J. Bradford DeLong's Blog, page 329

The very sharp Stefanie Stantcheva gets trapped into ling...

The very sharp Stefanie Stantcheva gets trapped into linguistic quicksand, and disappears into the mire. Her statement that "t���s good to be clear... whether you are making an efficiency argument about the reaction to taxes or expressing a social value judgment..." is totally incoherent: so-called "efficiency" arguments rest on a social value judgment���that the existing distribution of wealth corresponds to utility and deservingness. Whether the total of behavioral responses to balance-preserving fiscal interventions raise or reduce societal wealth holding the distribution of wealth constant hinges on who the Harberger triangles go to or come from. If the people they go to and come from do not have the same marginal utility of wealth, then "efficiency" can be inefficient.

And to claim the the current distribution of wealth corresponds to utility and deservingness ought to be a lie too big for anyone to swallow.

I think all these messes are potentially avoided by working in utility space rather than wealth space from teh get-go. But what do I know?

And, otherwise, it's great: Stefanie Stantcheva: "Optimal Capital Taxation in 7 Tweets: "Simplifying a lot, but here is the core logic...

...How much you (e.g., the government) want to tax anything (a given asset, or income from a capital asset or labor) depends to a first order on 2 factors:

How much you value transfers to the people who own this asset or income. Value them more? You should tax it less. Often, (but it's a matter of social judgement), societies value $1 given to a lower-income person more than $1 to a higher-income person.

How strongly people who own the asset or receive the income will react to taxes (e.g, will they save less? work less? how much less?). The stronger this reaction, the less you can tax it.

The data can tell us who owns each asset or gets each income flow (part of factor 1) and how strongly each will react to a tax change (factor 2). But, deciding how much we, as a society, value transfers to and money in the hand of different people is ultimately a social and political choice that the data alone cannot make for us. Eg, one may decide to not tax financial assets because ���They react very strongly to taxes by disappearing abroad!��� (could be checked in data) &/or because ���Individuals with financial wealth are job creators & deserve to keep their money!��� (deservingness is a matter of judgment).

Or, you may decide to not tax housing despite the fact that is is very immobile & slow to react to taxes, because it's owned more broadly including by lower-income people & you don���t want to take away from them.

It���s good to be clear, when arguing for one tax change or another, whether you are making an efficiency argument about the reaction to taxes or expressing a social value judgment. These tend to often be blurred in the debate...

#shouldread

Some Fairly-Recent Must- and Should-Reads...

Simon Wren-Lewis: Brexit Endgame: second stage (which is unlikely to end with no deal): "A No Deal Brexit. It was inevitable that the EU would use this as a threat-that is the whole point of the A50 process...

Dave Roberts: American white people really hate being called ���white people���: "They want their America, the America where white dominance is so ubiquitous as to be unremarkable, back. They keep saying so.... Being judged and asked to justify itself, as so many subaltern groups are judged and asked to justify themselves, feels like an insult. If you doubt that, go read this Twitter thread."

Andrew Reeves: "A really, really good sign that someone has read neither Thucydides, Tacitus, Homer, nor Plato is when that person talks about how Greek and Roman literature teach us about the Greatness of the West...

What was really existing socialism, comrade? This was really existing socialism: Yen Ho: Our Handling of 'The Great Wind': "In the tasks of editing and publishing the poem, we were in error...

Emily R.C. Wilson: "After one of my recent 'Conversation' interviews (in Sydney), someone asked me if the hanging of the slave women in the Odyssey is 'right'...

Robin Wigglesworth: Flat yield curve sends a grim message for investors in 2019: "investors are now starting quietly to fret that the US central bank may be on the brink of making a mistake, tightening monetary policy too aggressively in the face of a vulnerable global economy and still-quiescent inflationary forces. The Fed might get away with two hikes this year, but markets should worry about what might come in 2019..."

Comment of the Day: Robert Waldmann: Cognitive Science, Behavioral Economics, and Finance: "There are two separate questions. One is "are markets efficient?", which means there always is no winning arbitrage strategy. The other is "is there an arbitrage strategy which will always work?"...

