Thursday Roundup, 10/30/2014

I'm running out of cowgirl pictures that aren't family-friendly...


Me on BV

1. Perhaps you have forgotten that China is big. If so, I am here to remind you.

2. Why I'm not worried about all the papers about data mining and p-hacking.

3. Niall Ferguson continues not to be a serious or trustworthy public intellectual on matters of monetary economics.


From Around the Econ Blogosphere

1. Scott Sumner lavishes praise on Matt Yglesias. Sumner is a passionate man - he loves as he hates, without reservation.

2. Paul Krugman says important and necessary things about the ideological war against infrastructure investment, but fails to mention America's huge cost problem.

3. Here's why we use log returns, courtesy of Ren & Stimpy.

4. Alex "The Rock" Tabarrok has good news on the U.S. patent[ly f***ed up] system.

5. The left-right political axis is actually just a made-up piece of B.S.! Astonishing. But you're still all a bunch of right-wing nutjobs, FYI.

6. Cool Campbell Harvey paper about backtesting trading strategies. God, I hope there aren't people out there trading on strategies with a backtest t-statistic of 2.01...OK I'm kidding, no amount of silliness in the finance industry would ever surprise me.

7. Tony Yates reminds us that all of the models where we assume some simple passive behavior for (fiscal, monetary) policy and then examine the effects of (monetary, fiscal) policy are basically missing the point.

8. Jim Hamilton says that Saudi Arabia isn't likely to cut oil production to boost prices.

9. John Cochrane has taken up the Neo-Fisherian banner! Low interest rates cause deflation!

That which is not dead doth sleeping lie (RBC edition)

The other day I had dinner with two prominent New Keynesian macroeconomists (whose names shall not herein be revealed). Both of them told me that the idea of technology shocks as the main driver of business cycles is effectively dead. At the same time, a number of Twitter people (Josh Hendrickson, Tony Yates, Ryan Decker, and Pedro Serodio) asserted that NK is the dominant school of macro. Other macroeconomists, like Chris House, have made the same claim.

I just don't think this is true at all.

Now, it is true - to my knowledge, anyway - that central banks use NK-style models (like Smets-Wouters), and don't use models where tech shocks are the main driver.

Also, I've recently seen people like Patrick Kehoe, Mark Bils and Peter Klenow - who had been known for their skepticism of the sticky-price mechanism - writing some papers giving more credence to the idea of sticky prices.

But in terms of academic publishing, the hot areas in macro seem to be A) labor search models, and B) financial-friction models. In both of those, you often see tech shocks as being the main driver.

The Diamond-Mortensen-Pissarides model, when it includes business cycles, includes them by adding TFP shocks. In other words, once you leave the steady state, DMP is just RBC with a matching friction. By my count, that makes two Nobel Prizes for RBC models and zero for NK. Actually, the vast majority of labor-search models I've seen, if they try to match business cycle facts, use the RBC mechanism to produce the cycles. The big exception I've seen is Christiano, Eichenbaum and Trabandt.

For financial-friction macro it's more even, as you definitely do have models that augment New Keynesian models with financial frictions - e.g. this one by Christiano et al., or this one by Curdia and Woodford. And of course there is Bernanke-Gertler, one of the original financial-friction models. But Kiyotaki-Moore, the other canonical financial-friction macro model I know of, uses RBC-style tech shocks as the single shock. And Brunnermeier-Sannikov uses what is basically a TFP-news-shock model. So here, the literature is pretty split, but RBC is alive and well.

But there are other macro-ish areas of research besides macro! There's international finance, where the models I've seen are all RBC-type models (caveat: my teacher for the international finance field class in grad school did her PhD at Minnesota). And when macro-finance asset pricing models bother to model production, they usually - though not always - use RBC-style tech shocks to make dividends and consumption move around.

So it seems pretty clear to me that RBC - defined loosely as "models where fluctuating TFP is the main driver of the business cycle" - ain't dead by any means. What's more, it seems unlikely that it will die for a good long while. Why? At least two reasons - A) ease of use, and B) familiarity.

