J. Bradford DeLong's Blog, page 2068

A Bureaucratic Coup at Berkeley...

http://ias.berkeley.edu now reads:

International and Area Studies at UC Berkeley: IAS comprises nine interdisciplinary area research centers and institutes. These units support both contemporary and historical research on every region of the world, facilitating the work of more than 800 affiliated faculty and visiting scholars, hundreds of graduate students and thousands of undergraduates. Robert Price, Associate Vice-Chancellor for Research oversees the operations of all IAS Centers and Institutes.

It used to read:

International and Area Studies at UC Berkeley: Supports six interdisciplinary undergraduate and graduate degree programs. Includes brief descriptions, course lists, events, fellowships, and a staff...

Why this has happened I do not yet know...

More on Fukujima

More:

Discussion Thread – Japanese nuclear reactors and the 11 March 2011 earthquake « BraveNewClimate: Information on how this started that I had not seen before, from http://www.greenaction-japan.org/modules/wordpress1/index.php?p=2. This explanatory piece arrived at 17:55 from Takeshi Sakagami:

Fukushima Daiichi Nuclear Power Station Unit 2 lost its cooling system at 13:26pm.

Unit 2 was initially expected to have a possible core meltdown earlier than Units 1 and 3.
Estimating by the release of information from the Prime Minister of Japan and his Cabinet, as well as news media coverage, the tsunami hit Fukushima Daiichi Nuclear Power Station 50 minutes after the earthquake at 15:40 on the 11th, causing the emergency diesel generators to stop functioning. The Reactor Core Isolation Cooling pump of Unit 2, however, activated its water injection system the moment the reactor automatically shutdown.

A problem occurred at 20:30 when the M/C (Main Switchboard) was submerged underwater. This prevented proper monitoring of pump operations and the reactor’s water levels. The situation had to be managed without proper information from the site.

As a result, at 20:50, Fukushima Prefecture released an evacuation order for those living within 2km of the reactor. The government also released an evacuation order at 21:23 for those living within 3km and a stay-home order for those within 10km of the reactor. The government’s orders were released following prefectural correspondence.

TEPCO and NISA (Nuclear and Industrial Safety Agency) made two predictions for pump malfunctions at 21:00 and 22:00. The prediction for 22:00 had fuel exposure at 22:50, meltdown at 24:50, and a reactor containment “bent” (intentional release of pressure) at 27:20.

At 21:54, water levels were identified as L2(low-low) using temporary power. However, since this temporary power lasted only a short time, there were measures to secure an electric power supply through a power source car. This trial failed, as they could not connect to the source.

The predicted time for meltdown and reactor containment vessel venting (outer air release) passed without successful power connection.

However, the Reactor Core Isolation Cooling pump was operating. This information was discovered 13min after the predicted time for a reactor containment vessel bent. Water injection continued.

While this was happening, the Unit 1 situation got worse, as its pump was not operating. Problems occurred in Unit 1, followed by Unit 3.

Unit 2’s current state of problems include deterioration of the Reactor Core Isolation Cooling pump function, rising pressure in the reactor, and a lowered water level. NISA stated they would try recovering pump functions by lowering pressure through a reactor containment vessel venting (releasing radioactive inner air to the outside). Sea water was used so as to keep as much water as possible in the reactor containment vessel’s suppression pool.

Paul Krugman: Roots of Macroeconomic Ignorance

PK:

Roots of Macroeconomic Ignorance: Brad DeLong discusses the remarkable profusion of wrong-headed macroeconomic ideas, and blames Milton Friedman — not because Friedman himself was that wrong-headed, but because he led many economists down a path that eventually left them ignorant of basic principles.

I have some quibbles: Brad, I think, telescopes the process. Today’s freshwater economists don’t believe in Friedman-type monetarism; they’re two intellectual generations of intellectual retrogression beyond that. The first post-Friedman generation bought into the Lucas-type argument that no anticipated shock to demand can have any real effect; when that model failed, the next cohort turned to real business cycle theory, in which recessions are basically like bad weather that both reduces a farmer’s productivity and induces him to stay indoors.

But Brad is right about the larger point — that having spent the past 30+ years carefully forgetting all about demand-side shocks, many economists found themselves “trying to think complicated issues through on the fly from scratch” — and saying some very foolish things, things that economists were supposed to have gotten past 70 years ago, in the process.

This is presumably the answer to my question about why Keynesians seem to understand New Classical models, while the New Classicals themselves apparently don’t: the Keynesians have thought long and hard about demand, the classical types have never done so, not even in the context of their own models.