Michael D. Bordo: An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime: "From 1880 to the present... the incidence, costs, and determinants of financial crises... combined with narratives..

Some Fairly-Recent Links:

Richard Hartley: Bewick Moreing in Western Australian Gold Mining 1897-1904: Management Policies & Goldfields Responses
Ellis Wayne Hawley: Herbert Hoover As Secretary of Commerce: Studies in New Era Thought and Practice
Lawrence Goodwyn (1978): The Populist Moment: A Short History of the Agrarian Revolt in America (New York: Oxford University Press: 0195024168) http://books.google.com/books/?isbn=0195024168
The Survival of Noise Traders in Financial Markets
The 'new economy': Background, historical perspective, questions, and speculations - ProQuest : J Bradford DeLong; Summers, Lawrence H. Economic Review - Federal Reserve Bank of Kansas City; Kansas City��Vol.��86,��Iss.��4,�� (Fourth Quarter 2001): 29-59...
(2013-04-01): Shrugging off Atlas : Exactly how did once-respectable conservative economists get swept up in moocher class mania?...
(1997-01-01): America's Peacetime Inflation: The 1970s
(1990-08-01): Noise Trader Risk in Financial Markets
(1991-11-01): The Marshall Plan: History's Most Successful Structural Adjustment Program
(20217-02-02): Trading in Trump���s Lies : The loss of US manufacturing employment over the past three decades is undoubtedly a significant problem; but anyone who blames this trend on ���bad��� trade deals is playing the fool. NAFTA, for example, accounts for only a vanishingly small share of the decline...
(2007-09-01): Who Benefited From North American Slavery?
Iain Marlow and Vrishti Beniwal: Biggest Mobile-Phone Plant Masks Modi's ���Make in India��� Struggle : "India���s prime minister has promoted domestic manufacturing/But new investments are down, while stalled projects rise..."

Wall of Shame:

Morgan Gstalter: McConnell: Midterms could be 'a Category 3, 4 or 5' storm for GOP: "'We know the wind is going to be in our face. We don���t know whether it���s going to be a Category 3, 4 or 5'...

Matthew Yglesias: "The highbrow intellectual leaders of the modern conservative movement explicitly conceptualized it as a white nationalist undertaking. Trump is true to this legacy and his intra-movement critics are the innovators...

Eight years of Governor Sam Brownback has seen Kansas lose 8% of its jobs relative to the national average. Now Kansas is Ground Zero for Trump's trade war. Joshua Green: Chinese Sorghum Tariffs Will Hit Hard in Trump-friendly Kansas: "Trump���s Trade War Hits Another Red State: What���s the matter with Kansas? It���ll be hardest hit by new Chinese tariffs...

Will Wilkinson: The DACA and immigration debates are about whether Latinos are ���real Americans���: "Challenging the idea that Latino Americans can be truly American undercuts the very idea of America...

Just when you think the mainstream media could not sink any lower into misogyny and stupidity, it's the Atlantic Monthly!: Scott Lemieux: Are you provoked yet?: "Both James Bennet and Fred Hiatt have been asked to hold David Bradley���s beer...

Ezra Klein: @ezraklein on Twitter: "I don���t know what the [New York] Times should���ve done with Thrush. But I watched the efforts to plant oppo and smear @lkmcgann in the aftermath of her reporting. Anyone who thinks coming forward with these experiences is easy, even now, is wrong. I am beyond proud to be her colleague..."

Yes, this is as bad a violation of academic standards as it looks: Henry Farrell: The public choice of public choice: "Now this... 'financial ties to the Charles Koch Foundation... [but] George Mason University has cited its academic independence.

The Brexiters never had a plan for what they would do if they won the referendum. And they still do not have a plan. I do not see a road other than "transitional" arrangements that keep things as they are without the UK having any voice in Brussels���"transitional" arrangements that will keep getting indefinitely extended: Robert Hutton: Stuck In the Middle: These Are Theresa May's Four Brexit Options: "Her inner Brexit Cabinet has rejected her proposed customs relationship with the European Union...

