1. I am quoted by Caroline Baum.
2. I will soon be sharing a stage with George Gilder. You can watch (see the link to Cato live).
And so people were asking, could the Chinese have built a steam engine? And the basic answer, is: No, unless they had discovered what the Europeans discovered in the 17th century, which is the existence of an atmosphere.
my example of a very small invention for which we could ask this question is anesthesia. So you go to somebody who is about to have surgery and you ask him, How much would you demand to be paid if I took out your appendix without anesthetizing you, without putting you to sleep? Nobody would agree. The sum would be infinite. What can anesthesia contribute to GDP when it was introduced in the 1850s and 1860s? Russ: Could not be very much. Guest: Nothing. It’s very small. But that is exactly the kind of thing we fail to account for in our calculations. So that’s why I gave that whole list of things; and we could make this list infinitely large. It is the small things that actually don’t amount to an awful large part of our income and product that actually have improved life a great deal and that we really wouldn’t want to do without any more.
You can, of course, eat the zucchini you grow, the manager might say, but once you start trading zucchinis with the store, you can’t expect to get the same price on sales to the store as you pay on purchases from the store. The margin the store makes between the wholesale and retail price is what pays for the building, heating and cooling, labor, and other costs that are mostly fixed with respect to the amount you buy.
The same economics applies in electricity, only more so.
But in promoting renewable energy, the government is saying that electricity companies have to make those sorts of trades. Pointer from Mark Thoma.
Here is an interview with Robert N. Charette.
I haven’t seen any indication of who’s doing the configuration management. Typically in a large system, you have a master configuration list and a change control board, so people can say, “This is what you’re going to change; this is what the effects are going to be.” And it’s a fairly rigorous process, especially if you have a system that’s very complex like you do here. What you don’t want is somebody making a change that nobody else knows about. Just getting hold of who’s doing what to what, and understanding what the implications are is itself going to be a huge undertaking. For every bit of software, you want to have some release control. I haven’t seen anything to suggest that type of management. But then again the management has been extremely opaque.
I disagree with his conjecture. I was thinking the other day that they must have really good configuration management in place, or else the thing would have blown up already with all the fixes that they are putting in. You would be seeing things like
When MailOnline visited the website shortly after Carney’s daily briefing, the Obamacare portal spewed a nonsensical mixture of computer code instead of a typical login screen.
Gone were words like ‘Username’ and ‘Password.’
In their place were jumbled programming strings like ‘???ffe.ee.myAccount.login.username???’ and ‘???ffe.ee.myAccount.login.password???’
Oops, well maybe Charette is right. But anyway, I was about to say:
A computer system is not like a house, where you make fixes to the house by hammering nails directly to the actual house. Instead, think of having three versions of the house. You hammer your nails into a development version. When you think it is fixed, you call it a test version. When it’s been tested, you replace the defective house with the test house. When the new house goes “live,” it is called the production version.
I can imagine that back in early October, when things were just awful with the production site, they cycled from development to production pretty quickly, because they needed to show improvement. But my guess is that they have stopped doing that, and that now they are taking more time to test stuff before they release it.
In fact, it could be that by the time the chief fixer, Jeffrey Zients, came on the scene, the development version had most of the known issues taken care of. However, rather than put that version into production, they set a release date of November 30th. Some time before then, they will freeze (or have already frozen) that version and have it moved over to Test. They will try to rigorously test the Test version, which will result in a list of problems found during testing. They fix simple problems right away, and they defer complex problems until a later release. Then, on November 30th, they move the test version into production.
I am oversimplifying things here. But my main point is that I bet that there is more technical competence on the project than some critics are inclined to give them credit for.
It is hard enough to find people capable of running financial conglomerates – the fading reputation of Jamie Dimon, JPMorgan Chase chief executive, confirms my suspicion that managing these businesses is beyond the capacity of anyone. The search for a cadre of people employed on public-sector salaries to second guess executive decisions is a dream that could not survive even the briefest acquaintance with those who actually perform day-to-day supervisory tasks in regulatory agencies. They tick boxes because that is what they can do, and regulatory structures that are likely to be successful are structures that can be implemented by box tickers.
Kay’s views align exactly with mine. For close to five years now, I have been saying that we should not be aiming for making the financial system that is harder to break. We should aim for a system that is easier to fix.
Thanks to Alberto Mingardi for the pointer.
But as one can see from the red circles in the graph above, the expectations-adjusted Phillips Curve again seems to be missing over the last 5 years, with the observed inflation rate higher than predicted. Coibion and Gorodnichenko (2013) explore a number of possible explanations for this, including structural instability and changes in the labor market. They suggest that the best explanation is a divergence of different measures of the “expected inflation” that serves as a shift factor for the Phillips Curve. Using either the last-year’s average adjustment used in the above figures, or looking at expectations of inflation implied by the yields on Treasury Inflation Protected Securities, or expectations from the Survey of Professional Forecasters, one always finds recent inflation to have been higher than predicted by the historical Phillips Curve. But Coibion and Gorodnichenko note that these measures of expected inflation have recently diverged from the answers given by those households who are sampled in the University of Michigan’s survey of consumers. Those respondents have been consistently saying that they expect a higher inflation rate than the value implied by TIPS or professional inflation forecasters.
