Portrait of the Economist as a Young Man

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Some Additional Thoughts on Sanctions and Russia

In this post, I’ll try to add a little to the discussion of sanctions initiated by Tom in his post. But before I start, I just want to say again how excited I am to have Tom blogging with me. 

Anyway, In Tom’s first post he made two arguments that I find compelling:

(1) There is an inherent commitment problem that will likely limit the extent of Western sanctions (much less the use of force) against Russia.

(2) Western sanctions are likely not to be particularly effective in deterring Russia from its aggressive policy.

For my contribution, I’ll attempt to apply the logic of Bruce Buena de Mesquita’s (BBdM’s)“Selectorate Model” to these issues. The Selectorate Model is a game-theoretic construct that analyzes Nations’ behavior in terms of the relationship between the leader and the group that allows the leader to maintain power (the Selectorate). One of BBdM’s key insights is that whether a government is a tyrannical dictatorship or a democracy, the government still must rely on some coalition to maintain power. What distinguishes dictatorships from democracies is the nature of the Selectorate. In a dictatorship like Russia has once again become, the Selectorate tends to be a small body of elites (think Oligarchs). In democracies like the United States and those of Western Europe, the Selectorate is basically synonymous with the set of voters (For the purposes of this use of the model, there is no need to get into a more nuanced discussion of how democracies work in practice).

In terms of the West, thinking in terms of the Selectorate can help us to understand the contrast between the United States and Western Europe. Germany, for instance, relies heavily on Russian natural gas, oil, and coal imports. However, as Tom has pointed out, Russia is not a terribly important trading partner for the United States, and, with our vast energy resources, Russia is not critical to our long-term economic health.

Both the Selectorates of Germany and the United States generally find Putin’s behavior reprehensible. However, the Selectorates in Germany and other European Countries face the potential for real economic hardship as a result of sanctions at a time when Europe can scarcely afford more economic bad news. According to the Selectorate Model, it would be very unlikely to see European leaders to commit to harsh long-term sanctions. On the other hand, in the United States, voters are unlikely to notice the effects of sanctions. Thus, moral outrage will likely be a strong enough impetus for our leaders to impose and maintain sanctions. Yet, given that Europe is a much more important trading partner for Russia, taken as a whole, Western sanctions are a weak threat.

Applying the Selectorate Model to an analysis of Russia is necessarily more speculative, as Putin’s Russia is a very new entity and, despite being effectively a dictatorship, his regime is generally popular. However, with that caveat in mind, applying the analysis to Russia suggests additional reasons that Western sanctions may not be effective. Although popular, as a dictator, Putin does not necessarily have to rely on the people for his continued political existence. Certainly, since trade with the West is important to Russia, strict sanctions would hurt the Russian economy. However, Putin may be able to use his considerable political power to compensate a small, elite coalition for their suffering, while leaving the rest of Russia to bear the brunt of the sanctions. It is of course true that sanctions would stifle economic activity hurting business concerns owned primarily by elites. But Putin only needs to maintain a critical coalition of elites and has wide latitude to compensate the coalition keeping him in power. We should not expect that simply by making the Russian population question the direction of Putin’s leadership, we will induce change.

Does that mean that the United States should abandon sanctions? Despite the bleak nature of my analysis above, my instinct is that we still have to go forward with sanctions. In the long-term, it is possible that U.S. policy will eventually cause enough distress to the Russian Selectorate to affect change. But as the Economist observed in its lead story this week, we are yet again playing “the long game” with Russia.   


Introducing Tom Zylkin on Trade Sanctions

A couple of weeks ago, I was in Germany for the Lindau Conference of Nobel Laureates. Meeting the Nobel Laureates was of course very exciting. But among the real highlights of the conference for me was meeting Tom Zylkin, a Ph.D. student in Economics at Drexel University, and finding out he was interested in contributing to my blog. Tom’s research is focused on issues relating to trade and international conflict. Since I’m not particularly knowledgeable about those subjects, I think his insights will really expand the horizons of this blog. To that end, here is Tom’s first post. I’ll follow up with a few comments in the next couple of days.


Robe has kindly asked me, as someone who does research on both trade policy and armed conflict, to give my thoughts on the economics of trade sanctions as they apply to the situation in the Ukraine.  Unfortunately, the main thrust of what I have to say is, “here’s why trade sanctions probably aren’t going to make much of a difference.”

