Let’s have some fun for a change today.  Here’s the picture:

And here are a few hints:

1.  He was born in the summer of 1961, and is 52 years old.

2.  When he was a boy he lived on the island of Java, in Indonesia.

3.  He is an inspiring political figure, popular with younger voters.

4.  The picture (from a campaign poster) looks a little bit like him, but there is artistic license to make him look more inspirational.

5.  Unless something unexpected happens, he will be serving as the President of the third or fourth most populous country in the world during 2015 and 2016.

Now here is the hard part of the puzzle.  You must find TWO names that fit the bill.

[Update:  Since writing this post I’ve gotten a lot of feedback from people who think the earlier post was insulting, and lots from people that did not. That means I’ve failed as a blogger. If I did my job properly no one should have viewed as as insulting, as that was not my intention.  So apologies to Izabella Kaminska.]

Noah Smith recently left a rather perplexing comment at the end of a recent post:

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

Neither I nor the other commenters could figure out what he was getting at.  So he responded:

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

This was in reference to the following paragraph:

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.

Now obviously the literal meaning of the paragraph is not at all what Noah Smith claims, I am criticizing those who would call her a phony.  I’m pointing out that lots of smart people do get what she says.  But let’s give Noah the benefit of the doubt.  Sometimes there really are hidden meanings.  Recall Mark Antony’s famous speech in Julius Caesar.

So how do we know that I wasn’t doing something similar?  By reading the rest of the post, which is full of paragraphs like the following:

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.

. . .

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.

My guess is that Noah Smith stopped reading after the first paragraph, as he could hardly have missed the meaning if he had read the entire post.

My advice to young bloggers is to avoid jumping to conclusions.  Don’t put a statement by another blogger in the worst possible light; interpret it under the assumption that they were well-intentioned.  I’ve been blogging for five years.  Thousands of posts.  If I was the sort of blogger who made personal insults against other bloggers I am pretty sure it would have showed up by now.  And I certainly would never insult someone who had never attacked me in any way.

Try to put yourself in the shoes of others.  What makes you think they are any less well-intentioned than you are?

Of course none of this applies to politicians, who are fair game.  But the blogosphere debate will be much more civil if we are at least polite to each other.

I was trying to say that the lack of communication came from vastly different macro frameworks, which used different languages.  If Ms. Kaminska happened to read the post and interpret it the way Noah Smith did, then my apologies.

PS.  Yes, I often attack people’s ideas, but that’s very different from attacking their character.  I don’t know of any “phony” economics bloggers, I’m pretty sure that 100% of them believe what they say.  And when I say it would be “lazy” to consider someone a “phony,” I mean it.

Update:  I regret not saying this:

“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 that would clearly be wrong. Lots of smart bloggers do find her interesting, as does the Financial Times, which publishes her columns. Even if you think she were faking it, what incentive do these other bright people have to play along?  Obviously that’s not what’s going on.  So she presumably has valuable things to say.”

I think even Noah Smith would agree that this improved paragraph is not in the slightest way insulting. But he’s convinced that what I actually wrote had a different meaning.  Even worse, a different intended meaning.  I guess he’s right that people are more likely to misinterpret what I actually wrote, but he’s wrong in assuming the intended meaning was different.  Not just wrong, but completely out of line.

From The Economist:

LANCE SALTZMAN did not like the way his stepfather, Toni Minnick, settled arguments with his mother, Christina Borg. Once Mr Minnick fired a gun into a wall beside her. A couple of weeks later, says Ms Borg, he threatened to shoot her. So Mr Saltzman went into his stepfather’s bedroom and took the gun. He sold it to a friend, who used it in a burglary. Mr Saltzman was charged with burglary, theft and being a felon in possession of a firearm””all for taking a gun from his own house””as well as with the burglary committed using the gun, in which he says he took no part. He was sentenced to life in prison with no possibility of parole. He was 22.

