Sunday assorted links


Wrong. The only one reliable rule of thumb in macro is that academic and Wall street economists are as bad at forecasting as so-called climate scientists.

If macro doesn't even have a single reliable rule of thumb, what does it have? Some rather arbitrary definitions and a tautology? Is that it?

America doesn't know how to make planes anymore. The rot is everywhere.

As they say, climate scientists live in your head rent-free.

1. Duh. As national trends are toward more concentration, local trends are in the opposite direction. Why is that? Think about it: what are all those local folks working for local business going to do when local stores close because they cannot compete, move to NYC and become bankers? Malls and strip shopping centers don't become ghost towns overnight, they die a long and slow death, a death prolonged by the locals who have no other choice but to do what they have always done. Cochrane needs to get out more and visit small town America.

I won't pretend I understood that article, but my local mall - the only mall in one of the 15 most populous cities in the country - loses a store every few weeks. It is taking on a flea market atmosphere, and at the moment there's a Mexican circus set up in the defunct Sears parking lot.

But it still has a Nordstrom's - that's classy, right? I want to believe.

Bigger problem is that it apparently relies on unadjusted 8 digit SIC data without adjustment. A plant that produces sugar from cane is classified in a different SIC than one which produces from sugar beets. Nor does the data adjust for imports, which compete with nationally produced products.


"move to NYC and become bankers"
Reminds me of the old feudal order of Japan. Spend one year in your neck of the woods. Then spend the next year in Edo to justify your existence to your overlords.

'The lower line is the effect on concentration in the years before and after the top national firm enters a market. Concentration drops. If, when Wal-Mart came to town, all the exiting firms went under, concentration would rise. The upper line shows you concentration ignoring the largest enterprise. It's unchanged. '

So, there are 3 local stores in an area. Walmart shows up, two local stores go under, and a Family Dollar and a Dollar General open up - concentration unchanged. Except where there no national chains before, now there are three.

Just another example why loving B-B is a good long term bet.

#4. This is a bit of a pointless headline regarding bitcoin trading volume. Pretty much everyone in the space knows that the reported volume of some very sketchy exchanges was mostly just wash trading etc. Almost no one used those volumes in any sort of analysis. Theres been a few "exchanges" reporting billions in volumes for years and absolutely no one considered it legitimate. The bitwise presentation IS very good though, but not for this reason. Also, important to note that the bitwise presentation is just spot (actual BTC) volume. The largest crypto exchange by volume, BitMex, is NOT included. They are a BTC derivatives exchange and most would agree is the leading exchange for price discovery and movement. Granted, much of their volume is due t leveraged trades, but even accounting for that, it's a huge amount of volume that is not included in these figures.

TLDR, this isnt new and it doesnt change anything. Everyone knew it. It's a bit like if a store were to increase their prices 10x, everyone knew this deliberate increase was common knowledge, and then offer a 90% discount. Pretty anticlimactic.

This is a perfect summary, 100% agree.

2. I commented at Sumner's blog (his PPS) for his honesty about Steve Moore's nomination to the Fed, and then for his rule of thumb about macro, I questioned continued reliance on rising asset prices and high levels of consumer debt to keep aggregate demand and the economy from collapsing and asked what would be a better alternative and what polices would promote it and how we would transition to it without risking another depression. Sumner's response: "Rayward, And I admire your dishonesty." My dishonesty? Sumner cannot tolerate anyone who might even question his orthodoxy no matter how questionable orthodoxy might be. Did my question seem dishonest?

I feel your pain.

This applies to the Fed, and most academic and Wall Street economists: everybody but them pays for their incompetence.

See (first) my comment above: " Wrong. The only one reliable rule of thumb in macro is that academic and Wall street economists are as bad at forecasting as so-called climate scientists."

Einstein knew nothing about post-modern American insanity. Per Henry Kaufman, since 1913, when it as established to abolish the business cycle, the Fed has attained unprecedented powers and prominence - precisely because of all its policy failures. The same applies to guys like Sumner.

Stop trying to communicate with them. They deserve only to be mocked.

I wouldn't take it personally. He's probably irritable from doing battle against the MMT crowd, which are legion on the internet. Not a conversation I'd want to wade in for sure.

I generally don't read Sumner's blog because the subject matter is too technical for me, but I have found him to be extremely gentlemanly in his responses to commenters. So this is a surprise!

