Tag: Dialogue

An Excellent Nobel Prize for Angus Deaton–But Was Eugene Fama Always Such a Total [Redacted]?

Posted on by Brad DeLong

A truly excellent economics Nobel Prize–I have learned a lot from Angus Deaton.

And I look at my desk and see my copy of Akerlof and Shiller’s Phishing for Phools that I am halfway through on my desk. And I think about the panel I was on with Paul Krugman at New York Comic Con yesterday. There is a subset of economics Nobel Prize winners who are true geniuses, from whom I have learned and continue to learn an immense amount.

But then I turn to my computer to sort through my unread browser tabs.

And the first thing that comes up is: Eugene Fama: http://www.chicagobooth.edu/capideas/magazine/fall-2015/whos-really-in-charge.

And all I can think is: “What a maroon!”

I first remember becoming really aware of Eugene Fama in the aftermath of the stock market’s Black Monday in 1987. He and Merton were out there in its aftermath opining that the 25% fall in the value of equities on Black Monday was a rational revaluation in response to that day’s market news–it was just that we economists were just not smart enough to figure out what that news was that the marginal trader on Wall Street had learned that day, but it was probably something about the tax treatment of takeovers.

That struck me as moronic. I asked my elders: “They’re kidding, aren’t they?” My elders said: “Nope.”

Today I find Eugene Fama saying something else that strikes me as equally moronic:

Is Sally taking Lucy for a walk, or is Lucy taking Sally for a walk?… The Fed isn’t all powerful. Obviously, they couldn’t set interest rates at 10% and leave them there forever, any more than Sally could make Lucy go for a walk if she really didn’t want to. So who’s really in charge?… 83% of the movements in the Fed’s target rate just follow other short-term rates. There are a lot of forces affecting interest rates, and the Fed is just one small part…. And remember, this isn’t the interest on one loan–the Fed claims to control all the interest rates in the economy…

We did this experiment of seeing who was taking whom for a walk–or, rather, the German Reichsbank did it.

The Reichsbank did it back in the 1910s. It set its discount rate at 5%/year nominal. It left it there. It had no problem doing so. There was none of this “the Fed can’t make the market go for a walk if it really didn’t want to…” BS.

Of course, the Reichsbank wished, after the fact, that it had not done so.

By 1922 its policy of fixing the discount rate at 5%/year nominal had created one hell of an inflationary mess:

Reichsbank discount rate 1920s Google Search

Eugene Fama: Who’s Really in Charge?:

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Must-Read: Oregon Economic Forum

Posted on by Brad DeLong

Must-Read: Oregon Economic Forum to examine the post-recovery economy: “The 2015 Oregon Economic Forum… will be held Thursday, Oct. 15, at the Portland Art Museum, 1219 S.W. Park Ave…

…Forum director Tim Duy, an economist at the UO, and Bruce McCain, chief investment strategist of Key Private Bank, kick off the hour-long event with a status update of Oregon’s and the country’s economies. They will take a closer look at the financial markets and preview the economic forecast for 2016. Moderator Brad DeLong, a professor of economics at the University of California, Berkeley, will then guide a broader conversation about Federal Reserve policy, the extent of any effect on the U.S. from China’s slowing economy and what is–or isn’t–happening to inflation….

Mark McMullen, state economist for Oregon, Tom Potiowsky, chair of the Department of Economics at Portland State University and former state economist, and Christopher Allanach, an economist in the Legislative Revenue Office, will look at the changing structure of the state’s economy and its revenue streams… [and] about what Oregonians can do to ensure a bright economic future.

Jim Tankersley of The Washington Post will delve into the current economic health of the middle class in the keynote address, ‘Reflections on the Middle Class in the Aftermath of the Great Depression’…

Dysfunctional Debate Over Medicaid Expansion in Kansas City

Posted on by Brad DeLong

I actually made it to the second half of the Medicaid expansion in Kansas/Missouri panel last night:

Brad DeLong: Must-See: UMKC Medicaid Panel, and Think-Tanks: “Must-See: Alas! I seem to be missing the Kathleen Sibelius panel…

…on Medicaid expansion this evening at UMKC American Public Square: Dinner at the Square A Dose of Reality: A Medicaid Status Report…

Reactions:

  1. Tarren Bragdon, the President and CEO of the Foundation for Government Accountability, didn’t seem to either (a) know enough, (b) have gotten himself well enough briefed, or(c) be able to think fast enough to do anything other than regurgitate right-wing talking points. But, then, would anyone who could do (a), (b), or (c) want his job?