Gabrielle Coppola: Trump���s TPP Pullout May Have Cost Missouri Its Harley Factory: "Harley-Davidson Inc.���s chief executive officer said he may have kept a plant open in Missouri if the U.S. had stayed in the Trans-Pacific Partnership, the free-trade agreement that President Donald Trump withdrew from last year...

WTF happened to Brendan Nyhan? The braineater has eaten his brain: Josh Marshall: "There are several problems with this logic.: The first is that you are applying jury trial standards to what are political questions. You are also applying statutory standards where they do not exist. As a factual matter the obstruction question is not in doubt...

Josh Marshall: Future of TPM #1: "As a reader, here is wh...

Josh Marshall: Future of TPM #1: "As a reader, here is what I would and do want: if there���s a new story from Alice Ollstein on one of the various family separation immigration court cases, it would be helpful to have the recent stories there too and perhaps a quick explanation of how they fit together...

...If there���s a big story that explains the details or core issues of that court case, a link to that would also be handy. Say there���s a big new development on the Russia front, or some new thing about yet some new contact between Russian intelligence officers and a GOP bigwig. That���s great. But I���d like to be able to look in one place to see not just that one story but a broader read of where whole Russia story is today; or a link to the latest Weekly Primer on Trump/Russia or a selection recent stories to place the new development in the story progression.

On this front we have been admittedly a bit behind. But it���s particularly important for us because following stories through iterative coverage is the heart of what we do.

We won���t necessarily have all of this on day one. What our small but resourceful tech and design time has now spent many months working on is a new publishing system for the front page of the site which will give our team the tools to do this. So there will be a lot of experimentation in just how we use these tools, what seems to work and what doesn���t. But it will make it possible to do things we���ve wanted to do for a very long time but have not been able to do within the publishing tools we have available...

#shouldread

Should We Pity the Poor Global Warming-Denier Fools?

I pity the poor global warming-denier fools who were deluded by Fox News and the Koch Brothers into ignoring���or pretending���not to notice that El Nino events temporarily boost measured global temperatures and volcanic eruptions temporarily retard it:

On second thought, I do not pity them: I pity the rest of us...

And it is time to stop saying: "We cannot tell whether this extreme event would have happened anyway or not". Judea Pearl has some ideas: Judea Pearl: On Global Warming: "Until recently, climate scientists have found it very difficult and awkward to answer questions...

...like ���Did global warming cause this storm [or this heat wave, or this drought]?��� The conventional answer has been that individual weather events cannot be attributed to global climate change. Yet this answer seems rather evasive and may even contribute to public indifference about climate change.

Counterfactual analysis allows climate scientists to make much more precise and definite statements than before. It requires, however, a slight addition to our everyday vocabulary. It will be helpful to distinguish three different kinds of causation: necessary causation, sufficient causation, and necessary-and-sufficient causation. (Necessary causation is the same as but-for causation.) Using these words, a climate scientist can say, ���There is a 90 percent probability that man-made climate change was a necessary cause of this heat wave���, or ���There is an 80 percent probability that climate change will be sufficient to produce a heat wave this strong at least once every 50 years.���

The first sentence has to do with attribution: Who was responsible for the unusual heat?

The second has to do with policy. It says that we had better prepare for such heat waves because they are likely to occur sooner or later.

Either of these statements is more informative than shrugging our shoulders and saying nothing about the causes of individual weather events...

Judea Pearl and Dana Mackenzie: The Book of Why: The New Science of Cause and Effect (New York: Basic Books: 0465097618) https://books.google.com/books?isbn=0465097618

#shouldread
#causation
#statistics
#globalwarming

Health Care and Public Health: Some Fairly-Recent Must- and Should-Reads

Ann Marie Marciarille: David Slusky on The Impact of the Flint Water Crisis on Fertility: "K.U.'s David Slusky gave an interesting talk on "The Impact of the Flint Water Crisis on Fertility".�� A 4.9% decrease in birth weight is hard to ignore...