I want to begin by highlighting a choice quote that appeared in my local Sunday newspaper  regarding the recent ceasefire signed by the Ukrainian government and its pro-Russian antagonists this past Friday in Belarus:

“The terms of the deal underscored Russia’s apparent willingness to commit far more resources than the West to achieve its aims in Ukraine.”

Perhaps the economic analysis of the conflict doesn’t need to be made more complicated than that. In a nutshell, the government in Kiev has agreed to enshrine the territorial gains that have been made by the separatists in Eastern Ukraine, frankly because they have no other choice.  With the rebels almost certainly receiving military aid from Russia (unless their news services are to be believed anyway), and no one in the West displaying any willingness to do the same for Ukraine, this latest spectacle just further solidifies what has been plain to see for some time: Ukraine matters more to Russia than it does to the rest of us.

That is to say, Russia is more willing to risk a larger conflict than anyone else is.  And thus it may well wind up achieving its aims in Ukraine almost by default.  While the situation bothers many of us in the Western World, it is all too obvious there is no political appetite for trying to oppose Russia using force.  Preserving Ukraine’s territorial integrity and independence from Russia simply is not high enough on our collective list of priorities to merit the kinds of actions that would be necessary to do something about it (and not without good reason, given the risks, one could certainly argue).

Still, with both the recent ceasefire and, in particular, the new round of proposed EU trade sanctions in the news this week, this is as good an opportunity as any to evaluate the kinds of actions the West has shown it is willing to take.  Could increased trade sanctions potentially pressure Russia into abandoning its meddling in Ukraine?

First and foremost, it’s worth pointing out that the history of trade sanctions doesn’t give us many success stories to go on.  It often seems to be the case that when conflicts become ideological, the economics become secondary.  Long-term trade sanctions have not done much to topple regimes in North Korea, Iran, Syria, or Cuba.  It’s also worth noting that the current level of sanctions (and talk of further sanctions) does not seem to have hurt Vladimir Putin’s popularity much.  Even in the cases where trade sanctions have seemed to make a difference, such as the recent reforms in Myanmar, it seems to be a very slow process.

But let’s take the optimistic view that there is some level of trade sanctions the West can impose that will cause Russia to reverse its course.  There is sound economic reasoning that would suggest this.  A paper from a few years ago by Phillippe Martin, Thierry Mayer, and Matthias Thoenig (which you can read about here) offered evidence that increasing trade between countries can pacify frosty relations: once countries become dependent on one another via trade, the logic goes, pursuing conflict becomes very costly because it disrupts the flow of trade.

It stands to reason then that the world’s major economies, especially when acting in concert, should be able to use the mere threat of trade sanctions to condition the behavior of individual states.  Except there is an inherent problem here—trade dependence cuts both ways.  It is no coincidence that the U.S., which by and large does not trade that much with Russia, has been the most openly hawkish about trade sanctions.  The European powers on the other hand have been slower to come around to this view, and have at times displayed an embarrassing lack of credibility in their pursuit of these policies.  Indeed, the U.K.  has already indicated willingness to lift sanctions if they can be convinced the terms of Friday’s ceasefire are going to be honored.  It is perhaps not surprising either that the ceasefire is already under threat of breaking down: if Ukraine and the West are willing to surrender so easily, why not grab more?

Trying to reason out solutions involving trade dependence and trade sanctions simply brings us back to the same intractable problem as before: Russia cares more about the conflict than the West does.  Even if trade sanctions could be effective, Russia has no reason to believe that threats to impose sanctions of the necessary magnitude are credible, because they would inflict more pain than Western countries are willing to tolerate for the sake of Ukraine.  No matter how stringent the next round of sanctions may be, Russia probably doesn’t believe they will be in place for the long haul.

How might the West make such threats more credible in Russia’s eyes?  Well, this most likely won’t be taken as an optimistic answer either, but one way is to convince them that we are genuinely serious about opposing them militarily if they do not respond to sanctions.  If Russia felt there was a significant chance of actual war in the future, it would immediately see that the West has a strong incentive not to trade with them in the present.  At that point, much higher levels of sanctions could be considered credible.  The West’s best strategy then would be to convince Russia that all options are on the table, even though they probably aren’t.  One might reasonably argue this has been the West’s strategy all along.  If so, it isn’t working.


Words of Wisdom from Thomas Sargent

This speech, given by Thomas Sargent at Berkeley in 2007, is probably the best summation of the practical lessons of economics I have ever read (my favorites are in bold). And at 335 words, it’s also a model of succinctness:


I remember how happy I felt when I graduated from Berkeley many years ago. But I thought the graduation speeches were long. I will economize on words.

Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.

1. Many things that are desirable are not feasible.

2. Individuals and communities face trade-offs.

3. Other people have more information about their abilities, their efforts, and their preferences than you do.

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

5. There are tradeoffs between equality and efficiency.

6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse.

7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.

8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.

9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).

10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).

12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.


As an aside, I should mention that Sargent won the Nobel Prize in Economics in 2011 for his work in Macroeconomics. I think these points speak for themselves, so I’ll leave this post at that.

When Did Nassim Taleb Cut Off Our Balls?

Nassim Taleb is famous for his vitriolic hatred of economists and economics. The following Taleb quote is a particularly good example of this and the inspiration for the title of this post:

“Those with brains but no balls often become mathematicians; those with balls but not brains join the mafia; and those with no brains and no balls become economists. There are exceptions (for mathematicians).”

Taleb has also added that Wall Street Traders have both brains and balls (lucky them!).

Taleb’s bitterness towards economics is deeply entwined with antipathy towards the Black-Scholes-Merton options pricing formula and its creators. An interviewer of Taleb’s writing in the Chronicle of Higher Education relates the following:

“Taleb singles out his least-favorite economists, including Robert C. Merton, a professor of finance at MIT, formerly of Harvard, and Myron Scholes, a professor emeritus of finance at Stanford, who jointly received the Nobel Prize in 1997 for their model of valuing derivatives that’s designed to hedge against risk. Merton is “serious, mechanistic, boring,” according to Taleb, and the two used “fictional mathematics” in their research. He calls this “unsettling” in a footnote, though in the earlier draft he sent me he used a harsher word. I’d wager that punch may have been pulled by Random House’s legal department.”

Given the depth of Taleb’s hatred for economics, I had always assumed that these feelings had been percolating within him for the entirety of his adult life. And from the quote above, you would probably assume, say, that he had never written an article in praise of Robert Merton, the BSM Formula, and economics. But apparently, we’d be wrong.

I’ve been following Taleb for a long time now, so when I came across this article today, I almost fell out of my chair:


I’ll share a few of my favorite quotes:

“In other words, the entire neoclassical apparatus has been criticized for being a normative, not a positive or descriptive science. A normative theory describes how things should be, instead of describing them as they effectively are. We are indeed lucky to have had such normative prescriptions since the world of finance has agreed to resemble the textbook, in order to operate better.”

Did Taleb just imply we are lucky to have economics? And did he put economics in the realm of science??

“In a similar way, in spite of the criticism levied against the efficient market hypothesis, markets have been gaining in efficiency over the past twenty years, simply because the inefficiency has attracted traders and profit seekers. This point should strengthen the argument of general economists under assault because of the seeming lack of realism of assumptions of rationality and maximizing behavior.”

Did Taleb just defend economics??

“…the BSM formula allows the traders to be smart.”

Did traders just get some of their brains from economists??

Given this, I would think that in his initial books, a man as smart as Taleb would, at the very least, have written carefully about his evolving views. And, you might also think that he would be more thoughtful and respectful in his approach. But again, we would be wrong.

So the question is: when did Nassim Taleb cut off economists’ balls?

The article is dated June 1998. His first popular book, Fooled by Randomness, came out in 2001 and contains attacks on Scholes and Merton, so this evolution in thought must have come about very rapidly.

My best guess is that the key event that changed his perspective was the bail out of Long-Term Capital Management in September 1998, orchestrated by the New York Federal Reserve. Scholes and Merton were principals in LTCM, and indeed, Taleb criticizes them strongly for this failure in Fooled by Randomness.

Even if this guess is correct, however, it would still be edifying for Taleb to discuss how this event led to such a passionate hatred of economics as a whole. After all, most of economics has nothing to do with finance, and the failure of a highly leveraged hedge fund is a very poor basis for labeling a theory as totally useless. 

Of Economics and Oscars

As a result of the Oregon Trail Computer Game like March snowstorm here in DC, the planned presentation of my PhD research to the econ department at UMD got canceled. When I found this out Sunday, I gave into my girlfriend and agreed to watch the Oscars with a few friends.

I wasn’t up on many of the movies this year so people had to tell me what most of the movies were about. When someone started explaining the Dallas Buyers’ Club, I was pretty surprised to learn that someone had managed to make a movie about a topic that has been discussed by economists for a long time.

