have no idea whether he even knows who Kaminska is.”

    Scott, you did not read carefully:

    “Perhaps he finds that association (*not among the “smart bloggers”, obiously*, but that particular subset)…” (emphasis subsequently added).

    But, now that Mr. Smith has re-visited us with an explanation, I must say I find it hard to interpret that first paragraph as equivalent to calling her a phony. Besides, worse things have been said that are not deemed “un-civil” among the cadre of “smart” economic bloggers.

    And, I must further say that being “incomprehensible” is, unfortunately, a trait shared by too many economists. Phoniness aside, my experience is that there is a direct relationship between one’s mastery over a subject matter and one’s ability to express that mastery clearly. If one is unable to express oneself clearly it is often mistaken for genius when, in fact, it is more often a sign that he or she has no idea what he or she is talking about.

  32. Gravatar of dlr dlr
    8. December 2013 at 10:49

    I think Noah’s description of this post as uncivil is incredible. If anything, I thought it was too civil. Scott is admitting that he finds a journalist’s macro comments nonsensical despite being an expert, but says we should give her the benefit of the doubt because other smart people disagree, and that the confusion must instead be emblematic of communications in macro. 99% of experts who find journalists technically nonsensical simply decide the journalist is full of it, regardless whether a few other smart people disagree. If anything, I think Scott’s allegiance to Tyler Cowen, who seems to like Kamniska, has rendered him excessively civil here.

  33. Gravatar of Mark A. Sadowski Mark A. Sadowski
    8. December 2013 at 10:58

    Francis Coppola,
    “If you find Izabella’s writing incomprehensible, how on earth are you able to crack jokes about it?”

    It’s precisely the fact that it is so incomprehensible that I find it so funny. It’s evident that some people take her writing extremely seriously when in my opinion there is literally nothing of substance in it. I would not at all be surprised if it is indeed a hoax just as Nick Rowe suggests.

  34. Gravatar of ssumner ssumner
    8. December 2013 at 10:59

    Noah, You said;

    “Sounds insulting, right?”

    Not to me, and not to any of the other commenters here. Check out my new post.

  35. Gravatar of Mark A. Sadowski Mark A. Sadowski
    8. December 2013 at 11:23

    As long as I have evidently struck a nerve discussing Izabella Kaminska’s writing, let me go even further.

    I don’t consider myself to be of limited intelligence, so the fact that I cannot easily decipher her writings tells me either that she really has nothing to say, or that she so disrespects her readers that she chooses to express herself in the most confusing fashion possible. I personally go out of my way to write as clearly and explicitly as possible just so there is no question about my meaning.

    So if there is a joke the joke is on her.

  36. Gravatar of Emma Zahn Emma Zahn
    8. December 2013 at 11:33

    I suspect you do not understand Izabella because you do not understand how finance really works — not how it should or could but how it does work. You are not alone. Very, very few economists I follow do. You might find some courses in Treasury Management would help you understand what Izzy talks about.

    http://www.afponline.org/

    If you are not up for that, at least try asking some Treasury Managers of institutional investors to explain what she is saying.

  37. Gravatar of ssumner ssumner
    8. December 2013 at 11:39

    Emma, I suspect you are right. Finance is not my area. Of course I don’t expect to understand her posts on finance, but am more surprised that I don’t understand her macro posts. But again, that’s just as much me as her, we speak different macro languages.

  38. Gravatar of Vivian Darkbloom Vivian Darkbloom
    8. December 2013 at 12:07

    “If you are not up for that, at least try asking some Treasury Managers of institutional investors to explain what she is saying.’

    Sorry, but I don’t buy this. “Izzy” is a journalist who writes for the FT, which, as far as I know, is a mainstream financial newspaper, not an academic or trade journal (not that people who write for the latter shouldn’t be comprehensible). Per her bio, she has never been a Treasury Manager of an institutional investor so it is difficult to surmise that this is where the incomprehensibility arises.

    Imagine the FT advising their “normal” readership: “If you are not up for that, at least try asking some Treasury Managers of institutional investors to explain what she is saying”.

  39. Gravatar of Mark A. Sadowski Mark A. Sadowski
    8. December 2013 at 12:13

    Emma Zahn,
    In my own case I seriously doubt my inability to easily comprehend Izabella Zaminska is attributable to a lack of knowledge of how finance “really” works.

  40. Gravatar of Jim Glass Jim Glass
    8. December 2013 at 12:38

    @ Noah Smith, who asks us to imagine him saying…

    “The lazy way out would be to assume that Sumner is a phony economist. But lots of smart bloggers do find him interesting. So he probably has valuable things to say.”

    Sounds insulting, right?

    No, it sounds like the “lazy” people are being insulted for not realizing like the smart bloggers that Sumner is interesting, not a phony.

    Though it does sound like you are critiquing his writing skills, for not expressing his thoughts clearly and simply enough for the lazy to understand them.