Austin Frakt: Reagan, Deregulation and America's Exceptional Rise in Health Care Costs: "Why did American health care costs start skyrocketing compared with those of other advanced nations starting in the early 1980s?...

Jo Mannies: On Twitter: "At Truman Dinner, @clairecmc asks everyone to stand up who has a preexisting condition. Notes GOP wants to eliminate insurance coverage for them. Most of ballroom stands up:..."

Benjamin D. Sommers, Atul A. Gawande, and Katherine Baicker: Health Insurance Coverage and Health���What the Recent Evidence Tells Us: "An analysis of mortality changes after Medicaid expansion suggests that expanding Medicaid saves lives at a societal cost of $327,000 to $867,000 per life saved...

Jason Del Rey: Amazon is creating a health care company with the help of Warren Buffett and JPMorgan Chase: "Amazon... plans to work with Warren Buffett���s Berkshire Hathaway and JPMorgan Chase to create a new health care company...

Dahlia K. Remler et al.: Estimating The Effects Of Health Insurance And Other Social Programs On Poverty Under The Affordable Care Act: "The effects of health insurance on poverty have been difficult to ascertain...

Ann Marie Marciarille: What older people should know about Medicare and Medicaid: "Not unlike both the 111th Congress that passed the Affordable Care Act and the 115th Congress that recently amended it with the new federal tax bill, we are often in the dark about our own health care and health insurance systems...

Ann Marie Marciarille: The Amazon Threat to Kill the Hungry Tapeworm: "Health industry stock analysts and observers have been wondering for some time about Amazon's potential to enter the marketplace for health care goods and services...

Joseph P. Newhouse, Mary Beth Landrum, Mary Price, J. Michael McWilliams, John Hsu, and Thomas McGuire: The Comparative Advantage of Medicare Advantage: "We find differences in the distribution of beneficiaries across H[ierarchal ]C[ondition ]C[ategories]���s between TM and MA, principally in the smaller share of MA enrollees with no coded HCC, consistent with greater coding intensity in MA...

Center for American Progress: Medicare Extra for All: "'Medicare Extra for All'...

Mike Males: The Truth About Teen Suicide: "Trend[s] in suicide rates among teens... track... trend among... adults...

Ann Marie Marciarille: Say It Isn't So, Tim: "Sarah Kliff once noted that Tim Jost was 'scary fast/good' with his health law and policy analysis. I could not agree more...

Zac Auter: U.S. Uninsured Rate Rises to 12.3% in Third Quarter

Homer's Odyssey Blogging: "Like Little Birds... They Writhed with Their Feet... But for No Long While..."

So let me procrastinate some more this morning...

Let me riff off of something that crossed my desk last night: Emily Wilson's reflections on her translation of the Odyssey, and on the Odyssey itself. There is one passage that always has been, to me at least, horrifyingly freaky in a very bad way. As David Drake���one of my favorite science fiction and fantasy authors���puts it:

Odysseus caps his victory by slowly strangling���the process is described in some detail���the female servants who have been sleeping with Penelope���s suitors. This is only one example (although a pretty striking one) of normal behavior in an Iron Age culture which is unacceptable in a society that I (or anybody I want as a reader) would choose to live in... a hero with the worldview of a death camp guard...

Indeed:

"When ye have set all the house in order, lead the maidens without... and there slay them with your long blades, till they shall have all given up the ghost and forgotten the love that of old they had at the bidding of the wooers, in secret dalliance."... They led the maidens forth... and wise Telemakhos began to speak to his fellows, saying: "God forbid that I should take these women's lives by a clean death, these that have poured dishonour on my head and on my mother, and have lain with the wooers". With that word he tied the cable of a dark-prowed ship to a great pillar and flung it round the vaulted room, and fastened it aloft, that none might touch the ground with her feet. And even as when thrushes, long of wing, or doves fall into a net that is set in a thicket, as they seek to their roosting-place, and a loathly bed harbours them, even so the women held their heads all in a row, and about all their necks nooses were cast, that they might die by the most pitiful death. And they writhed with their feet for a little space, but for no long while...