First of all, productivity fluctuations are just plain easy to use. You can have constant returns to scale. You don't have to think about money or the aggregate price level. If you want to focus on other hard stuff, like labor search or banks, the easiest thing to do is just to use the simplest possible mechanism for the aggregate shock.

Second of all, everyone is really familiar with RBC, because everyone learns it before they learn any other type of shock mechanism (like NK). This is because RBC came first historically, because it's relatively easy to learn and understand, and maybe because of the enormous respect still given to the original RBC guys. So everyone knows how to use tech shocks, so they're the first go-to mechanism for many people.

So I think that all the people who pronounce RBC dead should think again. And NK's dominance is far from complete. If you don't believe me, just ask the Nobel committee!

Who Said It? (safe asset shortages edition)

OK, econ blogomaniacs, time for a quick little pop quiz. Here are two quotes from prominent economics bloggers. See if you can guess which blogger said which quote. No cheating!


Quote 1

"Though there are things that central banks can do in the face of safe asset shortages...a safe asset shortage is basically a fiscal problem. The safe asset shortage is reflected in binding financial constraints that imply the economy is non-Ricardian. Government debt matters, and an expansion in the stock of government debt can be welfare improving. Presumably this also implies a lower net cost of financing government projects, meaning that a safe asset shortage provides an opportunity for the government to finance education and infrastructure on the cheap."


Quote 2

"When the excess demand is for longer-term assets – bonds to serve as vehicles for savings that move purchasing power from the present into the future – the natural response is… induce businesses to borrow more and build more capacity, and encourage the government to borrow and spend…When excess demand is for high-quality assets – places where you can park your wealth and be assured that it will still be there when you come back – the natural response is to have credit-worthy governments guarantee some private assets and buy up others, swapping them out for their own liabilities and thus diminishing the supply of risky assets and increasing the supply of safe assets."


...If you got both right without Googling, then you're way too addicted to econ blogs.

The Omega Man

Time to write about a very uncomfortable subject that is also not anywhere close to my own area of expertise. A lot of people will be inclined to give this post an un-charitable reading, which is inevitable, so before you explode with rage, realize that A) I know I'm not any kind of an expert, and B) I might be saying something more nuanced than you think I'm saying. You'll probably explode in rage anyway, and I preemptively apologize for raising your blood pressure. I also apologize for the blatant heteronormativity of this post.

Anyway.

It seems to me that a big problem in the world consists of angry young men doing aggressive things. One example of this is terrorism. Another is online intimidation and harassment of women, like we've seen with #GamerGate. Another is random outbursts of violent crime. I don't know why young men are so much more prone to aggression than other groups - most people just wave their hands and say "testosterone", while I tend to just shrug and say "whatever". But anyway, it's a fact, and pretty much everyone knows it.

One thing I have sort of noticed, however - and here we leave the realm of well-established fact and enter the realm of Noah Talking Out of His Digestive Tract - is that when young men feel like they can't get sex, they tend to feel angry and resentful toward the world. Actually, I've noticed that women, when they feel like they can't get sex, also seem to feel unhappy and grumpy. But since young men tend to be more aggressive than their female counterparts (see previous paragraph), the frustration that comes from feeling like one isn't able to get sex seems often to translate into aggression in men, but far more rarely in women.

Note that I say "feel like they can't get sex" instead of "can't get sex", because from what I've seen, nearly anyone is able to get sex if they want. They may not be able to easily get sex with a partner whose quality - attractiveness, purity, status, hair color, whatever - they deem acceptable. But pretty much anyone can get sex. (As a half-crazed drug-addled hippie once told me in a Stanford co-op, "There's all this sex out there, and we don't even realize it!")

But basically, there are a whole lot of young guys out there who feel like they just can't get laid. They're wrong - totally, ludicrously wrong. But they really do feel that way. In current internet slang, these people are called "incels", which is short for "involuntary celibates." Whether this is an apt descriptor depends heavily on your definition of "voluntary," since incorrect beliefs still have power.