Read the whole thing. The charts tell a lot of the story.
In the current draft of the introduction to my macro book (and I am–once again–starting it over), I write,
If we look at the relationship between inflation and unemployment within time periods, the story is mixed. During the Forgotten Moderation, as unemployment came down, inflation increased, showing strong negative correlation. During the Great Stagflation, there is no apparent correlation, positive or negative, between inflation and unemployment. The same is true of the Great Moderation. The Financial Crisis Aftermath has only five years of data, which makes it difficult to establish correlation.
As you probably know, many macroeconomists have employed an equation (often on a diagram) that traces out a negative relationship between inflation and unemployment, and that this Phillips Curve has been at the center of controversy. I will have plenty to say about it in later chapters.
For the moment, I am just pointing out that the Phillips Curve is an example of macroeconomists using an equation that is not necessarily data driven…
The Phillips Curve began as an interesting empirical regularity, with no theoretical foundation. Milton Friedman famously said in 1967 (published 1968) that the attempt by policy makers to use it would cause it to break down. A few laters, it broke down. However, by this point, many economists had become so attached to it that they searched for new variables to add to the equation to make it work again. One of these was, in effect, the lagged dependent variable, supposedly representing “expectations.” In fact, in most economic time series, adding the lagged dependent variable improves the fit dramatically. Then you can play around with specifications to get the relationship you want between the variables you care about (in this case, inflation and unemployment).
The Phillips Curve is the archetype of Tinkerbell relationships in macroeconometrics. It is alive, but only if you believe in it.
Cnet has an interesting story.
The idea of techno-utopian spaces — new countries even — that could operate beyond the bureaucracy and inefficiency of government. It’s a decision that hinges on exiting the current system, as [entrepreneur Balaji] Srinivasan terms it from the realm of political science, instead of using one’s voice to reform from within, the very way Page and Brin decided to found their search giant instead of seek out ways in which the then-current tech titans could solve new problems.
Here is some Kool-Aid that I am not drinking:
With 3D printing, regulation is being turned into DRM. With quantified self, medicine is going mobile. With Bitcoin, capital control becomes packet filtering. All of these examples, Srinivasan says, are ways in which technology is allowing people to exit current systems like physical product production and distribution; personal health; and finance in favor of spaces of their own creation.
Instead, I think that secessionists are in for a tough slog. I would try to embark on the process gradually. A key step is to convince governments to unbundle their services and open them up to private competition. I know that sounds like an impossible task. But building a new society without the existing base of political norms and legal systems sounds even harder.
A commenter on an earlier post recommended a timeline created by Aaron Rodriguez that lists the attempts (mostly by Bush Administration officials) to regulate Freddie Mac and Fannie Mae. At every turn, they were blocked by Democrats. Read the whole thing. I would simply add that:
1. Even under President Clinton, Larry Summers wanted to tighten regulation over the two firms. He also recognized that their political clout was bad for the country.
2. At the time, Freddie Mac and Fannie Mae were shareholder-owned companies. If you want to maintain a narrative that the blame for the housing bubble falls on the private sector and too little regulation, they could include Freddie and Fannie in that narrative. In my opinion that would make the narrative of “not enough regulation” more intellectually respectable. But if your goal is to exonerate Democrats and blame Republicans, then you want to use the younger Tsarnaev’s defense in the Boston Marathon bombing case: Freddie and Fannie would have never gotten in trouble had they not fallen under the spell of their evil over brother, Wall Street.
The Obama administration announced Friday that it was putting a private firm in charge of fixing its faulty health insurance Web site and set the end of November as a target date for working out all the bugs, the first indication of how long repairs may take.
I am trying to figure out the timeline. Suppose that we work backwards:
–two weeks of beta testing takes us back to November 16
–three weeks of user testing takes us back to this week
–one week of integration testing takes us back to October 20
–one week of unit testing takes us back to October 13
–one week to code fixes takes us back to October 6
–two weeks to identify problems and specify fixes takes us back to late September
What I infer is that they have had a working version of the system, not ready for deployment but ready for testing, for a few weeks now.
Otherwise, I do not think I would want to be the guy who confidently announced that the system will be functioning smoothly by the end of November.
A senior official at the International Monetary Fund said Wednesday that it will be difficult for the Bank of Japan to meet its 2% inflation goal within its two-year time horizon, noting that inflation expectations aren’t growing significantly.
Those of us who are daft™ believe that inflation is only a monetary phenomenon if the monetary authorities do some really spectacular helicopter drops. Ordinary buying and selling of securities will not do it. To be fair, the official, Naoyuki Shinohara, seems to think that central bank purchases of stocks or real estate investment trusts could do the trick, so he may not be completely daft™.