Monthly Archives: October 2010

上来透个气

这段时间一直忙着赶两篇文章。今天终于胜利完工,上来喘口气。co-author由于三年到期要renew他的合同,所以必须这个月底把文章赶出来,投到杂志上去。这段时间感觉就像自己要renew contract一样,每天忙得昏天黑地,吃午饭的时间都没有。不过今天看着两篇新完成的文章,感觉还是值得的,看来有时候还是需要别人对自己push一下,工作效率才会提高,呵呵。

前段时间看到有人在BBS上问,一个B杂志请自己审稿,不知道应不应该答应。问问题的人应该还是个学生,显得对自己的能力不很自信。有人回答说,“不要。”而且还强调说,“谁愿意在B杂志上浪费时间呢?”当时感觉这种回复很不负责任,但没时间反驳。今天有时间聊聊,希望对大家能有帮助。

首先,对B Journal根本没有一个统一的定义,有人把TOP 5 之外的杂志都叫B。在还没有清楚到底杂志B到什么程度的情况下,妄下评论是危险的。其次,除了少数幸运儿外,对多数像我们这种小虾米级别的人物,都要在或多或少地有些B的杂志上长期灌水的。拒绝referee邀请是不礼貌的行为,尤其是对刚出道,或者还没有出道的PHD学生而言。如果没有很强的原因,一般不要这样。

更重要的是,editor为什么能找到自己一个名不见经传的学生来当REFEREE呢?很可能他通过某个渠道,比如你的导师,认识的你。比如他请你导师当REFEREE,你导师说,最近太忙了,没时间。有个学生不错,让他来吧。别人给你导师一个面子,然后你猥琐地把别人给据了。这不是没事给自己找过节么。尤其是如果你在回信时再措辞不得体,说自己太嫩了,没办法胜任。你导师的credibility损失不少啊。

所以在收到邀请后,首先要考虑一下别人是怎么找上自己的。尽量答应。如果题目自己不是很了解,就把它当成一个学习的机会。即使自己写的报告不是很精彩,editor一般也理解。不要小看B journal的editor,别人能当上editor,还是有一定活动能力的。能给对方一个好印象,就尽量给对方一个好印象。关于具体report怎么写,可以参考我以前的文章:链接

John Cochrane on global “imbalance” (from WSJ)

Abstract: 1. There is no economic reason that all countries have to “balance” their current accounts all the time. 2. In particular, no one, including economists, can answer defintely what level of CA deficits/surplus is appropriate. 3. As a result, it does not make any sense to set a target for CA deficits/surplus and force countreis to “rebalance” their CA whenever exceeding the target. 4. It is wrong to bashing China to appreciate its currency because no one knows if a currency is undervalued or overvalued. 5. What China did wrong is to invest too heavily into US-dollar denominated assets, not to run a trade surplus.   

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Economists are full of bad ideas. Terrible ideas seem to emerge when the gurus get together to talk about coordinating their bad ideas. Last week’s public letter from Treasury Secretary Tim Geithner to the G-20 finance ministers is a great example.

Mr. Geithner starts with a dramatic proposal: “G-20 countries should commit to undertake policies consistent with reducing external imbalances below a specified share of GDP [later reported to be 4%] over the next few years.”

Since when is every trade surplus or deficit an “external imbalance” in need of correction? It makes sense for a country that has good investment prospects to import a lot of goods, run trade deficits, and borrow money. Years later, the country puts the resulting products on boats to pay the lenders back. The U.S. borrowed abroad to finance our railroads in the 19th century and ran surpluses when Europe was rebuilding after World War II. Were these “imbalances”?

Or consider a country (say, China) with a lot of middle-aged workers who need to save for retirement. It makes perfect sense for them to put stuff on boats and send it to a second country (say, the United States) whose people want to consume the goods. The people in the first country invest their earnings, say, by buying the bonds issued by the second country. And as they retire, they cash in the bonds and buy goods flowing the other way.