Why do these young men feel like they're incapable of getting laid? I have a conjecture - and here we wander dangerously into the realm of pseudoscience, but still, I have a conjecture. My guess is that these men feel that they have low social status, and that this makes them either 1) not attractive, or 2) not deserving of sex. In fact, this could be unconscious - some men seem to tacitly think of themselves as low-status men, and this gives them a general pessimism about their ability to succeed in any social interaction, be it friendship, sex, or business. These beliefs might have been solidified by being bullied as kids - I don't know.

Anyway, these men seem to fit into a social niche that is well-observed in some primate societies - the omega male. Of course, this term has already been incorporated into internet slang (sometimes confused with "beta male"), but like any scientific concept, it has been mutated, misapplied, overapplied, etc. Still, I think the concept is a useful one. In a college course (HAHAHAHAHA...OK now that we've got that out of our system), I learned that in some primate societies, gangs of omega males engage in violence toward females, while the big tough alpha males and their beta male lieutenants try to protect the females and chase off the attacking omegas. I don't know about you, but that image sort of reminds me of #GamerGate.

One interesting question is whether the angry young omega-males are angry because they are sexually frustrated, or whether their lack of sex is simply a signal that seems to remind them that they are low-status. I'm not sure about this - probably both.

So to sum up: There seem to be a lot of young men out there who are angry because they think they can't get laid, and who think they can't get laid because they think of themselves as low-status. And because of this, these men sometimes do aggressive things, alone or in groups, toward women.

Next question: What do we, as a society, do about this problem?

One idea I've seen some of these angry young men suggest - including in long, unsolicited emails to Yours Truly - is to turn women back into pieces of property, and then distribute them evenly to men via a restored norm of traditional patriarchy, possibly enforced by church-state cooperation and mass shaming. Needless to say, I think this idea is total and utter shit, and would be total and utter shit even if it had a hope in Hell of working, which incidentally it would not. In fact, when I hear this idea, I sort of have the urge to take whoever suggested it and pitch him off a cliff into a tar pit, but I guess that just shows that I, myself, still have traces of angry-young-man-itude.

A better solution, I think, is the elephant seal solution.

When I discussed the issue of omega males with Brad DeLong on Twitter the other day, he pointed out that "ω-bull elephant seals hang out at edge of beach & try 2 look attractive—don’t hate on elephant seal cows & chase them off". I don't know if elephant seals actually do this, but I also don't care that much, because everything I've seen in life tells me that this is a good solution for human omegas.

In other words, the resentful, angry, frustrated young men simply need to realize that they are plenty attractive, and that getting sex is really not that much of a problem once you actually go out and try to do it.

In theory, this is what PUA culture is supposed to do - turn "incels" into ladies' men. At first blush, this seems like the perfect solution - teach men how to be attractive to women! Just imagine a world in which all the lonely, under-confident dorky guys suddenly become confident, socially adept men who knew how to be the object of women's desires!

Unfortunately, the PUA movement doesn't seem to have accomplished this societal transformation. Why? Well, one reason is that although many PUA movement leaders, like Erik von Markovik, try to spread the (good) message that any man can be attractive if he just tries - an example of what Carol Dweck would call a "growth mindset" - other members of the subculture propagate the idea that only natural "alpha" males can ever succeed at the attraction game. In other words, these people (no, I'm not going to name names) have reinforced the omegas' insecurity about their own social status and sexual prospects, instead of alleviating it.

Other reasons include A) the fact that practicing being attractive goes against many people's religious and/or traditional values, and B) the fact that even well-intentioned PUA gurus like von Markovik are speaking mainly from their own experience, which - though impressive in scope - simply doesn't work for everyone. As a result of all these factors, many of the omegas resent the PUA subculture just as much as they resent women.