Probably the most painful thing in Brad’s notes is Robert Lucas’s sneering dismissal of Christy Romer, whom he ridicules as someone who just made stuff up on the fly — and who then makes up his own version of Ricardian equivalence on the fly, and gets it completely wrong.

I wish I could believe that this whole episode would lead to some serious soul-searching on the part of all macroeconomists. But while the likes of Olivier Blanchard are indeed reconsidering their views, the people who got things completely wrong are showing about as much self-awareness and remorse as, well, Wall Street.

What the Frack Is Going on in Fukujima?

Or, why don't I know of any good weblogs run by nuclear engineers?

Hiroko Tabuchi and Matthew Wald write:

Risk of Meltdown Spreads at Japanese Plant: TOKYO — The risk of a meltdown spread to a third reactor at a stricken nuclear power plant in Japan on Monday as its cooling systems failed, exposing its fuel rods, only hours after a second explosion at a separate reactor blew the roof off a containment building.... Operators fear that if they cannot establish control, despite increasingly desperate measures to do so, the reactors could experience full meltdowns, which could release catastrophic amounts of radiation. The two reactors where the explosions occurred are both presumed to have already suffered partial meltdowns — a dangerous situation that, if unchecked, could lead to full meltdowns....

Mr. Edano said cooling systems at a third reactor at the Fukushima Daiichi plant had failed. The water level inside the reactor fell, exposing the fuel rods at its core for more than two hours despite efforts to pump seawater into the reactor, he said. Exposure of the rods means they heat up, melting their outer casing and raising the risk of a meltdown. At first, water was successfully injected into the reactor and the rods were again submerged. But new problems resulted in the rods being exposed again. A vent that had been letting out steam from the reactor closed, leading to pent-up pressure inside the containment vessel and hampering water from being injected. Water levels then fell rapidly, leaving the fuel rods again exposed, Tokyo Electric officials said at a news conference early Tuesday.

The jury-rigged fire hose pumps being used by the workers have added to the crisis by hindering efforts to keep reactors adequately cooled...

And at this point I have to say that Tabuchi and Wald do not seem, to me, to know what is going on. You want to keep the fuel rods submerged in order to keep them cooled so they don't melt. Pumping water into the reactor keeps the fuel rods submerged and keeps them cool. Jury-rigged fire-hose pumps that pump water into the reactor help keep the reactor adequately cooled: they don't hinder it.

They go on:

Difficulties in gauging exactly how much water remains in the containment vessel, as well as what exactly is occurring at the heart of the reactor, have also added to problems.... Hidehiko Nishiyama... said plant workers had renewed efforts to flood the reactor with seawater, and readings suggested that water again covered the fuel rods. Workers were also battling rising pressure within the reactor, Mr. Nishiyama said. They have opened vents in the reactor’s containment vessel, which houses the fuel rods, a measure that could release small amounts of radiation....

On Monday morning, Tokyo Electric, which runs both plants, said it had restored the cooling systems at two of three reactors experiencing problems at Daini. That would leave a total of four reactors at the two plants with pumping difficulties...

Reading between the lines (although it would be nice to know):

They lost the pumps--overwhelmed with seawater from the tsunami
They lost the power grid--washed away with seawater from the tsunami
They lost the generators--overwhelmed with seawater from the tsunami
They have brought in firehoses to connect the ocean to the reactors
They have brought in extra diesel-fueled pumps
They are pumping seawater into the reactor
The seawater is turning into steam and pressure is building up.
Some of the seawater is going into a higher-energy state by dissociating into hydrogen and oxygen gas--and then at some point all at once all the hydrogen and oxygen gas will revert to the lower energy state and go BOOM...

What Must Be the Case for the Economy to Be at Full Employment?

(1) Given the current price level, the long-term real risky interest rate must be such that total planned nominal spending is equal to the full employment level. In general the lower the long-term real risky interest rate, the higher is total planned nominal spending--this is the "IS" curve: the curve that corresponds to equilibrium in the market for "bonds".

(2) Given the current price level, the short-term nominal safe interest rate must be such that when nominal spending and incomes are at their full-employment level that planned holdings of liquid cash money are equal to the existing money stock--this is the "LM" curve: the curve that corresponds to equilibrium in the market for "money".

(3) The expected inflation rate, expectations of future shifts in short-term nominal safe interest rates, the amount of financial risk in the economy, and the financial risk tolerance of wealth holders must be such that the spread between the long-term risky real interest rate and the short-term nominal interest rate is equal to the gap between those respective interest rates' full-employment values. The spread corresponds to equilibrium in the market for "quality."

Recessions happen when:

(1) A shortage of savings vehicles to transfer purchasing power from the present into the future induces spenders to cut back spending and save more. Even if the money stock (and thus the LM curve) and the spread remain at their appropriate full-employment balanced-macroeconomic values, spending will fall and unemployment rise.

