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Dear Paul Krugman,

Is your cocksure, tinker toy model, which produces such obvious clear and distinct policy choices, simply a case of election pandering? If so, carry on.

If you think you are advancing the intellectual case for your economic philosophy, you should think again.

It's a blog. Clearly Krugman's delivery and style appeals to his audience or he wouldn't have such prime Internet real estate. Williamson has his own style too and it's no less neutral. I like the ideological spectrum of the blogs, but I still wonder about the selection biases. Economist bloggers are not representative of economists even controlling for knowledge, professional stature, and field. And yet, they often serve as a public face of economists. I have no problem with blogs, but if all the economics I got was from blogs, I would not be a good economist. But I'm probably missing the point.

I am not supposed to be talking about current analysis until after the next FOMC meeting, but I did like Williamson's point about carefully defining bubbles. Fuzzy targets for household de-leveraging are one of my current pet peeves.

Silly me, thinking a Nobel prize winning economist might aspire to be more than the left's answer to Rush Limbaugh.

Interesting argument on the electoral college, that I have admittedly not heard before. However a popular vote has its merits. It is more "fair" for such an important position to be elected via plurality. It could also spur political knowledge accumulation in states that, as of now, are meaningless in the electoral college format. We certainly need more educated voters.

The electoral college keeps the plurality part of the vote to WiTHIN the states. A national popular wide vote would most likely result in only a plurality winner as well, and not a majority winner. I do not see how this is more fair (than say a majority winner).

Regardless of Krugman's posturing, Williamson does not get it right. At least not on the natural rate of interest.

Increased demand for safe assets reduces the market rate of interest. That the demand shows no signs of abatement or getting satiated means that the natural rate of interest is even lower.

If the supply of safe assets were to go up, to 'hit the equilibrium', it's not their yields that would rise, the yields on risk capital would reduce.

For someone whose fundamental theory depends on recognizing that there are different kinds of capital that are not perfect substitutes, Williamson does not do a good of modelling this difference.

About Krugman/Stephenson: I used Stephenson's Intermediate Macro textbook as an undergrad. He had one chapter at the end of the book about the IS-LM model. And you can tell, he was pretty much forced to include it. So, I get that he doesn't "like" IS-LM, and that it's got to be frustrating for him that the IS-LM model has held up far better in the current environment then his micro-foundations approach, but there's no reason for him to take it so personally.

Maybe it would work better for him to just admit that some models work better under some circumstances, and others look really great on paper, but don't hold up well under stress?

IS-LM is not a model. It so many more degrees of freedom than it should, so it can reproduce anything after the fact. In short, its "not even wrong."


So many ridiculous statements in this one. Presidential candidates are not trying to appeal to the median voter across a "large number" of states. They are trying to appeal to the median voter in about a dozen of them.

mere regional transfer programs, switching across regions every four or eight years, would be quite bad enough.

Please, entire electoral college and Senate is a giant transfer program from California and New York to Alabama and Kentucky. These sort of regional differences and distortions ALREADY exist. California has the largest number of Republican voters in the country - Republicans can do just fine there and no Democrat will carry 100% of that state nor will the be able to exclusively pander to all the voters of that state. On the other hand, we are hearing more about ethanol and wind farming than anyone in the other 45 states not near Iowa will ever care about. We had fifteen minutes in a debate dedicated to that.

I'm fine with the electoral college, but the existence of that system itself is enough for me to not give two sheets about right-wing grievances over Affirmative action because they rural white conservatives are beneficiaries of the greatest political affirmative action scheme out there.

First, since when were Alabama and Kentucky swing states?
Second, farm subsidies are a relatively small distortion compared to country-wide pandering. The electoral college promotes small-scale vote buying instead of large-scale vote buying. As someone who lives in a popular vote country, I would far prefer an electoral college in order to help tamp down on the value destroying behavior of politicians.

I didn't say they were swing states, they are small states that have benefited from regional transfer programs already.

Country-wide pandering? Oh no! Large-scale vote "buying?" Oh not, god forbid that politicians throw a bone to the other 75% of the population!

I recommend Tara Ross's Enlightened Democracy: the Case for the electoral college.

There are many benefits of the EC. It forces moderation on the national level with the 2 party system - since a majority of EC votes is required to win. It prevents regional and possibly extremist candidates from gaining too much power. It forces a sufficient distribution of EC votes to win, especially in close national elections. It has proven to be an effective tool for keeping our very heterogenous society stable.

Anyway, right before election time is usually right when we hear the cries to abandon this institution. Yet, our government at the national level is based on representative democracy, including the electoral college.

It will be interesting to watch what happens when Obama wins the EC but loses the national popular vote, as is very likely. Will Al Gore sing his mantra of "one man - one vote?" Will the chorus of liberal activists decry a tainted election? doubtful.

#1 is a great example of how status quo bias makes otherwise reasonable people say really stupid things. That's all there is to it.

Does Garett Jones think we don't have regional conflicts in the US?

Sweet juggling video.