    That’s how I took the original comment — as criticizing Kaminska (and the FT editors) for producing columns that had “all sorts of people agreeing that they can never understand” … that is, as saying what it actually said.

    But geeze, if every economist who produced something that others called obscure or difficult to understand took it as a personal insult, who’d be left?

  41. Gravatar of Emma Zahn Emma Zahn
    8. December 2013 at 14:47

    @vivian darkbloom
    imagine the FT advising their “normal” readership…

    Since the normal readership of The Financial Times is presumably financial professionals like Treasury Managers they would have no need for an explanation.

  42. Gravatar of Vivian Darkbloom Vivian Darkbloom
    8. December 2013 at 15:30

    @Emma Zahn,

    Seriously, what percentage of FT readers do you suspect are “Treasury Managers” (or the equivalent)? Should the FT advertise those articles as intended for Treasury Managers of institutional investors? What I meant by “normal readers” were, in fact, readers with *less* of an understanding of finance than, for example, Scott Sumner. I’d bet that Sumner would be in the top 1 percent of the FT readership on that score even though I’m sure he does not claim that is his area of expertise (and, I’m not entirely sure Kaminksa would, either). I would respectfully submit that you have a fundamental misunderstanding of the function of a journalist in a mainstream financial publication such as the FT. Per a recent study by PWC the FT had a global readership of about 2.2 million readers (those are undoubtedly the figures touted to potential advertisers). That is not to say that every article or regular column has to cater to the needs or abilities of 2.2 million persons; but, I strongly suspect that the intended audience is far more extensive than you suggest.

  43. Gravatar of Dan W. Dan W.
    8. December 2013 at 16:38

    Scott,

    I realize you have chosen to ignore Geoff but in my view he poses a challenging question: How is it that so many intelligent and well meaning people have such conflicting views on economic theory? In the real sciences disagreements are settled when the preponderance of data fits the model. For low velocity objects F=MA and in all cases E=MC^2. The math says this is true and measurement supports the math. Meanwhile macroeconomics continue to fight over the most basic and fundamental questions of the discipline. The fact this happens begs the question if anyone knows anything.

    As I see it one of the fundamental errors of the macroeconomic discipline is the assumption that cause and effect are interchangeable. You argue that active targeting of a desired NGDP level will make it so. I find that an amazing assertion. As Morgan explains what happens when the target is missed? And if misses cannot happen how can that be when world history is replete of examples of the market fooling the wisest of men?

  44. Gravatar of ssumner ssumner
    8. December 2013 at 18:44

    Dan, You will miss targets both high and low. That’s why you want level targeting, so that when you miss you can try for “catchup growth” (or “catchdown growth.)

    I’ve been highly critical of mainstream macro in this crisis, so I certainly agree that macro lags far behind simple physics like motion in a vacuum. Of course that’s a simple problem. Try applying physics to predicting earthquakes, or weather two months out in the future.

    Overall I’d say there is some useful progress in macro, but I remain depressed by what I regard as our subpar performance during recent years. If we can’t agree then you are right, non-economists cannot have confidence in our views.

  45. Gravatar of Doug M Doug M
    9. December 2013 at 10:00

    Some of the problems with macro:

    Economists cannot agree on what words mean:
    Money, Investment, Savings, Efficiency. Different people have completely different definitions as to what these words even mean. I am sure I could come up with a few more with out much effort.

    Equilibrium conditions — much of the study of economics centers around locating equilibrium condition. There is not enough discussion of the dynamics. But, I have come to the conclusion that the equilibrium condition does not exist. Forces are never in balance. And as Robert Brown and Albert Einstein showed, even when conditions are very still, there are nonetheless imbalances.

    Aggregate supply / aggregate demand — heck supply and demand in general. We take something we can measure, quantity and price, and we develop a model full of parameters we cannot, supply and demand, to describe what is happening. But we don’t know the parameters.. e.g. how steep is the demand curve, so we can only vaguely describe how P and Q will change when one of the other variables is shocked. Then we take this rather crappy model (it is a good model to explain the intuition, it is a bad model to drive predictions) and abstract it again, applying it to difficult to measure, aggregate supply and aggregate demand.

    Money supply — well as I mentioned before, we don’t even agree on what money is. We also don’t agree on how it is created.

    Banking — the opinion ranges from Banks are central. Banks create money, to banks are irrelevant — they are merely intermediaries.

    Confirmation bias — Whatever events play out, Economists for completely opposite ends of the philosophical spectrum will spin them to prove their own pet theory. Any set of data can be shoehorned to fit any theory.

    Politics — Whenever an academic discipline enters the field of politics it becomes corrupted.

  46. Gravatar of Finn Finn
    9. December 2013 at 11:45

    Mark A. Sadowski said:
    “I don’t consider myself to be of limited intelligence, so the fact that I cannot easily decipher her writings tells me either that she really has nothing to say, or that she so disrespects her readers that she chooses to express herself in the most confusing fashion possible.”

    A plausible third option is you are an example of the Dunning-Kruger effect: http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect.

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