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August 1, 2015

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Latest Posts from Economist's View

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Posted: 01 Aug 2015 12:06 AM PDT

'There May be a Complex Market Living in Your Gut '

Posted: 31 Jul 2015 04:16 PM PDT

I found this amusing:

There may be a complex market living in your gut: Conventional theories used by economists for the past 150 years to explain how societies buy, sell, and trade goods and services may be able to unlock mysteries about the behavior of microbial life on earth, according to a study by researchers from Claremont Graduate University, Boston University, and Columbia University.
The findings, published July 29 in the open access journal PLOS ONE, provide new insight into the behavior of the planet's oldest and tiniest life forms, and also create a new framework for examining larger questions about biological evolution and productivity.
Joshua Tasoff, an economics professor at Claremont Graduate University, conducted the study with Michael Mee of the Department of Biomedical Engineering at Boston University and Harris Wang of the Department of Systems Biology at Columbia University. ...
Although microbes are ubiquitous, they interact with each other in complicated ways that are not well understood. A large fraction of microbial life exists in complex communities where the exchange of molecules and proteins is vital for their survival. They trade these essential resources to promote their own growth in ways that are similar to countries that exchange goods in modern economic markets.
Inspired by these similarities, Tasoff, Mee, and Wang applied the general equilibrium theory of economics, which explains the exchange of resources in complex economies, to understand the trade of resources in microbial communities. ...
The results confirmed the team's predictions. As trade increased, the bacterial communities grew faster. And while all of the microbes benefited from trade, the more a bacteria strain exported, the slower it grew relative to the importing bacteria strain.
"That means that species face a tradeoff between growing their communities faster versus increasing their own population relative to that of a trading partner," Tasoff said.
The findings open the door for the application of other economic concepts that could improve our understanding of microbial and other biological communities, Tasoff said.

Paul Romer: Freshwater Feedback on Mathiness

Posted: 31 Jul 2015 03:33 PM PDT

More from Paul Romer:

Freshwater Feedback Part 1: "Everybody does it": You can boil my claim about mathiness down to two assertions:

1. Economist N did X.
2. X is wrong because it undermines the scientific method.

#1 is a positive assertion, a statement about "what is …"#2 is a normative assertion, a statement about "what ought …" As you would expect from an economist, the normative assertion in #2 is based on what I thought would be a shared premise: that the scientific method is a better way to determine what is true about economic activity than any alternative method, and that knowing what is true is valuable.

In conversations with economists who are sympathetic to the freshwater economists I singled out for criticism in my AEA paper on mathiness, it has become clear that freshwater economists do not share this premise. What I did not anticipate was their assertion that economists do not follow the scientific method, so it is not realistic or relevant to make normative statements of the form "we ought to behave like scientists."

In a series of three posts that summarize what I have learned since publishing that paper, I will try to stick to positive assertions, that is assertions about the facts, concerning this difference between the premises that freshwater economists take for granted and the premises that I and other economists take for granted.

In my conversations, the freshwater sympathizers generally have not disagreed with my characterization of the facts in assertion #1–that specific freshwater economists did X. In their response, two themes recur:

a) Yes, but everybody does X; that is how the adversarial method works.
b) By selectively expressing disapproval of this behavior by the freshwater economists that you name, you, Paul, are doing something wrong because you are helping "those guys."

In the rest of this post, I'll address response a). In a subsequent post, I'll address response b). Then in a third post, I'll observe that in my AEA paper, I also criticized a paper by Piketty and Zucman, who are not freshwater economists. The response I heard back from them was very different from the response from the freshwater economists. In short, Piketty and Zucman disagreed with my statement that they did X, but they did not dispute my assertion that X would be wrong because it would be a violation of the scientific method.

Together, the evidence I summarize in these three posts suggests that freshwater economists differ sharply from other economists. This evidence strengthens my belief that the fundamental divide here is between the norms of political discourse and the norms of scientific discourse. Lawyers and politicians both engage in a version of the adversarial method, but they differ in another crucial way. In the suggestive terminology introduced by Jon Haidt in his book The Righteous Mind, lawyers are selfish, but politicians are groupish. What is distinctive about the freshwater economists is that their groupishness depends on a narrow definition of group that sharply separates them from all other economists. One unfortunate result of this narrow groupishness may be that the freshwater economists do not know the facts about how most economists actually behave. ...[continue]...

Pictures of Austerity

Posted: 31 Jul 2015 11:33 AM PDT

Brendan Mochoruk and Louise Sheiner of the Brookings Institution say that Fiscal Headwinds are Abating:

Tight fiscal policy by local, state, and federal governments held down economic growth for more than four years, but that restraint finally appears to be over...

This is a pretty good summary of the charts:

Fiscal policy is no longer a source of contraction for the economy, but neither is it a source of strength.

But in my view the statement "neither is it a source of strength" understates how poorly fiscal policy has been managed. The strong headwinds never should have been there to begin with, and we have yet to feel the wind at our backs:





'U.S. Paychecks Grow at Record-Slow Pace'

Posted: 31 Jul 2015 10:23 AM PDT

Martin Feldstein says that when it comes to income inequality, you're all a bunch of whiners:

...we should not lose sight of how well middle-income families have actually done over the past few decades. Unfortunately, the political debate is distorted by misleading statistics that grossly understate these gains..., the US middle class has been doing much better than the statistical pessimists assert. ...

So it's yet another another round of "inequality has not grown as much as Democrats claim." Thought we had gotten beyond that. Today's news:

U.S. wages and benefits grew in the spring at the slowest pace in 33 years, stark evidence that stronger hiring isn't lifting paychecks much for most Americans. The slowdown also likely reflects a sharp drop-off in bonus and incentive pay for some workers.
The employment cost index rose just 0.2 percent in the April-June quarter after a 0.7 increase in the first quarter, the Labor Department said Friday. The index tracks wages, salaries and benefits. Wages and salaries alone also rose 0.2 percent.
Both measures recorded the smallest quarterly gains since the second quarter of 1982.
Salaries and benefits for private sector workers were unchanged, the weakest showing since the government began tracking the data in 1980. ...
The employment cost index figures now match the sluggish pace of growth reported in the average hourly pay data that's part of the monthly jobs report. ...

Video: NBER Feldstein Lecture by Alan Krueger on Labor Force Participation

Posted: 31 Jul 2015 09:45 AM PDT

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