(2) A shortage of liquid cash money leads spenders to cut back spending to try to build up their liquid cash money balances. Even if the relationship between spending and real interest rates (and thus the IS curve) and the spread remain at their appropriate full-employment balanced-macroeconomic values, spending will fall and unemployment rise.

(3) A shortage of high-quality assets or expected deflation or expected future monetary contraction leads the spread between the short-term nominal safe interest rate and the long-term real risky interest rate to rise. Even if propensities to spend, to hold money, and the money stock remain at their appropriate full-employment balanced-macroeconomic values, spending will fall and unemployment rise.

And, of course, a shortage of any of these three classes of financial assets--savings vehicles ("bonds"), liquid cash ("money"), or high-quality assets ("quality")--relative to its full-employment balanced macroeconomic level can arise ither becasue of a reduction in the supply of such assets or an increase in the demand for such assets. In 2008 we had a fall in the supply and a rise in the demand for high-quality assets with the financial crisis. In 2001 we had a fall in the supply of savings vehicles with the collapse of the dot-com boom. In 1982 we had a fall in the real supply of liquid cash with the Volcker disinflation.

Is there a presumption that a recession that arises out of derangement in any of these three financial markets--for bonds, for money, or for quality--is best cured by a strategic government intervention to repair the supply-demand full-employment imbalance in that particular market? Yes, if you thought that the macroeconomy was in balance before the recession--that the long-term risky real interest rate and the spread were at their right value before. Otherwise? It is pretty clear to me that you do not want to reattain full employment with spreads that are "too low" or "too high", or with a long-term real risky rate of interest that is either "too low" or "too high". But what the appropriate values are of those variables is not something I would claim to have strong evidence-based views on.

Bob Lawless: Payday Lenders and the Middle Class

Bob Lawless:

My Personal Metaphor for the Middle Class: Today, I am visiting my parents' home and went for a walk that included a stroll down the commercial strip on the busy street near their house. Along this commercial strip in a solid middle-class neighborhood in Peoria, Illinois, is a small red brick building that thirty years ago I remember housing an insurance agency. What is there today? A payday lender. My stroll turned into my own personal metaphor for the change in the middle class over the past generation. In place of an institution that cushioned against risk, the neighborhood now has an institution that creates it.The local bowling alley is shuttered as well -- everyone now just can  "bowl alone." The payday lender that inspired this post does not even really stand out. In that one-quarter mile stretch of that commercial strip, there are are now five payday or auto title lenders.

David Frum: Why Newt Gingrich Should Not Be President

DF:

David Frum: Family values and the Newt Gingrich question: Pete Wehner tries to assess how much past marital infidelity will hurt Newt Gingrich’s presidential chances.

Many of the rest of us are on a continuum when it comes to deciding how much infidelity should matter in the selection of a president. Facts and circumstances are crucial. Was the infidelity an isolated instance or a chronic pattern? Were the transgressions long ago or recent? What levels of deception and cover-up were involved? What was the position of authority the person held when the infidelity occurred? Was there an alarming degree of recklessness on display? What evidence is there that this person has changed his ways? Has this person shown other worrisome signs when it comes to character and trustworthiness?

These are all fair and interesting points, but they do not address the reason that Gingrich’s personal life has been – and will be – so politically lethal. It’s not the infidelity. It’s the arrogance, hypocrisy, and – most horrifying to women voters – the cruelty. Anyone can dump one sick wife. Gingrich dumped two. And that second dumped wife is talking to the media. From the Esquire magazine profile of Newt Gingrich published in September 2010:

After going to the doctor for a mysterious tingling in her hand, [Marianne Gingrich] was diagnosed with multiple sclerosis. Early in May 1999, she went out to Ohio for her mother’s birthday. A day and a half went by and Newt didn’t return her calls, which was strange. They always talked every day, often ten times a day, so she was frantic by the time he called to say he needed to talk to her.

“About what?”

He wanted to talk in person, he said.

“I said, ‘No, we need to talk now.’ “

He went quiet.

“There’s somebody else, isn’t there?”

She kind of guessed it, of course. Women usually do. But did she know the woman was in her apartment, eating off her plates, sleeping in her bed?

She called a minister they both trusted. He came over to the house the next day and worked with them the whole weekend, but Gingrich just kept saying she was a Jaguar and all he wanted was a Chevrolet. “‘I can’t handle a Jaguar right now.’ He said that many times. ‘All I want is a Chevrolet.’ “

He asked her to just tolerate the affair, an offer she refused.

He’d just returned from Erie, Pennsylvania, where he’d given a speech full of high sentiments about compassion and family values.