Mr Saltzman was mauled by a pit bull as a toddler and is “not altogether upstairs all the time”, says his mother. In his teens he got hooked on drugs and was recovering at Muse rehab center LA. He was convicted of marijuana possession, trespassing and petty theft. He was then jailed for a burglary he committed when he was 16, and this was his undoing.

He stole his stepfather’s gun within three years of his release; under a Florida mandatory-sentencing law for re-offenders, the judge had to lock him up for ever. Given Florida’s Stand Your Ground laws, Ms Borg believes that her son would probably be free if he had shot his menacing stepfather instead of stealing his gun.

Mr Saltzman is one of at least 3,278 people serving sentences of life without parole for non-violent crimes, according to a new report from the American Civil Liberties Union (ACLU). Based on reports by legacy healing long island, around 79% of them were convicted of drug crimes. These include: having an unweighably small amount of cocaine in a shirt pocket, selling $10-worth of crack to a police informant and mailing small amounts of LSD to fellow Grateful Dead fans. Property crimes that earned offenders a permanent home in prison include shoplifting three belts, breaking into an empty liquor store and possessing stolen wrenches. (emphasis added)

Roughly 65% of the non-violent lifers are black.

Polls show that 58% of Americans now support legalizing marijuana, and the number is rising fast.

President Obama will never again have to face the voters.

President Obama continues to oppose marijuana legalization.

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.

Nick Rowe has a new post asking why we were so clueless:

What we have just witnessed is the economics equivalent of the Sokal hoax. It wasn’t a hoax, just a mistake, but the effect was the same. We all make mistakes. What matters is that the rest of us didn’t all spot that mistake immediately. Even those of us who did see that something was wrong didn’t immediately identify what exactly was wrong. We need to ask ourselves why. We can’t blame the person who made the mistake if we didn’t immediately see it either.

Many economists have been puzzled by recent house price inflation. My theory shows that house price inflation was caused by too many houses being built….Loadsa theory…..Let me give you the intuition with a simple thought-experiment. Suppose builders suddenly increase the stock of houses on the market. The rate of house price inflation must increase for people to be willing to hold those extra houses, because people demand more houses when they expect rising house prices.

If you believe my explanation makes sense, you will also understand why Zimbabwe had hyperdeflation. There needed to be ever-accelerating deflation, so that people would willingly hold all that extra money.

But why didn’t we immediately see what was wrong?

Then he translates into monetary economics:

There is an alternative way to get an increase in the money supply to cause deflation, while sticking to the fundamental equilibrium. You need to ensure that when M(t) jumps up, Mdot(t) jumps down at the same time. The money supply increases, but is expected to start declining from now on. The jump up in M(t) causes the P(t) to rise. The jump down in Mdot(t) causes Pdot(t) to fall, which in turn causes P(t) to fall. If you rig it just right, so the two changes have just the right relative magnitudes, the net effect is no change in P(t), and a fall in Pdot(t).

Here’s what I said back on November 30th:

Let me illustrate this with a specific example.  We start at the Australian position, near the bottom of the U-shaped graph.  Now the central bank contemplates three possible policies: status quo, the Japanese option, and the Zimbabwe option.  (No idea why they’d want to move.)  Assume policy is 100% credible.  My claim is that a move toward the Japanese option would actually require a larger monetary base, as the slowdown in NGDP growth would be trivial compared to the jump in demand for base money as a share of GDP, from 4% to 20%. Moving that way would force the central bank to print lots more base money, despite the slower NGDP growth and inflation. Sound far-fetched?  Check out the US since 2008.  We’ve seen the slowest NGDP growth since Herbert Hoover, and a big surge in the base.

My only regret is not explicitly spelling out that once you get to the Japanese position the expected change in the monetary base would have to turn negative, to insure that NGDP would fall over time.  I guess I thought that was obvious.

Milton Friedman discussed all this back around 1970.

PS.  This is an example of never reason from a quantity change.  Quantity can rise due to more demand for base money, or more supply of base money.