Of Cockroaches and Commissioners/March 6, 2013, 3:54 am

Of Cockroaches and Commissioners ゴキブリと委員の中で


Kevin O’Rourke points me to the FT’s Brussels blog, which passes on the news that various officials at the European Commission are issuing outraged tweets against yours truly. You see, I’ve been mean to Olli Rehn.
ケヴィン・オルークが指摘してくれたのだが、FT’s Brusselsブログで欧州委員会(EC)の様々な政府当局者がこの僕に対して怒りをぶちまけるツイートをしているというニュースが載っている。そう、僕のオッリ・レーンについての記事に関して。

And the EC response perfectly illustrates why I do what I do.

What you would never grasp from those outraged tweets is that all my criticisms have been substantive. I never asserted that Mr. Rehn’s mother was a hamster and his father smelt of elderberries; I pointed out that he has been promising good results from austerity for years, without changing his rhetoric a bit despite ever-rising unemployment, and that his response to studies suggesting larger adverse effects from austerity than he and his colleagues had allowed for was to complain that such studies undermine confidence.

It’s telling that what the Brussels blog calls a “particularly nasty attack” was in fact a summary of Paul DeGrauwe’s work indicating that European austerity has been deeply wrong-headed, in the course of which I quoted Mr. Rehn asserting, once again, that old-time austerian faith.
FT Brusselsブログが「特に辛らつな攻撃」と呼ぶものは、ヨーロッパの緊縮財政が酷く頭の悪いものであることを示したポール・デクラウエのサマリーの中で、レーン氏がまたしても昔ながらの緊縮派の信念を吐露しているのを僕が引用しているところであるのは興味深い。

Now, it’s true that I use picturesque language — but I do that for a reason. “Words ought to be a little wild”, said John Maynard Keynes, “for they are the assault of thoughts on the unthinking.” Exactly.

Kevin O’Rourke refers to the “cocooned elites in Brussels”, which gets to the heart of the matter. The dignity of office can be a terrible thing for intellectual clarity: you can spend years standing behind a lectern or sitting around a conference table drinking bottled water, delivering the same sententious remarks again and again, and never have anyone point out how utterly wrong you have been at every stage of the game. Those of us on the outside need to do whatever we can to break through that cocoon — and ridicule is surely one useful technique.

There’s an especially telling tweet in there about how “unimpressive” I was when visiting the Commission in 2009. No doubt; I’m not an imposing guy. (I’ve had the experience of being overlooked by the people who were supposed to meet me at the airport, and eventually being told, “We expected you to be taller”). And for the life of me I can’t remember a thing about the Commission visit. Still, you can see what these people consider important: never mind whether you have actually proved right or wrong about the impacts of economic policy, what matters is whether you come across as impressive.

And let’s be clear: this stuff matters. The European economy is in disastrous shape; so, increasingly, is the European political project. You might think that eurocrats would worry mainly about that reality; instead, they’re focused on defending their dignity from sharp-tongued economists.

Why Don’t We Have Deflation?/March 5, 2013, 8:59 am

Why Don’t We Have Deflation? なぜアメリカはデフレになっていないのか?

Whenever you see a piece suggesting that the US economy has entered a “new normal” of slow growth, you’re likely to see someone making the argument that if the economy actually had lots of excess capacity, we should be seeing deflation. And the question of why we don’t have deflation is a good one. It is, however, a question that people like me have answered repeatedly; unfortunately, it seems that this analysis hasn’t been making it to, say, a number of current and former Fed officials.

So here’s a restatement of what we think we know. Long-time readers will find this familiar, but as a number of commenters have wisely pointed out, there are a lot of people reading this blog now who weren’t reading it a year or two ago. (We’re adding Twitter followers at around 20,000 a month, which is some indication of the number of newbies).

OK, first things first: back when the crisis started, I did expect to see deflation, Japanese style, if it went on for an extended period. I was wrong — and I did what you’re supposed to do (but far too people actually do) when they’re wrong, which is to look for an explanation of your error that is consistent with the available evidence.

One immediate thing to look at was to see whether what was happening to inflation in the United States was consistent with historical experience of deep slumps that we know involved the economy operating well below capacity for an extended period. And it turned out that the Japanese deflation (which has never been very fast in any case) is pretty much unique. The IMF looked at Protracted Large Output Gaps — PLOGs — and found that in general inflation gets squeezed toward, but not below, zero:
まず、アメリカ経済でそのとき起こっていたことが長期間にわたり潜在成長力以下で動いていたと分かっている深刻な不況の歴史的経緯と矛盾しないのか調べてみた。そして日本型のデフレは極めてユニークなものであることが分かった。IMFはProtracted Large Output Gaps(PROGOs)を精査して、一般的にインフレは圧縮されることはあってもゼロ以下にはならない:

And our own history actually points in the same direction: the 1930s were marked by sharp deflation in the early years, but considerable inflation as the economy partially recovered, even though unemployment remained very high.