So basically, what I think we need is some new way of getting omegas to stop worrying about their supposedly low social status and learn how to go out and attract women instead of harassing and attacking them. We should teach the angry young human males to take a page from the book of the (alleged) sexy young elephant seal males. The goal is not just for them to get laid (though that's an important human activity), but for them to feel more confident, more worthwhile as mates, and less obsessed with social status.

Of course, I don't know how to accomplish that. But I think this is where our society needs to go. Angry young have to learn how to be attractive, but more than that, they have to learn that they're worthy of being attractive - that their low social status is a self-inflicted figment of their imagination.

Because the alternative method of dealing with the angry omegas is to keep having the alphas - i.e., the cops - continue throwing them off cliffs into tar pits when they get too violent. That solution works, but I wish there were a better way.

Anyway, once again, let me remind you that I don't claim to have any sort of expertise or special insight on this matter.

U.S. vs. China+Russia - the Tale of the Tape

About 70 years ago, there was a big battle for supremacy among all of the big countries on Earth, called "World War 2." The countries that came out on top of that battle were the United States, Russia, and China. Following the end of that war, there was a protracted low-intensity power struggle (the Cold War) between those three winners, which Russia lost, and the United States and China - who started out as enemies, but became de facto allies in the 1970s - won. 

People in the U.S. seem to tacitly assume that because we won those two big power struggles, we'll win the next one - if there even is one at all. 

During the 1990s, this seemed to be predicated on the idea that the U.S. would win the ideological battle - that democracy, capitalism, and human rights were such an attractive and potent combination that everyone would settle on these systems, and then there would be no need for further power struggles among nations. This was the "End of History" idea. It may still work out that way, but it hasn't yet - about 40% of the world has resolutely refused to adopt U.S.-like systems, and democracy has actually been in retreat since slightly after the turn of the millennium, if you believe Freedom House.

In the last few years, it has finally sunk in that the "End of History" idea is not right (at least, for now). People are waking up to the possibility that the spread of democracy and human rights from 1945 to 2000 might have been partially a byproduct of U.S. power.

But there is still the notion that the U.S.' economy and military are both so strong that we are guaranteed to retain preeminence over any foe or combination of foes. 

But now consider the combination of China and Russia, the other two victors of World War 2. These countries are each poorer than us on a per capita basis, which reflects the inferiority of their economic and political systems in terms of creating human welfare. But their draconian systems have, so far, allowed them to retain control over vast territories (17% of the world's land area) and huge populations (21% of humanity).

What's more, these countries are now both clearly opposed to American power and influence - Russia more so than China, given the war in Ukraine. The two countries have resolved the enmity and territorial disputes that existed between them in the Cold War, and are now de facto allies. 

So I thought it would be useful to compare the "tale of the tape" - the basic resources that the U.S. possesses, compared to the emerging alliance of Russia and China. Here is a table I whipped up:

All data are from 2012 or 2013. The source is Wikipedia.

Notice how in all categories except for nominal GDP, the U.S. is outclassed by the combination of the other two powers - sometimes by an enormous margin.

There are some caveats, of course, including but not limited to the following:

* Given China's greater growth rate, the GDP and Manufacturing disparities will continue to move in the direction of China+Russia.

* The nuclear warhead number is the sum of both tactical and strategic warheads, though the strategic-only numbers are similar.

* Proven fossil fuel reserves are not equal to economically recoverable reserves; the U.S. has more advanced extraction technologies.

* Active military personnel are not the same as total military personnel; the total number favors China+Russia even more.

* I did not include specific weapons systems, since I am not sure about the strategic relevance of any of these. For example, Russia has many more tanks and mobile ICBMs than the U.S., while the U.S. has many more aircraft carriers. I am simply not sure how useful tanks, mobile ICBMs, and aircraft carriers really are at this point. Nor do I know about differences in weapon quality. But it's worth noting that in both WW2 and the Cold War, GDP ended up mattering more than initial levels of military tech in determining the eventual victor.