Register that: As when thrushes... or doves fall into a net... the most pitiful death. And they writhed with their feet for a little space, but for no long while...

They die the most pitiful death, and they writhe with their feet, but for no long while. That is what Telemakhos wanted. Nobody disagrees with him. And one of the subplots of the Odyssey is: Telmakhos���far-thrower, he who can cast the spear a great distance���grows up.

Emily Wilson writes:

Do Odysseus and Telemachus think it's right? Yes, but... it's about being respected and controlling memories and (re) gaining power. Telemakhos... associates the killing with getting rid of dirt from the house. It's right to take out trash, but not the same kind of 'right' as self-defense or vengeance.

Does THE TEXT show (consistently?) that it's right? Tough question, not skippable. Narrative shows us why Odysseus and Telemachus want them dead. It also shows us what it feels like for them to be terrified and strung up (bird simile). They don't feel their deaths as "right". Is their pain and their deaths... presented as justifiable... a necessary cost for the restoration of Odysseus's household in something like its original state? Maybe. Maybe not. Important grey area. I think the capacity of literature to create these kinds of rich complex questions or fault-lines, between what this or that character thinks, and what the whole poem or story might be saying, is one of the biggest reasons why literature matters. It makes us see/feel/be more...

Is she right? Things are... complex... For one thing, almost all of reading (or listening) takes place between the ears. As Teresa Nielsen Hayden says, addressing authors, readers:

mix the handful of exposition you give them with the story you���re telling, transform it into a detailed real-time color 3D movie in their heads, and credit the whole thing to you. If they take a liking to a character, they can spin an entire human personality out of four facts and a couple of reaction shots, and experience that thing they create as a person that they know. You rely on them. Storytelling wouldn���t work if the audience wasn���t constantly filling in the details from the hints that you provide. Most of them are surprisingly good at it.... Every reader or viewer builds a slightly different experience from the materials you give them. It���s not unjust for them to feel a sense of connection with it, and their doing so takes nothing away from you. It���s an unavoidable consequence of their engagement with your work, so consider rejoicing, because you can���t make it stop happening except by becoming a worse or at least
less accessible writer...

In the case of the Odyssey, we cannot even attempt the move of asking "what reading did the author hope for?" and then assign that the privileged status of the "correct" reading. There was no single Homer. All we can ask is "what was the process of poetic performances and listener reactions that led to this 'death of the slavewomen' passage entering and remaining in the canonical text?" And the answer is that we cannot know.

David Drake has one interpretation of this: that the Iron Age listeners who are applauding (or at least those who are rewarding and feeding) the poetic bards approve of heroes with the "worldviews of death camp guards" because those who have managed to become, thrive, and remain the telestai skillfully apply brutal punishments and generous rewards to hold their little piece of order together with themselves at the top in the wrack after the collapse of Bronze Age civilization. The listeners to the Odyssey in the period of its composition will approve of���and the young males will learn to model themselves on���the acts of Telemakhos her, as he denies the slavewomen anything like an honorable death by the sword and instead gives them a pitiful and terrifying death by strangulation. That is, I think, his view of how the age in which the Odyssey grew has left it mark on the text and story.

Emily Wilson's interpretation is very different. She has had a different life, she has different grey matter between her ears, and so she "fills in the details from the hints" in a very different way. She agrees that Odysseus and Telemakhos believe that they are doing what is necessary��������������and perhaps even righteous: the kind of thing a man with a comprehensive understanding of the situation������������������������would do. But in her view the text goes further, and allows and encourages an identification and empathy with the murdered slavewomen, more than and beyond just noting that their terror at their pitiful death is a salutary thing that will keep the slavewomen of Ithaka on the straight-and-narrow in the future, and that raises the question for���and would have raised the question for not just female and wise male but young male���listeners around an Iron Age campfire of whether Odysseus and Telemakhos here are not being their best selves, are not properly and fully ��������������. And it will have provoked a catharsis of pity and fear in all listeners, even back then, as it does with us today.

