Sunday, May 24, 2009

Economic Forecasting in the NYT

Greg Mankiw had a piece in the NYT yesterday, That Freshman Course Won't Be Quite the Same, in which he discusses the ways the freshman economic course, or the college economic curriculum, may need to change in order to reflect what we've learned and are learning in the current crisis.

One of the four things he said struck me as funny (not ha-ha funny). (Ok, two things struck me as funny. The one I'm not going to say anything about is the Fed targeting interest at .25 to 0 percent. Free money! Woo!) Under the heading, "The Challenge of Forecasting," Mankiw writes:
It is fair to say that this crisis caught most economists flat-footed. In the eyes of some people, this forecasting failure is an indictment of the profession.

But that is the wrong interpretation. In one way, the current downturn is typical: Most economic slumps take us by surprise. Fluctuations in economic activity are largely unpredictable.

Yet this is no reason for embarrassment. Medical experts cannot forecast the emergence of diseases like swine flu and they can’t even be certain what paths the diseases will then take. Some things are just hard to predict.

Likewise, students should understand that a good course in economics will not equip them with a crystal ball. Instead, it will allow them to assess the risks and to be ready for surprises.
First, he thinks a good course in economics will allow students "to be ready for surprises," and he makes that point in trying to rescue the economic profession from the indictment of "some people." Yet, the point of the indictment is precisely that economists et al. were not "ready for surprises," or at least not for this surprise. The point is precisely that the risks of how we were operating for years before it all went boom were not assessed, with one or two exceptions (i.e., Nouriel Roubini, CalculatedRisk, etc.). To say that a good course in economics, integrating the lessons learned from the current crisis, will prepare people to assess risks and to be prepared for surprises in the future simply asks us to take it on faith that economists now know what they're doing, even if this episode demonstrates otherwise.

Second, I thought the analogy to swine flu, or to infectious disease outbreaks generally, was odd and not a good analogy. Infectious diseases involve a host of non-human factors (like environmental conditions, non-human animals, viruses and bacteria, etc.) Economics is about human interactions. What would be the analog in economics to RNA mutation in a virus that makes the virus more pathogenic? What would be the economic analog to RNA reassortment? There isn't one, not a good one, anyway. To analogize the failure of economic forecasting with the inability to accurately forecast an infectious disease outbreak is as ridiculous as analogizing economic forecasting with, say, meteorological forecasting. One is endogenous to humans, the other is exogenous. Same goes with infectious disease outbreaks.

"The Challenge of Forecasting" was the weakest part of Mankiw's otherwise interesting piece. I don't know where that leaves economics, because I don't know how central to economics the task of forecasting is, or is supposed to be. If forecasting is central, economics appears to be in trouble, at least if Mankiw's argument is the best one going for it.

Wednesday, May 20, 2009

The Sin of Speaking.

From The Life of Thaddeus Stevens, by James Albert Woodburn, p. 103:
The sum total of anti-slavery sinning was in the failure to keep silence.
Woodburn wrote that comparing the anti-slavery speeches given by Thad Stevens and Horace Mann in the House in February 1850.

Mann was gentle, eloquent, "refined and scholarly," whereas Stevens spared no feelings, minced no words, deferred to none. Stevens returned the rhetoric of the Southern fire-eaters bit by bit, and the Southern response was to claim woundedness, hurt feelings. In the words of the 11 March 1850 speech of Stanly, a representative from North Carolina:
I hope his next speech will be fit to read in the families of Pennsylvania farmers,. . . [and that] the gentleman will find some other Morgan to frighten the grandmothers and children of Pennsylvania with. I ask him to let us alone.
Emphasis added.

The point is that when the Southerners were challenged, whether in gentler terms by Mann or in more forceful and equal terms by Stevens, they threw up their hands and retreated to a position of, "Leave us alone!" Of course, the Southern representatives were vigorous in their opposition to admitting new territories as free states, vigorous in their dire warnings of impending disunion if Northerners dared to disrespect Southern slavery. The "leave us alone" trope obviously connects with the plea of states' rights.

Thus the power of speaking in the face of silence. A lesson we still have yet to fully learn.

Sunday, May 17, 2009

To Live as Thaddeus Stevens Lived

I'm reading right now Memorial Addresses on the Life and Character of Thaddeus Stevens, Delivered in the House of Representatives, Washington, D.C., December 17, 1868.

These words by one Mr. Godlove S. Orth (what a great name), of Indiana, struck me:
His love of truth made him an earnest man, acting upon the principle that whatever was worth doing at all was worth doing well. He never espoused a cause until he was satisfied of its merits and justice, and then brought to its advocacy all the strength and vigor of a richly cultivated intellect.
It's hard not to be impressed by Stevens. By all accounts, he was passionately dedicated to the cause of liberty and equality for all human beings. It's a shame that the Second Founders, the architects of the 14th Amendment, those who were dedicated to equality and to the perfecting of the Union, are so easily forgotten today. Not just forgotten, but never known. Perhaps it's one of the enduring legacies of Reconstruction's failures. With the Tilden-Hayes Compromise, and the ascendancy of the "Redeemers" in the South, everything that Stevens and his allies believed in, and fought for, was delayed for another 100 years. Were they, after all, failures?