Do these and similar stories exactly account for current trade patterns? I don’t know. But nobody else does, either. In particular, the army of economists in the basements of the International Monetary Fund (IMF) has no clue exactly how much each country should be saving, or where the best untapped global investment opportunities are around the world—including whether trade patterns are “normal” or “imbalanced.”

So what policies would Mr. Geithner have countries undertake to bring economies around the world into his idea of better balance? He says that G-20 “countries running persistent deficits”—that’s the U.S.—”should boost national savings by adopting credible medium-term fiscal targets consistent with sustainable debt levels.”

So Mr. Geithner knows that trade surpluses in the end come down to saving and investment. And he knows that in the U.S. people are trying to save right now. Our government is undoing their efforts with massive fiscal deficits. Mr. Geithner recognizes that most of the trade “imbalance” comes down to a big fat fiscal imbalance centered in Washington, D.C. But there’s the catch. “Medium term” means “not now” and “not long-run entitlements.” “Target” means “promises.” Even if a target would make a difference, who believes in targets from our government? We don’t know what the rate of taxation will be in three months!

Mr. Geithner goes on to say that “countries running persistent deficits” should “strengthen export performance,” but he doesn’t say how, or what other “performance” we should weaken to get it. Is this a code word for export subsidies, devaluation and industrial policy, and a plea that the rest of the world should let us get away with it?

His advice to the other G-20 countries, those “with persistent surpluses,” is that they “should undertake structural, fiscal, and exchange rate policies to boost domestic sources of growth and support global demand.” In particular, “G-20 emerging market countries with significantly undervalued currencies and adequate precautionary reserves”—have you figured out this means China?—”need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals.”

He argues for a brave new system, coordinated by the IMF, of international discretionary currency interventions: “G-20 advanced countries will work to ensure against excessive volatility and disorderly movements in exchange rates.”

How does anyone know if a currency is “undervalued” or not? The economists hidden away in the sub-basements of the IMF may try to decide what currencies “should be” worth across vastly different countries, but this is a hopeless task. Is $2 a day the “right” wage in China, or should that be $2.20 per day because the currency is “undervalued?” Good luck.

Why push China to manipulate its currency upward, but ignore its capital and exchange controls? We should push China to abandon those controls instead. A freely pegged currency is a great idea, especially for a fast-growing, trade-based economy with a weak central bank like China.

What’s the right policy toward China? They put a few trillion dollars worth of stuff on boats and sent it to us in exchange for U.S. government bonds. Those bonds lost a lot of value when the dollar fell relative to the euro and other currencies. Then they put more stuff on boats and took in ever more dubious debt in exchange. We’re in the process of devaluing again. The Chinese government’s accumulation of U.S. debt represents a tragic investment decision, not a currency-manipulation effort. The right policy is flowers and chocolates, or at least a polite thank-you note.

Yet Mr. Geithner thinks that the Chinese somehow hurt us. There is at work here a strange marriage of Keynesianism and mercantilism—the view that U.S. consumers supported the world economy by spending beyond our means, so that other people could have the pleasure of sending things in exchange for pieces of paper.

This is all as fuzzy as it seems. Markets and exchange rates are not always right. But it is a pipe dream that busybodies at the IMF can find “imbalances,” properly diagnose “overvalued” exchange rates, then “coordinate” structural, fiscal and exchange rate policies to “facilitate an orderly rebalancing of global demand,” especially using “medium-term targets” rather than concrete actions. The German economics minister, Rainer Brüderle, called this “planned economy thinking.” He was being generous. Planners have a clearer idea of what they are doing.

updating needle arts pictures

人民银行加息

人行昨天上调一年期存贷款利率25个基本点。这个行为出乎市场预料。在央行和政府网页上,并没有明确指出加息是处于对通货膨胀的考虑。只是说要“合理把握信贷投放节奏”。这种不透明和突然改变政策的做法是货币政策的大忌。另外一个有趣现象是,这次加息幅度是25个基本点。而以前往往是9的倍数,比如18,27个基本点等。在这方面人民银行向国际靠拢了。不过希望以后在zhi定政策的透明度上也多和世界接轨。

An article from NYT to explain why economists disagree

I found the following statements are particularly insightful. It may be fool to claim scientific attitude in economic research because it is not science at all. Scientific attitude only applies to the mathematic tools that you use to “prove” your ideology.