I'd rather hear Garret Morris defend the Electoral College.

I'm gonna get me a shotgun...

The justification for the EC (and the Senate) remains as it always has been. Without those, farm policy would be set by the much more populous urban areas; public land use policy (which lands are overwhelmingly in the West) would be set by the eastern third of the country. We're also starting to see some non-traditional regional conflicts with a population mismatch. For example, policy that drives higher expenses to implement tougher emissions control on coal-burning power plants is being driven by states with lots of people but that don't burn much coal.

Isn't the result of this a "farm policy" that features tons of bs subsidies from the eastern third of the country and populous urban areas to the rural areas?

As if farm policy is really even in the top 25 of important policy matters. Giving them ability to control "farm policy" also means they the ability to control every other policy.

There is a pretty long list of states that get much of their electricity from coal that voted for Obama.

That's a good description of the farm subsidy cash flow. Subsidies that were created as part of a set of programs implemented in the 1930s, with the support of the coastal and urban areas, to ensure that rural states weren't relegated to a permanent second-class status. And absent those programs, rural states would be back on the same path. This problem isn't new or unique to the US; how to keep rural areas from falling behind has been a problem as long as there have been cities.

Look at the lists of states that sued the EPA on key points. Of the ten that sued to force the EPA to regulate carbon dioxide, coal is a very small part of the generating mix in eight of them. Of the 14 states that initially sued the EPA over the new power-plant particulate, NOx and SOx emission rules, all are heavy coal users, and in this election cycle, all are firmly in the Romney column or at best toss-ups.

The point is that there are groups of states that still fear being overruled to their detriment by small but heavily populated regions. Easily enough of them that a constitutional amendment going to a straight popular vote for the Presidency is DOA. Something like the National Popular Vote Interstate Compact may ultimately do an end-run around the EC, but they won't ever get it into the Constitution.

there are groups of states that still fear being overruled to their detriment by small but heavily populated regions.

Why does the fact that some heavily populated areas are small matter? This seems to imply that acreage somehow ought to have political power. Besides, it's not a question of "states" being "overruled," it's a question of sensible methods of collective decision-making.

National policy affects people. Giving some people vastly greater voice than others because they live in certain areas defined by mostly arbitrary lines on a map is truly silly.

"National policy affects people. Giving some people vastly greater voice than others because they live in certain areas defined by mostly arbitrary lines on a map is truly silly."

It's not the geographic size of the state that matters but the difference in population. During the original Constitutional Convention the smaller populated states insisted on it to protect themselves from being dominated by the larger populated states.

It's pretty much irrelevant that you don't like it. It's a Constitutional Right.

That I don't like it is no more "irrelevant" than that you and Jones do. It's in the Constitution, true, though there are ways around it.

I understand thehistory, more or less, but that doesn't make it a good idea. The notion of states as reasonably separate entities may have made some sense 200+ years ago. Today it's just silly in most cases. The majority of states are creations of the federal government, not the other way around.

Besides, why, on questions of national policy, should states matter at all? It's people who pay taxes, fight in wars, etc., not states.

"It’s in the Constitution, true, though there are ways around it. "

Wow. If you truly believe that, the US is the wrong country for you.

#3 is completely out of this world. Unreal!

One thing I'd like to see in defenses of the Electoral College is why the problems it is claimed to advert somehow never happens in any other country with a presidential system and where the president is elected directly by popular vote; or for that matter in California, which after all has a ninth of the population of the United States but somehow stumbles along despite directly electing their governor by popular vote.

It takes a bit of chutzpah for Stephen Williamson to imply that others are using simple-minded models to then say something like this, "Money, for example, is a pure bubble, as its fundamental is zero [makes same point with government debt]...Thus bubbles can be a good thing. We would not compare an economy with money to one without money and argue that the people in the monetary economy are "spending too much," would we?"

Hmm, OK, let's write down a model that assumes 0 transaction costs and then conclude that there is a bubble in money demand. A more sophisticated model that takes into account liquidity and transaction costs may well give a completely different conclusion.

So for the #1 EC post... What exactly is the policy that your theoretical marginal Californian Republican from Orange County would flop to Obama for, that Obama would propose if only it would do him some good?
What would Romney say to a voter in south Texas to convince him to switch his vote, if only that vote mattered? And try to do it without losing his Orange county voters? (trick question, the answer is he would say anything)

If you don't like the electoral college, then you shouldn't defend the senate, either. And if you don't defend either, then you shouldn't be defending state governments and federalism, too.

Well, given it's recent record, there probably are not a whole lot people defending the Senate at this point.

The rest of it doesn't follow. Just because I think it's better that candidates cater to California, New York, and Texas rather then Florida and Ohio doesn't mean that I don't think that there are significant regional differences across America that can be better met by regional governments, and that I don't think those governments should have resources and power to meet their different challenges.

I don't, actually.


Why would a currency pegged to a currency of a larger economy (HKD to USD) become a reserve currency preferentially to the large economy's currency?

I am totally agree with your thoughts. Keep doing these type of work.

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