The next night, they sat talking out on their back patio in Georgia. She said, “How do you give that speech and do what you’re doing?”

“It doesn’t matter what I do,” he answered. “People need to hear what I have to say. There’s no one else who can say what I can say. It doesn’t matter what I live.”

Who needs oppo research with quotes like those on the record?

IAS 107: March 15, 2009 Lecture: Wrong Models of the Great Recession

20110315 ias 107.pdf

Nick Rowe: Where Will the Demand Come From?

NR:

Worthwhile Canadian Initiative: "But where will the demand come from?" In praise of older Keynesians: It gets asked in every recession. Recovery requires an increase in demand. "But where will the demand come from?"... Macroeconomics is ultimately about closed systems.... Demand cannot come from outside the system. There is no outside. Demand comes (mostly) from itself. That's the answer that makes no sense whatsoever to most people. It's the logic of the Old Keynesian multiplier. The Hawtrey-Kahn-Keynes-Clower multiplier contains an important truth that is missing from nearly all modern macroeconomics.

The short side of the market determines quantity traded. Quantity sold is whichever is less: quantity demanded; or quantity supplied. If there is excess supply of goods in aggregate, then realised sales of goods, and income from those realised sales, is demand-determined. And if people are unable to realise their plans to sell as many goods as they wish (if they face Clowerian quantity constraints) then their demand for goods will depend on their realised sales, which is demand-determined. Demand creates income. And income creates demand. So demand creates demand. That's the fundamental insight of the Old Keynesian multiplier that was lost in the New Keynesian Euler equation.

Now I'm going to bring together two very unlikely bedfellows: Keynes and Say.

It's income from the realised sale of newly-produced goods that provides the wherewithal to purchase those same newly-produced goods. And if some people save part of their income and lend it to others to spend (on investment or consumption) more than their income it makes no difference in aggregate. Whether spent or lent, (nearly) all income is spent. That version of Say's Law (there are many versions, most having nothing to do with Say), which says that people in aggregate plan to spend all their income, is very nearly right. The marginal (and average) propensity to spend (on consumption plus investment) is (very nearly) equal to one. If the marginal propensity to spend is one (if the slope of the Keynesian Cross AE curve is one), then the Old Keynesian multiplier is infinite. An infinitesimally small exogenous increase in desired expenditure is sufficient to bring the economy to "full employment", where the supply constraint bites and stops further expansion. That, actually, is very close to my view of macroeconomics. It's an ungodly mix of Keynes and Say, seen through a Clowerian lens.

But it's only "very close". It's not exact. And that version of Say's Law, in which aggregate demand is determined by and equal to aggregate income, is only "very nearly" correct. There's something missing. What's missing is money. Add monetary disequilibrium to the mix of Keynes and Say.

None of the above makes any sense in a barter economy. The very distinction between aggregate supply and aggregate demand only makes sense in a monetary exchange economy, where we sell goods for money and buy goods with money. Money is the medium of exchange. As Yeager noted, there are always two ways to get more money: sell more goods; and buy less goods. If you face Clowerian quantity constraints on selling more goods, because there's an excess supply of goods, you can still buy fewer goods if you want to get more money.

It is money, and only money, that makes Say's Law false. If, in aggregate, we wish to hold more money than we currently hold, we will plan to spend less than our income. If, in aggregate, we wish to hold less money than we currently hold, we will plan to spend more than our income. An excess demand for bonds won't falsify Say. If there's an excess demand for bonds we can't buy more bonds, because the quantity of bonds is supply-determined. And if we can't buy more bonds, we have to spend our income ourselves. Or hold more money.

If the desired stock of money were identically equal to the actual stock of money, at all levels of income, then the Old Keynesian Cross model would have an indeterminate equilibrium. Any level of income between zero and "full employment" would be an equilibrium. At any level of income, demand would equal income, and income would equal demand. And so an infinitesimally small increase in the supply of money, or decrease in the demand for money, would be enough to create a self-perpetuating increase in demand, increase in income, further increase in demand, to get the economy to expand to where the supply constraint stops any further expansion. Or where inflation reduces the real value of the money supply, or leads the central bank to take away the punchbowl.

So don't ask where the demand will come from. It comes from itself. And from an excess supply of money.

Fukushima Meltdown

Josef Oehmen:

Why I am not worried about Japan’s nuclear reactors: If you want to stay informed... consult the following websites:

http://www.world-nuclear-news.org/RS_Battle_to_stabilise_earthquake_reactors_1203111.html
http://bravenewclimate.com/2011/03/12/japan-nuclear-earthquake/
http://ansnuclearcafe.org/2011/03/11/media-updates-on-nuclear-power-stations-in-japan/