Which gets to another great variable: personal values. In his textbook “Principles of Economics,” N. Gregory Mankiw, a Harvard professor, proposed this thought experiment: A town must maintain a well. Peter, who earns $100,000, is taxed $10,000, or 10 percent of his income, while Paula, who earns $20,000, hands over $4,000, or 20 percent of her income.

“Is this policy fair?” Mr. Mankiw asks in “Principles.” “Does it matter whether Paula’s low income is due to a medical disability or to her decision to pursue an acting career? Does it matter whether Peter’s high income is due to a large inheritance or to his willingness to work long hours at a dreary job?”

Economics, Mr. Mankiw concludes, won’t tell us, definitively, whether Peter or Paula is paying too much, because an answer inevitably leads to matters of values, which inevitably leads to different answers.

Below is the article:

October 16, 2010
The X Factor of Economics: People
By DAVID SEGAL
Economists — they certainly are a contentious bunch.

The latest evidence came last week, in the form of the minutes of the latest meeting of the Federal Open Market Committee, the brain trust that establishes monetary policy. The committee, we learned, is divided on a seemingly straightforward question: Should the Fed take action to goose the economy now, or wait, watch and perhaps goose later?

Similar debates have attended virtually every element of the government’s efforts to turn the country’s fortunes around — even the parts that have been unfolding for more than a year. You might assume, for instance, that there would be a broad consensus about whether the $787 billion stimulus, passed in early 2009, worked.

But generally speaking, economists who thought it was a good idea at the time think it worked, and economists who thought otherwise beg to differ. And both sides make their cases with plenty of hard numbers.

Let’s leave aside the merits of these arguments and ask a question so basic it will sound naïve: Why do economists argue at all? Given that Fed members and economists are looking at the same data, and given the reams of evidence accumulated over decades — not to mention a few centuries of great minds, great theories and thick books that preceded this crisis — why isn’t a right answer self-evident?

George Bernard Shaw once said, “If all economists were laid end to end they would not reach a conclusion.” How come? What prevents economics from yielding answers the way that physics, chemistry and biology do?

As it happens, plenty of dismal scientists have pondered this one. After the onset of the Great Recession, there was considerable hand-wringing about what the discipline had gotten wrong, memorably captured last year in an article by Paul Krugman in The New York Times Magazine. But the limits of economics is a subject that many in the field have been discussing for years, in print, in discussions with each other, and, in the case of Robert Solow, Nobel Prize winner and M.I.T. professor emeritus, with graduate students.

“I talk about what it is about economics and economic life that leads to differences of opinion,” Mr. Solow said. “One point I always make to my graduate students is, avoid sound bites. Never sound more certain than you are.”

To explain the case for humility in economics, Mr. Solow said, look no further than the stimulus bill: “It has run its course over the past year and a half, but it is not an isolated event. One thousand other things were happening that had an effect on employment and real G.D.P.,” a measure of a nation’s total output adjusted for changes in prices. “You want to trace the effect of one of a very large number of significant causal effects, and that’s a very hard thing to do.”

That the world doesn’t offer up clean economic experiments is a common refrain in the discipline, said Gary Becker, a Nobelist at the University of Chicago. There have been endless studies on every tax change in the modern history of the republic, Mr. Becker said, from Kennedy to George W. Bush, and arguments about the wisdom and aftereffects of each. It’s not just that there is so little clear signal amid so much noise. It’s that many economists have a unique idea of what signal to listen to and what priority it deserves.

Which gets to another great variable: personal values. In his textbook “Principles of Economics,” N. Gregory Mankiw, a Harvard professor, proposed this thought experiment: A town must maintain a well. Peter, who earns $100,000, is taxed $10,000, or 10 percent of his income, while Paula, who earns $20,000, hands over $4,000, or 20 percent of her income.