* Some argue that China and Russia are not true allies. However, this was also true of the U.S. and China in the latter part of the Cold War - and, for that matter, the U.S. and USSR in WW2. Predictions that Russia and China will come into conflict over Russia's Far East have so far proven to be total fantasy, and the two countries have moved ever closer together.

* The U.S. might be able to count on allies in an actual war - Britain, France, and/or Germany in a European war against Russia, and Japan and/or India in an East Asian war against China. So this might not be an appropriate comparison; indeed, I think that building strong alliances is our best hope of countering a China-Russia alliance. Note also that China+Russia might be able to draw on some allies as well, such as Pakistan (against India) or North Korea (against Japan).

Anyway, I think that the numbers should demonstrate to all but the most blinkered observers that the U.S. is not facing an opponent whose resources are far less than ours, as we did in both WW2 and the Cold War. For the first time since the early days of our country, our rivals have more resources than we do - and the disparity is getting larger every day. Despite the obvious superiority of our governmental and economic systems, we are not guaranteed to prevail in a power struggle against a Russia-China axis. Henry Kissinger knew this, which is why he always warned that we should be closer to either China or Russia than those two countries were to each other. But in recent years that has proven to be impossible.

Now hopefully, this blog post, and others that point out the same facts, won't matter at all. Hopefully, there will be no new Cold War or anything like it. But just in case this is where things are headed, it pays to be honest with ourselves about the facts.

Thursday Roundup, 10/16/2014

You know what? There is NO WAY the An Lushan rebellion killed 30 million people. What a hoax. OK, time for econ links and semi-crazed raving.


Me on BV

1. Energy limits won't hold back growth. Reason: We've been growing while using less energy for decades now.

2. Why I'm not too worried about the China slowdown (warning: contains macrobullshitting).

3. Why Jean Tirole is like Charles Barkley. Hint: It's not the hair.

4. Why the EMH is right. And also wrong. But mostly right.

5. I'm disappointed that Tony Hsieh has not yet managed to turn Las Vegas into a hipster techtopia. Next time, he should try more communism.


From Around the Econ Blogosphere

1. In which SMBC sums up about half of the experimental economics literature to date, in a single mildly funny comic. On a more serious note: https://ideas.repec.org/a/eee/jeborg/v73y2010i1p65-67.html

2. Roger Farmer says that the NAIRU is a myth. That Farmer, what a card. Next thing you know, he'll be telling us that the accelerationist Phillips curve has no out-of-sample predictive power! (slaps knee and hyuks)

3. Elizabeth Bruenig is against affirmative consent. Cacao to cacao.

4. Zachary David writes about agent-based models and macroeconomics. Rajiv Sethi and co. are not going to be happy with Mr. David.

5. Arnold Kling doesn't like the ideas of Olivier Blanchard. Paul Krugman doesn't like the ideas of Arnold Kling. I don't like walnut bread.

6. Mark Thoma provides your one-stop shop for coverage of Jean Tirole's Nobel prize. You can Tirole around to your heart's content. GET IT?? Heh. Heh.

7. A deep and thoughtful Matt Yglesias meditation on the philosophy of forecasting. I plan to say something along these lines when I take down the 2010 Inflation Derpers for claiming now that they were only "warning about risks".

8. Alex "Ragnarok" Tabarrok catches a great article about the boondoggle of U.S. pension funds. Alex's new nickname comes from the fact that he is actually an incarnation of Surtur, the fire-demon who will eventually burn this world so that a better one may be created in its place.

9. Jim Hamilton breaks down the factors behind higher oil prices. Sadly, reptoids - which we all know are the real cause - are not listed. Get out your orgone pendants, Hamilton's one of Them!

10. Economist battles streakers in the classroom. This is part of a fetish known as CENA, or "Clothed Economist Nude Activist", that has been gaining in popularity on Reddit.

Three ways of understanding the world

P-E Gobry has a narrow view of what science is:

[L]et me explain what science actually is. Science is the process through which we derive reliable predictive rules through controlled experimentation. That's the science that gives us airplanes and flu vaccines and the Internet... 

