Saturday, April 8, 2017

Noahpinion quotes


Noah Smith is a popular econ blogger and writer for Bloomberg. I recommend reading his posts because he talks about complex econ concepts in essentially layperson's language. Smith is known for both defending and criticizing modern economics. This post is a list of my favorite quotes from Smith.

Support for realism


"So what seems to unite the new heavyweight macro critics is an emphasis on realism... even the people advocating for more realism acknowledge that there's some ideal middle ground. But if Romer, Kocherlakota, etc. are to be believed, macroeconomists aren't currently close to that optimal interior solution." (The new heavyweight macro critics, Sept 14, 2016)

"Economics deals with hideously complex systems where controlled experiments are usually impossible. If you want to isolate one phenomenon, you're going to have to ignore an awful lot of interesting stuff. But if you think about it, that describes most of the situations we face in our daily lives." (Economics isn't Science or Literature, August 27, 2014)

"My guess is that econ will be dragged kicking and screaming into the empiricist fold, but will get there in the end." (Data vs. Theory in economics, September 30, 2015)

"Empirical economists may get things wrong, but at least they come with evidence in hand." (How to Restore Faith in Economics, March 15, 2017)

"If an expert or guru can't point to some research that supports his pronouncements, you shouldn't trust that his brain just works better than yours." (Beware of thinking like an economist, March 17, 2017)

"Each science has its own 'scientific method', and this method evolves in time. We just have to figure out what seems to be working and what doesn't seem to be working, and adjust accordingly." (Judgement calls and the philosophy of science, July 25, 2012)

DSGE models


"As far as I'm aware, private-sector firms don't hire anyone to make DSGE models, implement DSGE models, or even scan the DSGE literature. There are a lot of firms that make macro bets in the finance industry - investment banks, macro hedge funds, bond funds. To my knowledge, none of these firms spends one thin dime on DSGE." (The most damning critique of DSGE, January 10th, 2014)

"Soon, we may even see people insisting in seminars that DSGE models only use assumptions that have been rigorously tested on high-quality micro data! That dream is still far off, but it seems to be getting closer." (Astrologers and macroeconomists, April 11, 2016)

"[DSGE models] contain so many unrealistic assumptions that they probably have little chance of capturing reality. Their forecasting performance is abysmal... Any rigorous statistical tests tend to reject these models instantly." (Economics Struggles to Cope with Reality (June 10, 2016)

Econometrics


"By not teaching our introductory students even the most basic techniques for testing theories, we are asking them to take conventional wisdom - often, incorrect conventional wisdom - on faith. That can’t be good." (Theory Versus Data? You Shouldn't Have to Choose, February 17, 2016)

"What is a probability in the first place? I mean, sure, it's a number between 0 and 1 that you assign to events in a probability space. But how should we use that mathematical concept to represent events in the real world? What observable things should we represent with those numbers, and how should we assign the numbers to the things?" (I still don't understand the philosophy of Bayesian probability, August 26, 2014)

"The new [econometric] techniques - regression discontinuity, difference-in-difference, synthetic controls - are mostly pretty easy and quick for any smart person to grasp." (A new age of econ imperialism is coming, April 5, 2016)

"Is McCloskey unaware of the fact that physicists regularly use statistical significance testing, of the classic R.A. Fisher type?" (Dierdre McCloskey Says Things, June 14, 2015)

"Significance tests results shouldn't be used in a vacuum - to do good science, you should also look at effect sizes and goodness-of-fit." (The backlash to the backlash against p-values, August 8, 2015)

"Quasi-experimental research becomes less reliable the further you move away from the conditions where the experiment happened -- and you don’t even know how fast the reliability vanishes." (Elegant Economic Theories Get Shoved Aside by Data, Mar 7, 2016)

What's wrong with modern economics?


"The root problem here is that macroeconomics seems to have no commonly agreed-upon criteria for falsification of hypotheses." ('Science' without falsification is no science, June 29, 2012)

"New Keynesian theory, which is the academic idea most beloved of central banks around the world, has failed to explain Japan's lack of inflation... Japan offers a clear object lesson that macroeconomic theory is very, very hard to get right." (An Economics Lab where Theories Go to Die, Mar 10, 2016)

"Macro is the glamour division of econ, but maybe more economists should avoid the glamour and get down in the muck where there are real conclusions to be had." (Econ critique scorecard, October 19, 2015)

"The modern economics profession made a collective decision, long ago, to develop a system of jargon in which words have multiple, sometimes contradictory meanings. Unfortunately, the general public’s reaction tends to be similar to that of poor Alice [in wonderland] ... So econ vocabulary is, to put it bluntly, a dumpster fire." (Economics Builds a Tower of Babel, April 6, 2016)

"In econ, though, un-validated theories - even empirically unsuccessful theories - do sometimes get Nobel prizes, especially in macro." (Economists don't have 'physics envy', May 9, 2015)

"For centuries, even as chemists and physicists and biologists were constructing labs, 'economists' were still basically writing literary tomes full of speculation and hand-waving." (Is econ a science? On it's good days, yes. March 17, 2011)

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