David Drake's best works are, IMHO at least, those that are cathartic military horror: awful things happening to people, described in prose with a flatness of affect, because if the people allowed themselves to properly and humanly and humanely register what was happening they would be totally unmanned and unable to function. In no sense are they in any way a glorification of war. And occasionally Drake will allow one of his characters to explain this to others:

Force accomplishes a lot of things. They just aren���t the ones you want here. Bring in the Slammers [Regiment] and we kick ass for as long as you pay us. Six months, a year. And we kick ass even if the other side brings in mercs of their own--which they���ll do--but that���s not a problem, not if you���ve got us. So, there���s what? Three hundred thousand people....

So, you want to kill fifty kay? Fifty thousand people, let���s remember they���re people for the moment.... You see, if we go in quick and dirty, the only way that has a prayer of working is if we get them all. If we get everybody who opposes you, everybody related to them, everybody who called them master--everybody.... They���re not dangerous now, but they will be after the killing starts. Believe me. I���ve seen it often enough. Not all of them, but one in ten, one in a hundred. One in a thousand���s enough when he blasts your car down over the ocean a year from now. You���ll see. It changes people, the killing does. Once it starts, there���s no way to stop it but all the way to the end. If you figure to still live here on Tethys....

What do you think the Slammers do, milady? Work magic? We kill, and we���re good at it, bloody good. You call the Slammers in to solve your problems here and you���ll be able to cover the Port with the corpses. I guarantee it. I���ve done it, milady. In my time...

And Drake in his own voice reflecting on his reaction to having been attached as an interrogator to the 11th Armored Cavalry when Nixon and Kissinger in their ill-advised and criminal way sent them through the Cambodian market town of Snuol:

I [now] had much more vivid horrors than Lovecraft's nameless ickinesses to write about.... I wrote about troopers doing their jobs the best they could with tanks that broke down, guns that jammed���and no clue about the Big Picture.... I kept the tone unemotional: I didn't tell the reader that something was horrible, because nobody told me.... [T]hose stories... were different. They didn't fit either of the available molds: "Soldiers are spotless heroes," or... "Soldiers are evil monsters"... [...] The... stories were written with a flat aspect, describing cruelty and horror with the detachment of a soldier who's shut down his emotional responses completely in a war zone... as soldiers always do, because otherwise they wouldn't be able to survive. Showing soldiers behaving and thinking as they really do in war was... extremely disquieting to the civilians who were editing magazines...

And yet, and yet... there are people whose stuff between the ears reacts to David Drake's prose very differently than my stuff between the ears does. Literary critics who love him find themselves writing things like: "No one who reads Drake properly can imagine him advocating war... not military pornography but rather a form of horror fiction... not intended to deaden the sensibilities to the horrors of war, but to awaken them... immense sympathy for the character who has done repulsive things in battle to win, and finds it difficult to live with himself afterward..." (David Hartwell); "Only an idiot would think that David Drakes stories glorify war. Alas... we have no danger of idiots being in short supply..." (Hank Davis); and "anyone who accused him of glorifying war did not understand his work, nor the intentions of the man himself..." (Alan Brown). And these "idiot[s not]... in short supply" who "did not understand his work" as "not military pornography but rather a form of horror fiction..."���they are not just "fainting maidens and posturing twits... sneering self-righteous... perpetually offended... [whom his editor] Jim Been... enjoyed shaking up..." (Hank Davis, again); they are not just those who know a little bit too much about the muzzle velocities of the different main guns on the different model of the Nazi Armored Battle Wagon 4; they include people (overwhelmingly male) who are a little too impressionable and a little unreflective and a little young.