Countless academic disciplines have been wrecked by professors' urges to look "more scientific" by, like a cargo cult, adopting the externals of Baconian science (math, impenetrable jargon, peer-reviewed journals) without the substance and hoping it will produce better knowledge.

Predictably, one thing this leads to is the conclusion that economics isn't a science:

Since most people think math and lab coats equal science, people call economics a science, even though almost nothing in economics is actually derived from controlled experiments. Then people get angry at economists when they don't predict impending financial crises, as if having tenure at a university endowed you with magical powers.

If you want a rebuttal to the "econ isn't a science" thing, Adam Ozimek has one here.

But I want to make a different point. I think Gobry is right that there's something special about controlled experiments, whether or not you want to restrict the word "science" to mean only that. But there are other ways of systematically understanding the world. In fact, I think there are 3 big ones:

Method 1: History

One way of systematically understanding the world is just to watch it and write down what happens. "Today I saw this bird eat this fish." "This year the harvest was destroyed by frost." "The Mongols conquered the Sung Dynasty." And so on. All you really need for this is the ability to write things down.

This may sound like a weak, inadequate way of understanding the world, but actually it's incredibly important and powerful, since it allows you to establish precedents. What happened once can happen again. Maybe you don't know why, or how likely it is, but you know a bad harvest or a Mongol invasion isn't out of the realm of possibility, and that is valuable knowledge.

Method 2: Empirics

A second way of systematically understanding the world is repeated observation. This is where you try to make a large number of observations that are in some way similar or the same, and then use statistics to identify relationships between them. This is most (though not all) of how economists understand the world.

The first big limitation of empirics is omitted variable bias. You can never be sure you haven't left out something important. The second is the fact that you're always measuring correlation, but without a natural experiment, you can't isolate causation.

Still, correlation is an incredibly powerful and important thing to know.

Method 3: Experiments

Experiments are just like empirics, except you try to control the observational environment in order to eliminate omitted variables and isolate causality. You don't always succeed, of course. And even when you do succeed, you may lose external validity - in other words, your experiment might find a causal mechanism that always works in the lab, but is just not that important in the real world. This is a big big problem for psychology, including prospect theory. 

Experiments give you information about mechanisms. When these mechanisms have external validity - for example, when the same process that moved balls down ramps on Galileo's desk happened to be the one that moves the planets in their orbits - then experimental science (what Gobry just calls "science") is incredibly powerful, more powerful than either of the other techniques. But it doesn't always work.

You may be thinking: Where does theory fit in with all this? My answer is that theory is part of all three of these. Theory is needed to understand causal mechanisms found in experiments, to explain correlations found with empirics, or to isolate the important features of a historical event. Sometimes the theory comes before the observations, sometimes afterward.

You may also be thinking: Where do natural experiments fit in with all of this? Well, they're kind of Method 2.5. The boundaries between these methods aren't always perfectly clear, in any case.

So what we've got here is a sort of hierarchy of ways of understanding the world. There's a tradeoff between general applicability and the amount of knowledge you get. Experiments rarely work, but when they do you get a lot of understanding. History works any time, but you rarely understand why things happen. Empirics is (are?) in the middle.

But what I see is a lot of people dissing empirics as somehow inferior to experiments. That's what's really behind the "econ isn't a science" trope. Why does this happen? Don't people get that empirics, though less powerful than experiments, can be applied in a much wider range of situations? 

My guess is that it's all because empirics came out of order. History is cheap, and experiments are also (sometimes) very cheap - think of Mendel growing peas in his garden. But empirics usually requires Big Data, which is expensive. And even the simplest empirics requires statistics. So while we got written history over 8000 years ago, and experiments almost 1000 years ago, we didn't get modern statistical empirical methods until maybe 100 or 200 years ago. And only recently, with the rise in information technology, have empirics really exploded.