No dishonesty. You're just a simple country lawyer that doesn't understand economics or finance but is doggedly persistent.

No dishonesty. You're just a simple country lawyer that doesn't understand economics or finance but is doggedly persistent.

5. Agnes Callard stands out as my favorite Conversations guest; the episode was memorable and I have enjoyed following her writing since. I look forward to this video.

2.Yogi B: prediction is hard, especially about the future.

Mueller: Seems true about the past too

#2 Macroeconomics Fail


... What --- Macroeconomic central-planning doesn't work as advertised ? (don't tell Bernie or AOC)

By regarding the metaphor of “ the economy” as something that exists in the real world, mainstream economists reach a bizarre conclusion that human individuals don't direct savings/investment/production ... but that abstract "economic" aggregates really guide things -- and that noble government agents can use this information to properly control and expand "the economy".

2. There is only one reliable rule of thumb in macro.
"Things change"
A bit, how else do we estimate macro except by perturbation.

... why does a free market economy of individuals need macros at all ?

government interventionists are the only ones imagining a concrete need for macroeconomics.

That’s quite a bit over simplistic. There are many uses of macroeconomic principles that are beneficial to profit maximizing firms in a free market economy. What are the results of different labor and production costs across many companies? How is a free market economy affected by protectionist policies in a “less-free” market trading partner? There are many other (and better) examples.

#3...I'll read the Atkinson book along with your book, but be forewarned, the sword shall be unsheathed.

6. Video of a vortex of thousands of puffins flying. Short.
First, step one. What about Nash and his pigeons wandering the court yard? That is another hologram, the pigeons operate in 1-D space, worry only about closeness to nearest neighbors. But they form a 2-D circular pack. It is still the tree trunk abstract model. When they get crowded, next to their neighbor, they all suddenly fly away.

How accurate is the circular pack? The accumulated error, from periphery to center, must exceed the error bound for close packing, the pigeons know that bound. We see birds as lower intelligence because this is a low intelligence packing behavior, 1D trunk, they mostly cannot form in 3-D ellipsoid. That i why the puffins vortex, from surface in sky to surface in the ground, they have to fake a vortex highway, no 3-D sense.

Economics is not value-free. Economics is always about optimizing one or another objective function. If you are doing any sort of optimization, by definition, you have embraced a value.

Now, economics can be used to optimize different objective functions. So the analytics are not married to a single goal, but if you are using economics to answer a question, you are engaged in a value-based exercise by definition.

Economics is also about understanding how the economy works, how people make decisions, etc. Your definition of economics is way too narrow.

You are right (and those are the parts that I like). But, there is an undeniable premium on making "policy implications", which drives the bulk of the funding and is why (IMO) economists are paid higher salaries. Without that part, well, Ariel Rubinstein described game theory as like a sculpture in a park.

1. Maybe there is also a distinction between B2C and B2B businesses? It seems that there is less concentration among most consumer-facing businesses today. Having lived in the same Midwestern city for decades, I have many more options for restaurants and retail today than ever before. And in the last few years, I have noticed an explosion of new consumer products and retail companies facilitated by the Internet. Maybe there is more concentration on the B2B side though.

I'd be happy to have more than internet service provider in my city.

Yes, the 95% of volume being fake on bitcoin is a real thing. I second what Dan (other commenter) says about most in the space already knowing this, but the Bitwise report was an excellent analysis of the situation. Some friends and I were joking last week that creating an exchange with fake volume is the new ICO. Many created ICOs in 2017, trying to make easy money. Now it seems many are creating trading platforms for the same reason. From my understanding, the fake volume is done to give the appearance of liquidity in an attempt to attract users.

5. Loved the section of conversation about reciprocal exchanges in deeper markets. I think Robin Hansen has a contribution here: that we societally are either not ready or not able to admit to the trades we actually do. So wouldn't that be where to look for understanding, amongst the trades that are actually consumed? And certainly it would be easier to start away from the life and death scenarios or the flagrant consumption of luxury. (Not to take anything away from Thorstein, a Minnesota native and Carleton grad I might point out.) The gift giving scenario makes an important point about the potential indebtedness created in the receipt of a gift, or anything given for that matter like a college education or welfare. Lots to think about here...

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