No, surely not. We do have the 13th, 14th, and 15th Amendments. Even if we continue to struggle with their meaning and continuing relevance, even if we continue to fall short of the aspirations and promise of Stevens' vision for America, we have his words, his works, and his life to contemplate.

My conclusion: it would be a good life to believe as Stevens believed, to fight as Stevens fought, and to live as Stevens lived.

UPDATE 1: As is my wont, I have come across another passage worth putting up (and emulating for that matter), after I've already made the main post; so I add:
[Stevens] was a zealous advocate of free speech, concurring fully in the sentiment of Jefferson, that "error of opinion can safely be tolerated so long as reason is left free to combat it."

To him the idea was most preposterous that there should be any subject so sacred as to forbid examination or debate. Whatever seeks to avoid scrutiny or shrinks from investigation is justly subject to suspicion, and that which cannot bear the test of thorough discussion is in its nature inimical to republican institutions.
Emphasis added. Reminder frequently needed in contemporary America.

UPDATE 2: James Albert Woodburn, in his The Life of Thaddeus Stevens, quotes from a speech Stevens gave in 1835 at an Anti-Masonic meeting in Hagerstown, Maryland. First, on the maintenance of liberty:
Two things are indispensable to the continuance of national liberty,--the independence of the public press and the impartial administration of justice.
That's at page 19 of Woodburn. If true, one despairs for the continuance of national liberty. Second, an interesting comment in light of those in the Republican party today who say that they would rather have a smaller number of True Believers than a larger number of mixed beliefs.
Some are afraid of being in the minority,--tame souls who delight to dwell on neutral ground, who tremble lest they should mistake the strong side, who hover around the confines of the battle-field ready to throw up their caps and shout hosannas to the victors. Such men we would advise to remain where they are, in dull and useless slothfulness. Those who are not with us in moral feeling we are better without. We want no hireling forces. Those who address themselves to this warfare must do it from love of country. Who would not rather be vanquished with honorable associates than triumph with a horde of mercenary traitors? If you must fall you will have the consolation to know that you have lived while there was anything worth living for. . . .
At 20-21 of Woodburn. Of course, Stevens was there talking about fighting for equality of and before the law, not about ideological purification so much.

Sunday, May 10, 2009

Iconoclasm of Law

I am reading Pierre Schlag's brilliant article, "Normative and Nowhere to Go" (43 Stan. L. Rev. 167 (1991), if you're interested). Now, I don't really know what I think about postmodernism, Derrida, Foucault, etc. I know that I don't buy their whole program, but I think they at least have important things to say to us. So I present to my non-existent readers the following from Schlag's article, because I think this passage (at 178-79) points at something important:
In short, [normative legal thought] cannot wait to tell you (or somebody else) what to do.

In fact, normative legal thought is so much in a hurry that it will tell you what to do even though there is not the slightest chance that you might actually be in a position to do it. For instance, when was the last time you were in a position to put the difference principle into effect, or to restructure the doctrinal corpus of the first amendment? "In the future, we should. . . ." When was the last time you were in a position to rule whether judges should become pragmatists, efficiency purveyors, civic republicans, or Hercules surrogates?

Normative legal thought doesn't seem overly concerned with such worldly questions about the character and the effectiveness of its own discourse. It just goes along and proposes, recommends, prescribes, solves, and resolves. Yet despite its obvious desire to have worldly effects, worldly consequences, normative legal thought remains seemingly unconcerned that for all practical purposes, its only consumers are legal academics and perhaps a few law students--persons who are virtually never in a position to put any of its wonderful normative advice into effect.*
The footnote ("*" here, "32" in the piece) reads:
The possibility that a significant number of judges might actually be reading significant quantities of this academic literature is undemonstrated and unlikely. The possibility that judges might actually be persuaded by this academic literature to adopt a position not their own is even more undemonstrated and even more unlikely.

The only kind of normative legal thought that might actually be having some significant and authentic normative efflect effect on judicial decisionmaking (and here again, it is difficult to know which way the causal lines would run) is the work of the treatise writers. But, this treatise work cannot really be seen as having much effect, since much of it is simply a reflection (an encyclopedic collection) of the modes of thought and norms already extant in the courts.

UPDATE: Incisive, brilliant, and witty. Best way to make a point:
What is truly wonderful about normative legal thought, then, is that it immediately compels people to take certain roughly predictable steps in the dialogic game: "You're evil." "No I'm not." And so on (except with more argumentative flourish).
43 Stan. L. Rev. 183. That is an absolutely accurate representation of the "dialogic game" involved in the torture debate, among others.

UPDATE 2: Last quote I'll add here, though there are many more worth putting up.
What [normative legal thinkers] all agree upon, in this implicit unexamined sort of way, is that they are all autonomous, rational, morally competent individuals who are having a meaningful, important, and effective discussion about how society or some subdivision thereof should be organized.