To a lot of people, the empirics revolution must seem like a step backward. We look back to the huge successes of chemistry and physics and medicine in the last few centuries, and the rock-solid theories they generated, and we compare it to the regressions economists are running nowadays, and we say "Ugh, this isn't science!" We look at the progression from history to experiment, and we think that new methods (if they exist) should go the same way - i.e., they should lead us to deeper understanding. But empirics, instead, goes in the direction of wider applicability with less-deep understanding, and that rankles some people.

I don't think they should be rankled. Empirics is an innovation that allows us to know some things about big phenomena that previously we could only understand through written history. It's not a substitute for experiments, it's a complement. It's a valuable addition to humanity's toolkit, whether you want to call it "science" or not.

Casey Mulligan's thoughts on the Great Recession

At the St. Louis Fed's Fall Conference, it was my great fortune to see a presentation this week by Casey Mulligan, UChicago economist, NYT columnist, and book author Casey Mulligan. Casey's presentation was of a paper entitled "The New Full-time Employment Taxes," which is all about the implicit taxes on full-time work relative to part-time work that have been imposed or (presumably) will be imposed by Obamacare.

During that talk, Casey mentioned his book, "The Redistribution Recession," and made some other remarks that I interpreted as meaning that Casey thinks that efforts at redistributive policy were the primary cause of the Great Recession. However, it appears I was not quite right, as Casey was quick to point out in an email. Here is an excerpt that he allowed me to post:

I see a couple of possibilities:

(1) Redistribution did not cause the recession (by which I mean reductions over time in national average labor hours per capita), but it “thwarted the recovery.”  This has been the WSJ’s interpretation on a couple of occasions.  It means that, but for redistribution, the labor market would have hit bottom at essentially the same level (-10 percent for labor hours per capita) but would have returned to baseline significantly (i.e., years) more quickly.

(2) Redistribution made the recession, say, twice as deep as it would have been without (changes in) redistribution.  Under this possible interpretation, labor hours per capita would never have fallen 10 percent even “for five minutes.”  Instead, the recession would have bottomed out at, say, –5 percent.

(3) I do not have a pinpoint estimate of the relevant elasticities, which means that the –5 percent cannot be taken as a pinpoint-accurate estimate.  A reasonable person could believe that the behavioral elasticities are larger than I take them to be, in which case they could reasonably believe that labor hours per capita would have hardly fallen at all but for the enhanced redistribution.  I could not be sure that large-elasticity opinion is wrong, but I would tell that person that he is in danger of exaggerating the effects of redistribution.  The same applies to a reasonable person who thinks that the redistribution was depressing the labor market somewhat less. 

I confess that I had interpreted Casey's position as ascribing more explanatory power to redistribution than he does. I may have been influenced by recollection of Casey's New York Times articles, which attributed a substantial amount of the recession to redistribution-incentivized drops in labor supply as early as December, 2008.

In any case, I apologize for over-interpreting Casey's statements, and I hope this post will make clear the nuance of his view of the Great Recession.

On "Asian Values"

The protests in Hong Kong make me want to write about something that's bothered me for longer than I can remember.

There’s a strain of thinking called “Asian Values,” which basically says that human rights and democracy are things that the West either A) needs or B) is capable of handling, but which does not suit East Asian countries. This idea was heavily promotedby Lee Kuan Yew, who forged Singapore into a durable oligarchy. More recently, Xi and other Chinese leaders have declaredthat human rights and democracy are foreign ideas that must be rejected. Perhaps the starkest expression of the idea came from film star Jackie Chan in 2009:

"I'm not sure if it is good to have freedom or not," [Chan] said. "I'm really confused now. If you are too free, you are like the way Hong Kong is now. It's very chaotic. Taiwan is also chaotic." 

He added: "I'm gradually beginning to feel that we Chinese need to be controlled. If we are not being controlled, we'll just do what we want."