From what I’ve gathered (and from looking it up subsequently), the main premise of the Dallas Buyers’ Club is that a man with HIV whose body is having a difficult time tolerating what at that time was the only approved treatment for HIV, AZT, goes to Mexico where he gains access to a non-FDA approved drug. That drug works much better for him and so he ends up smuggling the drug from Mexico to the United States to provide it to other people with the same problem.

The people I spoke to seemed pretty shocked that the FDA would prevent people from accessing a beneficial treatment that could save their lives. This is an issue that I’ve always found interesting and was first introduced to through Milton Friedman’s book “Free to Choose.” I found a link to the chapter that discuses it here.

When I first read this a number of years ago, the thing I was most struck by was the estimate that for every year Beta blockers were available in other countries but not in the United States approximately 10,000 lives a year could have been saved.

Of course, an overly permissive drug approval regime can cost lives too. Friedman discusses that the push for increased oversight by the FDA occurred after the famous thalidomide tragedy from 1961-1962. He ultimately concludes:

“Granted all this, may these costs not be justified by the advantage of keeping dangerous drugs off the market, of preventing a series of thalidomide disasters? The most careful empirical study of this question that has been made, by Sam Peltzman, concludes that the evidence is unambiguous: that the harm done has greatly outweighed the good. He explains his conclusion partly by noting that ‘the penalties imposed by the marketplace on sellers of ineffective drugs before 1962 seems to have been sufficient to have left little room for improvement by a regulatory agency. After all, the manufacturers of thalidomide ended up paying many tens of millions of dollars in damages –surely a strong incentive to avoid any similar episodes. Of course, mistakes will still happen— the thalidomide tragedy was one—but so will they under government regulation.”

Whether you accept Friedman’s cost-benefit analysis or not, a regulatory regime like the FDA drug approval process can lead to the perverse situation where someone doing something beneficial for society can run afoul of the law. The particular episode of this highlighted by the movie does a good job of indicating the potential human cost of over regulation. Of course, to the extent that it would have been prevented by the FDA, the thalidomide tragedy also highlights the potential cost of under regulation. It’s no wonder that making effective policy is so difficult. 

Some Thoughts on the Comcast/Time Warner Merger

My friend and fellow PhD student Ryan Decker (who I’m hoping will some day join me in blogging so that I can put stuff up more than once a year) has pointed out to me that a lot of the commentary by econo-pundits on the Comcast/Time Warner isn’t really consistent with the modern economic view of vertical mergers. Thus, even though I’m in the depths of PhD research hell, I couldn’t help but take this opportunity to write a little.

Much of what I’ve seen on the Internet starts from the premise that the merger will directly further Comcast’s monopoly power as a cable provider and an ISP.  However, Comcast and Time Warner do not compete for subscribers in any geographic territory. To the extent that the cable providers provide their services at prices above those that would prevail in a more competitive market or offer worse service, they do so as a result of the monopoly power that they already have. Since they don’t compete with each other for consumers, the merger will not reduce direct horizontal competition.

Now, in the last 25 years or so, economic research has shown that vertical restraints, including vertical mergers, exclusive dealing, tying, etc. can sometimes be used as a mechanism to maintain or further monopoly power. In fact, the applied theory paper I’m currently working on as a potential dissertation topic is a theoretical model of anticompetitive exclusive dealing. (Self-Promotion Alert: A simple version of the model can be found here). Given that most of the concerns voiced by econo-pundits have to do with the vertical aspect of the merger and I have already addressed the issue of horizontal monopoly in the cable industry, I will now consider the issue from the perspective of the modern economic literature on vertical restraints.

There are essentially two mechanisms of potential vertical harm from the merger in terms of price theory, assuming that the merged firm has monopoly power as a cable provider/ISP:

(1) The merger would increase Comcast’s monopoly power in the content market allowing it to charge higher prices for its content.

(2) The merger would allow Comcast to increase its prices as an ISP/Cable provider by curtailing competition from other ISPs or Cable providers.

Although the idea that Comcast seeks to monopolize the content market to increase its prices is a popular one, this mechanism of anticompetitive harm lies on a weak foundation. The essential problem is this: consumer demand for Internet or cable is purely for the bundle of distribution and content that makes its way through the supply chain to consumers. From the standpoint of economic theory, Comcast sets its prices with respect to the consumer demand curve and treats the content as a cost. The content providers then set their prices based on Comcast’s demand for their services which is clearly derived from underlying consumer demand.