This pleasant fantasy is harmless enough, except that it reproduces legal academics and law students (and hence lawyers) in the image of humanist individual subjects. This, too, is a harmless self-indulgence, except that it provides instrumentalist bureaucracies with an absolutely marvelous and captivating rhetoric that defines, organizes, routinizes, and services their clientele. It's all really neat. 7-11 sells freedom (which you can find in their Slurpees). Pepsi brings you the downfall of the Berlin Wall. And normative legal thought guides the development of the law.
43 Stan. L. Rev. 190-91. Funny thing is, I'm pretty sympathetic to the liberal humanist vision of the individual subject, so this piece very much challenges the structure of what I identify as my system of beliefs. Particularly since I don't deny or disagree with much of what Schlag says in this article (although I also don't necessary accept or agree with all of it).

Friday, May 8, 2009

Transparency as Transformative

There was an interesting piece in Time yesterday by Michael Grunwald, entitled, "Republicans in Distress: Is the Party Over?"

The thrust of the piece is that the electorate just isn't interested in buying what the Republicans are selling (i.e., tax cuts, social conservatism, tax cuts, corporate welfare, tax cuts). It caught my attention because of what Patrick McHenry (a committed conservative) was quoted as saying:
"Marginal tax rates are the lowest they've been in generations, and all we can talk about is tax cuts," he said. "The people's desires have changed, but we're still stuck in our old issue set."
Coming from McHenry, that was, indeed, shocking. So, if it's true that the Reaganesque model of government just isn't attractive to people any more, what explains the shift? Before exploring that question a little bit, I should warn that my explanation is decidedly incomplete. But it is, I think, a piece of the larger puzzle:

The nature of the relationship between the government and the governed is changing.

First, welfare government is here to stay. People are not going to support the return to a pre-New Deal style of government. But that has been obvious for a while now. The difference is captured in one of the key themes of Obama's campaign: transparency. Set aside what you think about whether he has lived up to his broad promises for openness in government and focus on the fact that the message resonates with people. The information revolution, broadened and deepened by technological advances (starting with the internet itself), has profoundly altered our perceptions, and our expectations, of government.

Technology has given the general public visibility of their government. Government is no longer the mysterious source of benevolent assistance in times of need. The social safety net isn't an invisible mechanism that exists by the grace of a government beyond our reach. We can now peer directly into the heart of government and see for ourselves what is happening. We can read the budget, or the text of legislation, or proposed regulations, instantly, and that's just the very very beginning of what the information revolution has wrought.

We the People now have the tools to connect ourselves directly to the process of governance, if we choose to use them, but if government shuts us out, those tools are all but useless, except insofar as they allow us to force our way in. For example, if legislators make backroom, sweetheart deals with lobbyists, we may never know about it. Unless we have access to the records of contacts between lobbyists and politicians, of donations to political campaigns, of disclosure of potential conflicts of interest. And if they don't want to tell us about those things, we can find out. We the People have been empowered vis-a-vis our government, and there's no rolling that back now. The emphasis on transparency and openness in government recognizes the power we now possess. Perhaps the campaign pledge merely panders to that power, and when elected, politicians will not live up to their promise. I'd suggest that they do so at their own political peril.

To tie it back to the story in Time, people haven't rejected the basic ideas of Republicans because they suddenly trust the government, or believe it to be a reliable, and reliably benevolent, presence in their lives. I don't believe people trust the government much at all. Nor should they. Trust implies a measure of faith, and faith is the gap between belief and evidence. And the point is that we don't have to trust the government. "Trust, but verify" is an already outdated slogan. Transparency means that we have no need to trust government because we can see what is happening for ourselves. Big Government isn't as much of a threat when we can watch its every move. People generally favor the social and economic programs of liberals, but when the government that administers them is a black box, we are rightly skeptical. We want to know what's going on inside the box. Who's benefiting from it? What aren't they telling us? This attitude is classic American skepticism about government. About closed government.

In other words, my thesis is that the ideas of the Republican Party are not attractive to people who want help, who want a social safety net, who want some measure of economic equality and a full measure of social and political equality, and who can obtain those things in such a way that they don't have to entrust extraordinary power in an unaccountable way. If, but only if, we have visibility of what's going on in our government can we accept an expanded role for government. Think about the Treasury's response to the economic crisis and think about how objectionable people have found the withholding of basic kinds of information about who is getting what in the bailouts. I suspect that people recognize the need for government to do something, given the scope of the problem; indeed, the suggestion in the Time story is that failure to do something constructive could spell the end of this Democratic upsurge. People generally (notwithstanding the libertarian exceptions) want the government to do something to fix the economic disaster wrought by unaccountable banks, but we want the government to do it in the open. We want them to do it in the open because we believe in our power to pressure the government to do it right. We know the first desire of every politician's heart is to be reelected. We know their ambitions. And we're willing to give them the power they desire, but only if we can see what they do when they arrive. Thus, openness is (or is becoming) a condition precedent.

My concluding point is that the message of the story in Time is two-edged for Democrats. They are on the right side of the substantive debate, as Republicans themselves are beginning to realize (see the Patrick McHenry quote at the beginning). But being right isn't sufficient to win. You have to do it right, too, and that means conducting business in the open, in the full sunshine of public scrutiny. If Democrats do that, they have a very bright future.