Of course, this is all B.S. Autocrats are always telling us why their autocracy is necessary. Faced with the success of democratic countries in the 20^thCentury, their only option is to claim that their countries are somehow different – that what worked for others won’t work for them. A few in the West may be tricked into believing this hogwash, motivated by outdated racial stereotypes that paint East Asians as collectivist, Russians as responding only to authority, Arabs as religious fanatics, etc. I’ve seen a number of pundits claim that Hong Kong’s protests aren’t really about democracy, but about anti-mainland elitist snobbery.

This idea is absurd, offensive, and obviously wrong. Studies show that Asian values place just as much weight on freedom and rights and democracy as Western values. The experience of Korea, and Taiwan shows that “Confucianist” East Asian countries want democracy, and that when they get it, they continue to thrive. All the “chaos” that Jackie Chan blabbers about didn’t stop Samsung and Foxconn from conquering global markets.

Personally, I’ve lived in Japan, and I work at a university with a huge Chinese presence. All my graduate students are from China. And I have seen no evidence that East Asians desire any different kind of relationship with their governments than the one Americans enjoy. Distrust of autocrats, desire for free speech and other rights, and a desire to kick out bad leaders appear to be universal.

But don’t take it from me. For a lengthier, more thorough rebuttal of the myth of authoritarian Asian values, read the 1994 essayin Foreign Affairs by former South Korean president Kim Dae Jung.

After the misadventure in Iraq, Americans are understandably souredon the idea of promoting democracy abroad through force. But that makes the idea of “Asian values” dangerously tempting. We want to believe that Asians don’t want or need the rights and freedoms we enjoy, because this gives us a convenient reason not to invade their countries.

We should resist this motivated reasoning. Invading countries is indeed a terrible idea almost all of the time, but that doesn’t mean we should stop ourselves from offering moral support to people like the Hong Kong protestors, who simply want to enjoy the same respect from their societies that we enjoy from ours.

The fact is, autocratic rule is causing real problems for people in East Asia, especially in China, but also in Vietnam, Cambodia and Laos – and of course, North Korea. Meanwhile, in South Korea, Japan, Taiwan, and Indonesia, East Asians are proving the “Asian values” idea to be a self-serving canard.     

Thursday Roundup, 10/2/2014

Thursday Roundup is a bit more sedate today, since I'm temporarily laying off cocaine suppositories and peyote milk tea.


Me in Bloomberg View

1. It's a good bet that Japan will have to monetize its debt. That will be an interesting an unprecedented macroeconomic experiment.

2. John Cochrane shouldn't be so quick to dismiss concerns over income inequality.

3. It's possible that high Wall St. pay is due in part to compensating differentials.


From Around the Econ Blogosphere

1. Brad DeLong is absolutely on fire this week. In one epic post he explains why Bill Gross got 2011-2013 so very wrong. In another, he calls out and chastises a remarkable number of inflation-derping economists who have refused to admit they were wrong in 2011. Ahh, 2011, the year that the 1970s died.

2. Paul Krugman says that the reason he seems mean is that he only gets involved in debates that justify being mean.

3. Economists rediscover the endowment effect.

4. Matt Yglesias politely smacks down Scott Winship, who has made a career of downplaying trends he knows perfectly well are real.

5. Joe Stiglitz says that macroeconomics uses crappy microfoundations. Technically an NBER working paper instead of a blog post, but whatev.

6. Tony Yates has more gripes with John Cochrane's talk on inequality.

7. Cardiff Garcia reports on deflationary pressures around the world.

8. Scott Sumner vs. Matt Bruenig is a blog battle for the ages.

9. In case you wanted to read another debate about whether economics is a science, here is a debate between Adam Ozimek and a troll named Pascal-Emanuel Gobry.

10. Robert Waldmann claims that 1960s macro equations perform well out of sample to this very day. I'd be interested to see some quantitative evidence of that bold claim.

11. Stan Veuger's reflexive, hand-waving dismissal of Michael Strain's excellent column on infrastructure shows that some conservative derponomists just refuse to believe that public goods exist.

12. Josh Brown has written a magisterial epitaph for Bill Gross' tenure at PIMCO.