I love Drake. I love the Odyssey. But I am distressed to find myself somewhat more sympathetic than I want to be with Plato's recommendation that only "hymns to the gods and praise of famous men" be allowed in the Just City because allowing more would lead to sensation and melodrama and would excite the baser instincts of men. And I have now opened up the following can of worms: How do we educate people to read���listen���watch���properly, so that they become their better rather than their worse selves? Mind you, I do not wish that the Odyssey were otherwise (or that David Drake wrote otherwise). But I do wish we teachers taught better how to read���and listen���and watch...

#books
#moralresponsibility
#cognition
#odyssey
#homer

Comment of the Day: Robert Waldmann: Cognitive Science, B...

Comment of the Day: Robert Waldmann: Cognitive Science, Behavioral Economics, and Finance: "There are two separate questions. One is "are markets efficient?", which means there always is no winning arbitrage strategy. The other is "is there an arbitrage strategy which will always work?"...

...The confusion occurs because existential qualifiers don't commute. For any market for any time t, there is a strategy S which is better than buying and holding the market = "the efficient markets hypothesis is false" != For any market there is a strategy S which is better than "buy the market", and that strategy will be better for all time.

The efficient markets hypothesis matters, because, with additional assumptions (which are false but most economists don't understand this) it implies that free markets are Pareto efficient. The case for prudential regulation does not depend on the assumption that there is one strategy which beats the market now and always will beat the market. One can't commute "for every" and "there exists a".

Also Fama's empirical research consists of repeated proofs that markets aren't efficient, always followed by a conclusion stating that they are. Andrei Shleifer once said "The great thing about Fama is that his theoretical beliefs have no effect on his research"...

#commentoftheday

Michael D. Bordo: An Historical Perspective on the Quest ...

Michael D. Bordo: An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime: "From 1880 to the present... the incidence, costs, and determinants of financial crises... combined with narratives...

...Financial crises have many causes, including credit-driven asset price booms, which have become more prevalent in recent decades, but in general financial crises are very heterogeneous and hard to categorize. Moreover, evidence shows that the association across the country sample between credit booms, asset price booms, and serious financial crises is quite weak...

#shouldread

It would be very good for me to understand this. At the m...

It would be very good for me to understand this. At the moment I do not: Victor Chernozhukov et al.: [1608.00060] Double/Debiased Machine Learning for Treatment and Causal Parameters: "Most modern supervised statistical/machine learning (ML) methods are explicitly designed to solve prediction problems very well...

...Achieving this goal does not imply that these methods automatically deliver good estimators of causal parameters. Examples of such parameters include individual regression coefficients, average treatment effects, average lifts, and demand or supply elasticities. In fact, estimates of such causal parameters obtained via naively plugging ML estimators into estimating equations for such parameters can behave very poorly due to the regularization bias. Fortunately, this regularization bias can be removed by solving auxiliary prediction problems via ML tools.

Specifically, we can form an orthogonal score for the target low-dimensional parameter by combining auxiliary and main ML predictions. The score is then used to build a de-biased estimator of the target parameter which typically will converge at the fastest possible 1/root(n) rate and be approximately unbiased and normal, and from which valid confidence intervals for these parameters of interest may be constructed. The resulting method thus could be called a "double ML" method because it relies on estimating primary and auxiliary predictive models. In order to avoid overfitting, our construction also makes use of the K-fold sample splitting, which we call cross-fitting.

This allows us to use a very broad set of ML predictive methods in solving the auxiliary and main prediction problems, such as random forest, lasso, ridge, deep neural nets, boosted trees, as well as various hybrids and aggregators of these methods...

#shouldread

Robin Wigglesworth: Flat yield curve sends a grim message...

Robin Wigglesworth: Flat yield curve sends a grim message for investors in 2019: "investors are now starting quietly to fret that the US central bank may be on the brink of making a mistake, tightening monetary policy too aggressively in the face of a vulnerable global economy and still-quiescent inflationary forces. The Fed might get away with two hikes this year, but markets should worry about what might come in 2019..."

#shouldread