“Is this policy fair?” Mr. Mankiw asks in “Principles.” “Does it matter whether Paula’s low income is due to a medical disability or to her decision to pursue an acting career? Does it matter whether Peter’s high income is due to a large inheritance or to his willingness to work long hours at a dreary job?”

Economics, Mr. Mankiw concludes, won’t tell us, definitively, whether Peter or Paula is paying too much, because an answer inevitably leads to matters of values, which inevitably leads to different answers.

This is not to suggest that economics is a total free-for-all, lacking a broad consensus on any subject. Polls of economists have found near unanimity on topics like tariffs and import quotas (bad), centralized economies (very bad) and flexible, floating exchange rates (very good). Nor is it fair to say that economists have done little to help in the latest crisis. A depression seemed possible two years ago, and thanks to the ideas of economists, that didn’t happen.

But economics will forever have to contend with the biggest X factor of all: people. As Mr. Solow notes, you feed people poison, and they die. But feed them a subsidy and there is no telling what will happen. Some will use it wisely, others perversely and some a mix of both.

As a result, a certain amount of psychological guesswork is part of an economist’s job, which accounts for the rise in popularity of behavioral economics, an effort to account for the slippery, indefinite nexus of money and humans. “The entire question of how emotion will change people’s behavior is pretty much outside the standard model of economics,” said Dan Ariely, a professor at Duke University and author of “The Upside of Irrationality.”

“Pride is not in the model. Revenge is not in the model. Fear is not in the model. Even simple things like the disenchantment of people who are fired from their jobs — the model doesn’t account for how devastating that experience can be,” and what that sense of devastation will mean for the economy, he said.

Professor Ariely regards the stimulus package as a $700 billion experiment that had no chance for fine-tuning. He would have tried different types of stimulus in different states. Maybe California residents would get cash, while New York residents would get pre-paid debit cards. The most effective stimulus of all, he guesses, would have been the debit card, with President Obama’s face on it, along with the words: “Spend the government’s money.”

“We can make fun of economics, and I’ve made a professional habit of it,” said Professor Ariely. “But there’s a good reason that human irrationality isn’t part of the standard economic models, and this gets to the dilemma of economics. If you have a simple problem, you can offer a simple solution. But the economy is a hugely complex problem. So we either simplify the problem and offer a solution, or embrace the complexity and do nothing.”

Needle Arts

I bought a couple of needle arts when I was in China this summer. Finally, they are framed and ready for display. They look so gorgeous that I cannot wait sharing them here with my friends. The pictures were taken last night with my iphone, so the quality is not as good as it should be. I might update them later when I get some better pictures.

今年的炸药奖和当前的劳动力市场

今年的炸药奖发给了Peter Diamond, Dale Mortensen, and Christopher Pissarides。这些人的主要贡献在于通过search模型来研究劳动力市场。这个模型中一个很重要的概念是劳动力市场中存在着frictions, 从而雇主和劳工没有办法有效配对。这种情况在出现结构性调整时尤其突出。比如90年代出现IT泡沫的时候,很多公司没法找到合格的员工。同时市场上又有失业人员,但由于教育和经验等问题,他们又没法胜任空缺的职位。这种现象被称为劳动力市场的错配(mismatch).

很多人把最近美国劳动力市场的疲软归结为这种错配造成的:由于房地产和金融市场泡沫的破裂,人力和其他经济资源要从这些商场向其他市场转移。由于这种结构性调整,劳动力市场上的需求和供给没办法有效match。

但数据似乎并不支持这种说法。一个有效衡量错配的方法是对公司进行问卷调查。在每个月的NFIB survey中,公司被询问是否有困难招收到合格的工人。绝大部分公司回答不是。回答“是” 的公司比例处于一个历史上很低的水平。对这种现象的一种解释就是目前劳动力市场的疲软主要是因为需求疲软造成,而不是劳动力的错配。而需求疲软的主要原因是由于在资产大幅度贬值后,家庭消费更加保守。这种保守对美国经济而言,未尝不是一件好事。