Now consider Comcast’s profit maximization problem. Comcast is already a monopolist so it increases its price until any further price increases actually reduce profits. All things equal, Comcast would like to serve the people that it chases out of the market with its high prices, but since that would undermine its monopoly price, it simply lets those consumers go. Now note that in the context of a content merger, the willingness to pay of the consumers does not change. Consumer’s demand is the same as it has always been and both Comcast and the content providers are taking advantage of this willingness to pay to the maximum extent they can. However, what’s key to note is that the upstream content providers’ profit maximization is actually interfering with Comcast’s ability to serve more consumers by increasing the price at which Comcast can provide the content. If Comcast acquires the upstream content producers, it effectively lowers its acquisition cost; and a monopolist responds to lower costs with lower prices! A very general property of monopoly pricing is that prices are increasing in costs (for the mathematically inclined, a very elegant little proof of this can be seen on p. 66-67 of Jean Tirole’s textbook The Theory of Industrial Organization).

Again, the key is that the willingness to pay of the consumers’ never changes so Comcast already takes advantage of that to the maximum extent it can. Any further imposition on consumers will simply reduce its profits. Actually, consumers are better off as a result of the reduction of the effective cost of providing the service. Thus, as far as content is concerned, given the monopoly pricing principle discussed above, the merger should actually lead to lower, not higher prices (considering, for the moment, only this factor).

With respect to (2) modern economic literature has indicated that such stories are very plausible in theory and thus we must evaluate this issue based on the particular circumstances of the merger. Economic literature has identified a number of mechanisms whereby such behavior has anticompetitve consequences:

For a few of my favorite examples see: Salop and Scheffman (1984), Whinston (1990), Rasmusen, Ramseyer, and Wiley (1991), Segal and Whinston (2000), Simpson and Wickelgren (2007), and of course my research.

Cutting through the math involved in these models, the basic concern would be that Comcast uses the merger to acquire content essential to entering the market for the provision of ISP services. In other words, the concern here would be that Comcast would use its advantageous position over content to block the entry of firms who would compete in providing access to the Internet.

Why is this situation fundamentally different than the foreclosure of content situation? The key here is that in the absence of the conduct by the monopolist, the market structure would be more competitive.

So this analysis suggests that the question of whether to allow the merger is largely about whether it is empirically plausible that this merger will facilitate Comcast/Time Warner’s ability to block entry by ISPs. I do not know all the details of the merger and so I am hesitant to make an absolute pronouncement that the merger is good or bad. However, for the following reasons I am somewhat dubious that foreclosure of competitors in distribution is a concern at this point.

As far as Cable is concerned, there are already competitive alternatives in the form of DirecTV, Dish, FiOS, U-Verse. It is difficult to imagine that anyone would enter the market solely a cable provider since I think everyone agrees that the future is Internet, so the question now becomes: will the Time Warner merger help Comcast to prevent the entry of a new ISP?

Certainly at the moment, it doesn’t seem likely. Comcast is obligated to share NBC with its rivals and it has already made extension of the NBC merger conditions part of the deal. Also, Comcast is only merging with Time Warner Cable so while it may gain some regional sports programming, it won’t gain access to much more as far as I am aware. 

In the future, as wireless Internet improves, company’s providing Internet over spectrum may become a viable competitor to Comcast.* It is these entrants who would be the most in danger, but I’m not sure if this merger really involves enough content to be the pivotal factor in such an arrangement. I should note that in all of the models discussed above, the assumption is that the rival absolutely must have the input—that is Comcast would need to have content that is essential for a competitor to gain competitive traction (In that sense, Comcast owning ESPN would raise larger concerns). Also, once a rival does successfully enter, Comcast’s incentives as a content provider suddenly change as it now has to co-exist as a competitor it now makes more money selling its content to other ISPs. Thus, it would seem that the only potential harm is if Comcast can totally block other ISPs from entering its markets at all. Once entry occurs, Comcast’s profit maximization calculation changes.

There’s a lot more to say about this merger and the related issue of Net Neutrality that I’ll try to address soon, but I think this provides a good start to understanding the merger in terms of the modern economic literature on monopoly. At the moment, it seems to me, the scale tips in favor of allowing the merger, but I’m open to hearing coherent economic arguments to the contrary (what does not make sense is to oppose the merger because you hate Comcast and Time Warner, or because the resulting merged company is “big”).

