- Trumping the Party and the Pollsters
- Worst Forecaster at the Fed
- 'The Aftermath of LIBOR and Penny-Shaving Attacks'
- Links for 08-12-15
- Macroeconomics: The Roads Not Yet Taken
Posted: 12 Aug 2015 12:33 AM PDT
Will Donald Trump Crack-up the Republican/Tea Party Alliance?: ... It appeared that Trump was the favored candidate of Fox News before the debate... Trump was clearly shocked by the sharpness of the questions at the debate...
With Trump and Fox now on opposite sides and the Republican establishment eager to quash his threat to run next year as a third party candidate, which would virtually guarantee a Democratic victory, conservatives began to choose sides. Erick Erickson, a paid Fox contributor who runs the politically powerful RedState website, publicly disinvited Trump to an Atlanta gathering at which most other Republican candidates appeared.
Of particular interest, I think, is that two of talk radio's most powerful voices, Rush Limbaugh and Mark Levin, quickly came to Trump's defense. I suspect this was as much a market-driven decision as an honest personal one – talk radio has long catered to the more downscale, less educated wing of conservatism, where most Trump supporters dwell. Whatever else one thinks of Limbaugh and Levin, they are enormously useful allies in the sort of fight Trump is waging.
It is too soon to know whether Trump is in this for the long haul, but I would not underestimate his ego or willingness to spend freely from his vast fortune to secure the Republican nomination. Early signs are that his support remains firm in post-debate polls and he is still leading the pack. If the Republican field stays divided, preventing consolidation around the strongest non-Trump candidate, one cannot dismiss his chances of success.
Of more importance to me is that if the forces for and against Trump play out as they have so far, with Fox and Tea Party leaders siding with the GOP establishment while talk radio and large numbers of the Tea Party grassroots are committed to Trump, we may see the crackup of the Republican coalition that controls Congress, many state legislatures and governorships. The Tea Party will go down in history as just another populist movement that lacked staying power and Donald Trump will be its William Jennings Bryan.Paul Krugman:
Tea and Trumpism: Memo to pollsters: while I'm having as much fun as everyone else watching the unsinkable Donald defy predictions of his assured collapse, what I really want to see at this point is a profile of his supporters. What characteristics predispose someone to like this guy, as opposed to accepting the establishment candidates? ...
OK, here's my guess: they look a lot like Tea Party supporters. And we do know a fair bit about that group.
First of all, Tea Party supporters are for the most part not working-class, at least in the senses that group is often defined. They're relatively affluent, and not especially lacking in college degrees.
So what is distinctive about them? Alan Abramowitz:
While conservatism is by far the strongest predictor of support for the Tea Party movement, racial hostility also has a significant impact on support.
So maybe Trump's base is angry, fairly affluent white racists — sort of like The Donald himself, only not as rich? And maybe they're not being hoodwinked? ...
Again, this is just guesswork until we have a real profile of typical Trump supporter. But for what it's worth, I think the Trump phenomenon is much more grounded in fundamentals than the commentariat yet grasps.
Posted: 12 Aug 2015 12:24 AM PDT
Worst Fed Forecaster: It is quite an accomplishment to both be (a) the worst economic forecaster among your peers, and yet (b) engage in no public reflection and discussion of how and why you got the past wrong, and how you are changing your model of the economy in order to get it less wrong when you forecast in the future.
Charles Plosser has managed that accomplishment.
Those close to him in the WSJ rankings of Fed forecasting success--Bullard, Lacker, Kocherlakota, Williams, and Bernanke--have all discussed, sometimes at great length, what they got wrong, why they think they got it wrong, and what they think they have learned. Not Charles Plosser--at least, nowhere that I have seen. I have not even found any recognition by Charles Plosser that every single year he was President of the Federal Reserve Bank of Philadelphia he did get it wrong, did misjudge the economy, and was recommending monetary policies that would be unduly and inappropriately restrictive. None.
Posted: 12 Aug 2015 12:15 AM PDT
The Aftermath of LIBOR and Penny-Shaving Attacks: Anyone remember the LIBOR scandal from back in spring 2008? A trader for UBS Group and Citigroup named Tom Hayes was just sentenced by a British court to 14 years imprisonment for his role as a ringleader of the scandal. Darrell Duffie and Jeremy C. Stein discuss both the scandal and--perhaps more interesting to those of us who bleed economics--the economic function of financial market benchmarks in "Reforming LIBOR and Other Financial Market Benchmarks," in the Spring 2015 issue of the Journal of Economic Perspectives. (All JEP articles back to the first issue in 1987 are freely available online courtesy of the American Economic Association. Full disclosure: I've worked as Managing Editor of the JEP since that first issue.)
Posted: 12 Aug 2015 12:06 AM PDT
Posted: 11 Aug 2015 08:35 AM PDT
My editor suggested that I might want to write about an article in New Scientist, After the crash, can biologists fix economics?, so I did:
Macroeconomics: The Roads Not Yet Taken: Anyone who is even vaguely familiar with economics knows that modern macroeconomic models did not fare well before and during the Great Recession. For example, when the recession hit many of us reached into the policy response toolkit provided by modern macro models and came up mostly empty.
The problem was that modern models were built to explain periods of mild economic fluctuations, a period known as the Great Moderation, and while the models provided very good policy advice in that setting they had little to offer in response to major economic downturns. That changed to some extent as the recession dragged on and modern models were quickly amended to incorporate important missing elements, but even then the policy advice was far from satisfactory and mostly echoed what we already knew from the "old-fashioned" Keynesian model. (The Keynesian model was built to answer the important policy questions that come with major economic downturns, so it is not surprising that amended modern models reached many of the same conclusions.)
How can we fix modern models? ...
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