  2. Kathleen Sibelius and MO Hospital Association Senior VP of Governmental Relations Daniel Landon said about what I expected them to–and were, by and large, accurate and on point.

  3. Michael F. Cannon of the Cato Institute surprised me in a number of ways.

  4. Cannon claimed that Amy Finkelstein et al.‘s Oregon Medicaid study had found “no effect of getting Medicaid on physical health”. Not “no statistically-significant effect”. Not “effects quite possibly due to sampling error, but in line with clinical expectations”. Not “effects that might have been due to chance”. Not “effects that might not pass a sensible benefit-cost test”. Instead, he said “no effect”–over and over again, a couple of times qualified as “no discernible effect”. I wonder if he would have dared to so mischaracterize the Oregon Medicaid study–which found statistically significant and substantial effects on family finances, statistically significant and clinical substantial effects on depression (which is, mind you, a physical illness: brain chemistry plus, you know), clinically substantial but statistically not significant (due to low statistical power) effects reducing unhealthy blood sugars, and clinically substantial but statistically not significant (due to low statistical power) effects reducing unhealthy blood pressure–if Amy Finkelstein or their coauthors had been in the audience or on the panel?

  5. Cannon’s big argument–made over and over again–was that the Affordable Care Act was bad because it did not eliminate insurance companies’ ability to engage in adverse selection via insurance plan design, and that the regulations in the ACA to limit such simply showed that it was a serious problem. Now if you really do believe that adverse selection by insurance companies via insurance plan design is a fatal flaw in the ACA, that has consequences. Getting rid of the ACA makes adverse selection a much bigger problem, and thus a much more fatal flaw. If that is your objection to the ACA, then you are a single payer advocate. If you are intellectually consistent. Sibelius nailed him: “Now I do not understand whether you object to the ACA because it regulates insurance companies too much or too little.”

  6. Cannon’s slip-up when he said “the ACA is not going to be repealed”–apparently the start of the argument that he should not be held accountable for the consequences of the ACA appeal that he advocates. He stopped in mid-sentence, however, apparently realizing that was not a road he really wanted to go down.

  7. Cannon’s claim that his 48-year-old developmentally-disabled cousin in New Jersey did not deserve to have and should not have a Medicaid card because he came from “a large Irish Catholic family with lots of relatives to take care of him”. Presumably female relatives. Again, Sibelius nailed him: “New Jersey’s Republican Governor Chris Christie disagrees–he expanded Medicaid.”

  8. The “should Kansas/Missouri expand Medicaid?” argument is over before it starts. Kansas’s and Missouri’s taxpayers are paying for Medicaid expansion elsewhere. The question is whether they pay the taxes and get the benefits, or pay the taxes and don’t get the benefits. Thus the only argument that can be made is that there are no benefits–hence the misrepresentation of the Oregon Medicaid study that Medicaid does no good, the claim that those who qualify for Medicaid under the expansion do not “deserve” it, attacks on overpaid health-care providers who receive Medicaid payments. Plus, most recently, Kansas’s Governor Brownback’s claim that the real purpose Obama has in mind with Medicaid expansion is to keep urban hospitals that treat Black people open. (False, by the way: the hospitals most at risk from the absence of Medicaid expansion in Kansas right now are rural hospitals that treat poor people.)

Must-Read: Ed Kligore: The Brand: What You See Is What You Get

Posted on by Brad DeLong

Ed Kilgore: The Brand: What You See Is What You Get): “Ann Friedman has written a piece for TNR that will be of great interest to all of us who have had to grapple with the idea…

…of a personal ‘brand’… back in the day… called a ‘voice.’… Friedman shares with us the hilarious and sobering tale of her own wrestling match with ‘branding’…. Personally, I find it easier to remain ‘authentic’… by letting people absorb my unique characteristics organically, rather than spending time each day trying to figure out how to improve the lefty-cracker-Christian-bloviator-with-a-surprisingly-good-vocabulary brand…. We’re not entirely immune to the logic of ‘branding,’ but for the most part, what you see is what you get.