*Next year an unprecedented double auction is set to occur which will facilitate the transfer of wireless spectrum from broadcasters to wireless Internet providers like AT&T, Sprint, Verizon, and T-Mobile. With efficient allocation of spectrum and the development of LTE-A and then 5G technology it seems quite possible that wireless spectrum providers will become viable competitors to wireline ISPs like Comcast. One reason not to interfere in the market at this point is then to allow this process to advance and then set out the appropriate regulatory structure once we have more of a feel for what ISP landscape looks like. At the moment, the primary constrains to entry into the ISP market are not issues of content, but scarcity of spectrum and technology.

My First Citation by a Federal Appellate Court

Today I found out that an academic article I wrote was cited by the DC Circuit Court of Appeals in a decision released today! It’s a pretty minor point in the decision (which I don’t recommend reading  unless you happen to be interested in the subject matter) but it’s there nonetheless on p. 6 (PDF p. 17).

Here is a link to the case (which I’m mostly putting up so I know where to find it):


Also, here is a link to the article I wrote:


Oh and I guess to get all of the self-congratulation out of the way in one fell swoop, I also, as of finishing the school year yesterday night, now have a Masters in Economics!

Anyway, that’s enough self-promotion for one day.

Three Things #1 (Song of Fire and Ice Inspired Series)

In a few hours, when I finally turn in my MATLAB code for this computational econometrics project I’ve been struggling with for the last few weeks, I will be done with school for the year!

But since its been awhile since I’ve posted I wanted to start a new series of posts that I can do when I’m too busy to really write anything. Thus I bring you the “Three Things” series.

For those of you who do not read George R.R. Martin’s  Song of Fire and Ice Series, I highly recommend you start reading! Anyway, to those of you who do read here is a little context: starting in Book 4, A Feast for Crows, Arya Stark makes her way to Braavos and ends up in the House of the Black and White where it appears she is being trained to become one of the Faceless Men. As part of her training, she is told that she must learn three things every time she leaves the House of the Black and White and then report on these things when she returns. So in that vein, here is the first entry in my Three Things series.

Here are three things I read recently that I thought were particularly interesting;

(1) This is an article about life in prison for that rarest of state prisoner’s, a Jewish person. The article is of interest to everyone though because he gives  description of gang life in prison that in a few pages tells you way more than any of those stupid sensationalized documentaries you see on TV. I highly recommend reading this for both Jew and non-Jew alike:



(2) The New York Times magazine recently had a profile contrasting the ideas of Larry Summers and Glenn Hubbard. Both are extremely intelligent people who have quite different views on the proper course of Macroeconomic policy at the moment:



(3) This is extremely nerdy and its something I want to blog about at some length when I have some time, but just so I remember where to find it, I’ll put it up here now. For anyone who has taken high-school calculus, the whole issue of infinitesimals (the dy/dx business) is pretty much totally glossed over. For those who go on in math but are also in an applied field that uses a lot of math one starts to notice a divergence in approach. In math classes like real analysis all calculus is based on limit processes and dy and dx are just treated as notation. However, in your physics, economics, etc. classes suddenly people start treating dy and dx as if they are quantities that one can do algebra with. Again I want to write about this at length at some point because squaring the two approaches has bugged me off and on for awhile, but here is a link to an elementary calculus book available for free online that develops calculus without any limits and shows how the two approaches co-exist:



Nassim Taleb is Out to Get Me, Apparently

As of today, Nassim Taleb has declared all out war on the “economics establishment”:

NASSIM TALEB: “My Moral Obligation Is To Destroy The Economic Establishment, And I Will”

Read more: http://www.businessinsider.com/taleb-vows-to-destroy-economic-establishment-2013-4#ixzz2Ru78KQEm

For someone whose first book was largely based on observations from behavioral economics about how we delude ourselves into believing we have control when we don’t…well, I’ll leave it to you to finish that thought.

But seriously, why is he always so angry? It must really be exhausting. In fact, just thinking about him being so angry is making me tired, so I think I’ll go to bed so I can be ready for another day of practicing the black art of economics.

Commander’s Palace, My Favorite Restaurant

First of all, when I said that the 2.0 blog would be dedicated to nuance, that was code for, dedicated to whatever I feel like putting up here.

Commander’s Palace is my favorite restaurant in the world, but it just doesn’t get the credit it deserves on lists of the best restaurants in the US usually.

Finally, here is a list that includes it: http://www.businessinsider.com/the-best-restaurants-in-america-2013-4#40-commanders-palace-6

By the way, this post is dedicated to the DC crew who traveled to New Orleans with me last summer. You know what you did. Also complicity in the face of evil is no defense. But at least we all had a really memorable meal at-what was the name of the restaurant and what kind of food was it again?-instead.