So inflation seems “sticky”. But why? One immediate thought was that we might be looking at the effects of downward nominal wage rigidity: employers are very reluctant to engage in actual wage cuts. Way back in 1996 Akerlof, Dickens and Perry suggested that this would make inflation stubborn at low rates, breaking the usual link between high unemployment and disinflation.
つまりインフレは「粘着的」なようだ。でも、どうして? まず思いつくのは、名目賃金の下方硬直性の影響を考えることだ。実際、雇用主は名目賃金を下げるのにすごく抵抗を持つ。1996年に、アカロフ、ディケンズ、ペリー論文で、このことが高失業率とディスインフレの通常のつながりを崩壊させ、低率でのインフレを頑固なものにすることが示された。

Still, how can you tell if sticky inflation reflects sticky wages, as opposed to being the result of an economy that really doesn’t have very much slack? The answer is that sticky wages should leave a “signature” in the wage data: a large number of workers whose wages neither rise nor fall, and a rising number of such workers as the economy slumps. Sure enough, researchers at the San Franciso Fed found exactly that:
だが、粘着的なインフレは粘着的な賃金を反映したものであって、経済に重大な供給過剰など存在しない結果ではないとどうすれば分かるのか? その答えは、それが粘着的な賃金の場合には賃金データにその「証(あかし)」を残すということだ。賃金が上がりも下がりもしないたくさんの労働者がいて、経済が下降するとそのような労働者が増加することになる。案の定、サン・フランシスコ連邦準備銀行の研究でまさにその通りのことが証明された:


Actually, once you start looking for it, downward nominal rigidity is everywhere. For example, Catherine Rampell had a great piece pointing out that starting salaries at elite law firms have been frozen at precisely $160,000 for years:


The bottom line is that we have a lot of evidence suggesting that the failure of deflation to materialize reflects wage rigidity, not absence of economic slack. And it is therefore frustrating to see supposedly well-informed people talk about this issue as if none of that work had been done.

Data, Stimulus, and Human Nature/February 19, 2013, 9:34 am

Data, Stimulus, and Human Nature データ、景気対策、そして人の性

David Brooks writes about the limitations of Big Data, and makes some good points. But he goes astray, I think, when he touches on a subject near and dear to my own data-driven heart:

For example, we’ve had huge debates over the best economic stimulus, with mountains of data, and as far as I know not a single major player in this debate has been persuaded by data to switch sides.

Actually, he’s not quite right there, as I’ll explain in a minute. But it’s certainly true that neither stimulus advocates nor hard-line stimulus opponents have changed their positions. The question is, does this say something about the limits of data — or is it just a commentary on human nature, especially in a highly politicized environment?

For the truth is that there were some clear and very different predictions from each side of the debate — not about the success of the Obama stimulus, which even advocates like yours truly warned would fall far short, but about interest rates, inflation, and the effects of austerity policies. On these predictions, the data have spoken clearly; the problem is that people don’t want to hear.

And really, would you have expected otherwise? It would be lovely to live in a world in which the failure of interest rates to soar as predicted would lead Brian Riedl of Heritage and Niall Ferguson to concede that their anti-stimulus critiques of 2009 were based on a completely wrong model; in which the economic downturns that have followed austerity policies almost everywhere they have been applied would lead Alberto Alesina to concede that his work on expansionary austerity was probably flawed, and lead George Osborne to proclaim publicly that he led Britain down the wrong path. But such things very rarely happen, and the fact that they don’t happen has nothing to do with the limitations of data.
そんなことは考えもつかなかった? 利子率が急騰するという予言が外れたのなら、ヘリテージのブライアン・リードルやニーアル・ファーガソンが、彼らの2009年の反景気対策論が完全に間違ったモデルに立脚したものであることを認める様な世界に住みたいもんだ。その世界では、緊縮財政政策がとられたほぼ全ての国で景気が後退したのなら、アルベルト・アレシナは彼の拡張的緊縮に着いての論文にはおそらく瑕疵があるものと認めるだろうし、ジョージ・オズボーンは彼の政策がイギリスを間違った経路に追いやったことを公式に認めるだろう。でも、そんなことはめったに起こらない。そして、それが起こらないことはデータの限界とは関係ない。

Indeed, such things rarely happen even in fields of endeavor that are largely insulated from politics, and in which the ethos is supposed to reward objectivity over ego. Science, Max Planck declared, progresses funeral by funeral. If quantum mechanics needs to rely on mortality to prevail, how much more so must this be true of Keynesian macroeconomics?

That said, if you look at players in the macro debate who would not face huge personal and/or political penalties for admitting that they were wrong, you actually do see data having a considerable impact. Most notably, the IMF has responded to the actual experience of austerity by conceding that it was probably underestimating fiscal multipliers by a factor of about 3.

So yes, it has been disappointing to see so many people sticking to their positions on fiscal policy despite overwhelming evidence that those positions are wrong. But the fault lies not in our data, but in ourselves.